The rush of expectation for a company that had not delivered decent growth since the 1990s was replaced by despondency in late 2018 as investors realised that Huntsworth’s (HNT) shift into the pharmaceutical sector was not as exciting as they had hoped. That is arguably unsurprising – this is still a company that makes almost a third of its revenue from corporate public relations.
Investors should be relieved that the communications division (which includes PR firms Citigate and Grayling) finally returned to expansion in the first half of 2019. Stripping out unprofitable clients has helped improve the division’s operating margins from 7.4 per cent to 8.7 per cent.
But corporate PR is not Huntsworth’s growth engine. Pharma marketing offers higher margins and opportunity, which is why the group acquired five businesses in this sector in the past 18 months. These contributed the bulk of interim revenue growth. On a like-for-like basis, revenue rose just 3 per cent.
The scale-up now needs bedding in and net debt – which was more than twice 2018’s half-year figure – must be reduced. Huntsworth is nowhere near its covenants, but finance costs rocketed to £3m from £842,000 in the first half of 2018. Reported profits were also hurt by acquired intangibles and property consolidation, but brokers think margins should improve.
Bloomberg consensus forecasts point to full-year pre-tax profit and EPS of £41.2m and 8.6p, respectively, up from £30.9m and 7.1p in 2018.
| HUNTSWORTH (HNT) | ||||
| ORD PRICE: | 95.6p | MARKET VALUE: | £ 353m | |
| TOUCH: | 94.4-95.6p | 12-MONTH HIGH: | 137p | LOW: 77p |
| DIVIDEND YIELD: | 2.5% | PE RATIO: | 27 | |
| NET ASSET VALUE: | 47p* | NET DEBT: | £85.8m | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2018 | 102 | 10.3 | 2.3 | 0.70 |
| 2019 | 123 | -1.1 | -0.6 | 0.75 |
| % change | +21 | -111 | -126 | +7 |
| Ex-div: | 26 Sep | |||
| Payment: | 06 Nov | |||
| *Includes intangible assets of £345m, or 94p a share | ||||
