Next Fifteen Communications (NFC) posted an 11 per cent increase in net revenue to £249m for its January year-end. But the digital communications group expects that two-thirds of its portfolio will be impacted by coronavirus, with sales down anywhere between 5 and 25 per cent depending on sector and specialism. Management said that it has not seen a material effect on trading to date, but expects that profits will be affected from May.
We flagged in our recent buy tip that the group was likely to see a squeeze on earnings – and it does not seem to have come as much of a surprise to the market, with the shares flat on release of the full-year figures. Long-term prospects are supported by growth in its data and analytics division, which saw organic revenue growth up by almost a fifth to £45.1m, while the adjusted operating margin has increased by 70 basis points since the half-year mark to 28.2 per cent. The marketing agency's skew to tech, with recent new wins at Google Cloud, O2 and Du Pont, should provide some shelter against wider market turmoil, as larger clients are usually a surer bet on the receivables front.
The group has taken steps to reduce capital expenditure and short-term discretionary spending, adopting relevant furlough and tax deferral schemes. It announced in its last trading update in March that it would not be paying out a final dividend.
Broker Peel Hunt forecasts adjusted pre-tax profits of £46.7m and EPS of 39p in 2021, compared with £40.2m and 34.8p in 2020.
| NEXT FIFTEEN COMMUNICATIONS (NFC) | ||||
| ORD PRICE: | 376p | MARKET VALUE: | £326m | |
| TOUCH: | 363-389p | 12-MONTH HIGH: | 668p | LOW: 376p |
| DIVIDEND YIELD: | 0.7% | PE RATIO: | 139 | |
| NET ASSET VALUE: | 130p* | NET DEBT: | 56%** | |
| Year to 31 Jan | Net revenue (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2016 | 130 | 5.60 | 6.00 | 4.20 |
| 2017 | 171 | 2.90 | 1.60 | 5.25 |
| 2018 | 197 | 13.3 | 11.6 | 6.30 |
| 2019 | 224 | 18.8 | 17.5 | 7.56 |
| 2020 | 301 | 5.56 | 2.70 | 2.50 |
| % change | +34 | -70 | -85 | -67 |
| Ex-div: | na | |||
| Payment: | na | |||
| *Includes intangible assets of £155.4m, or 179p a share. **Includes lease liabilities of £54.2m | ||||
