Next 15 Group Plc · LSE:NFG
Next 15 — H1 2014 Earnings Presentation
30 slides from Next 15's earnings presentation, Apr 8, 2014
Slide 1: Interim Results 2014
INTERIM RESULTS 2014 8TH APRIL, 2014
Slide 2: £49m revenues, 1,155 staff worldwide
24 key cities: Key clients: BEIJING AMAZON £49m 1,155 LONDON MUNICH NEW DEHLI AMERICAN EXPRESS APPLE CISCO GROUP STAFF NEW YORK COCA COLA REVENUES PARIS FACEBOOK INTERIM 2014 WORLDWIDE SAN FRANCISCO GOOGLE SINGAPORE IBM % +4% +6% 17% 57 GROUP INCREASE IN ORGANIC AVG CLIENT 12 US REVENUE GROWTH INTER
Slide 3: Executive Summary
EXECUTIVE SUMMARY FINANCIAL RESULTS COMMERCIAL • Revenue up 6% to £49.3m in H1 2014 (2013: £46.6m) • Developed Agent3 and acquired Continuous Insight* • 4% organic revenue growth lead by 13% growth in US • Acquired content marketing specialist Republic • Adjusted EBITDA up 10% to £6.1m (2013: £5.6m)
Slide 4: Next 15 Performance in Context
NEXT 15 PERFORMANCE IN CONTEXT 6 MONTHLY REVENUE AND ADJUSTED PBT MARGIN: • 6 monthly 2010 - 2014 REVENUE Adjusted PBT margin per 6 month 55 6 monthly PBT 12 % period had begun to show improving MARGIN trends as revenues had grown 10 50 % • Key break out from this was H2 2013 8% given the impact of
Slide 5: Revenue Bridge 2013/14
REVENUE BRIDGE 2013/14 INTERIM REVENUE PROGRESSION £’000 : 2013 - 14 • Growth of 6% in the period driven by organic gains 51,000 • Average client revenue yield up by 50,000 1,215 448 6% 49,301 49,000 1,915 • £1.2m of revenue from a full contribution of 2013’s acquisitions 48,000 (Connections Media)
Slide 6: New Business Update
NEW BUSINESS UPDATE REGION WINS LOSSES • Increasingly digital and especially social capabilities Amazon, Blackboard, Google, GoDaddy, key to pitch success SAP, EMC, Lytro, Hitachi Data Systems, Airbnb, Stripe, Vimeo, US Trust the Vote, PhRMA, Tripadvisor, Patron Udacity, • More non tech brands Fours
Slide 7: Global Breakdown
GLOBAL BREAKDOWN EMEA 10% UK 20% APAC 13% • Organic growth gains on FY 2013, in line with H2 • US was up 13% on an organic basis (10% at full year 2013) – now 57% of group revenues • US revenues per head is >3x that for APAC • UK on an improving trend after tough 2013, returning to growth in H2 US 5
Slide 8: US is our long term growth driver (1)
US IS OUR LONG TERM GROWTH DRIVER (1) DATA MARKET • Growth in 2013 in US digital • Early investment in digital skills advertising market was 14.9% (social, content marketing) 13% (e marketer 2013) • Industry-leading specialist brands (OutCast, Blueshirt, M Booth, Increase US Connections Media) organ
Slide 9: US is our long term growth driver (2)
DATA US IS OUR LONG TERM GROWTH DRIVER (2) 57 % NEAR TERM OUTLOOK US % of group • Strong pipeline of new business across all areas revenues H1 • Bite regaining its profile after tough 2013 2014 • BiteDA and agent3 extending into the US, and Republic Publishing also expanding into the US • Continue t
Slide 10: Executing the Digital Transition Plan
EXECUTING THE DIGITAL TRANSITION PLAN FY 2013 H1 2014 H2 2014 (KNOWN) New digital lead at Lexis, Added digital talent across new Chairman at Lexis, new Restructure group (Bite, head of social digital lead at Bite US, new at Lexis) insight lead at M Booth BiteDA US, Republic Continuous Insight for In
Slide 11: Transition Update
TRANSITION UPDATE • Next 15’s insight agency, agent3, delivers software and consultancy services to improve marketing and sales • Built from internal teams, it acquired Continuous Insight in Feb 2014, whose data insight platform is now at the heart of the agent3 value proposition • Annualised revenu
Slide 12: Acquisition Update
ACQUISITION UPDATE • Acquired content marketing specialist Republic Publishing in January 2014 • Republic help to generate inbound traffic to client web sites through the judicious use of content in all its forms (video, social, editorial) • Annualised revenue of circa £2.5m, positive contribution o
Slide 13: Client Update
CLIENT UPDATE • Next 15 has worked with Google since 2011, now a top 10 client by revenue • Key priority for multiple brand initiative • Activity in UK/Europe and US with 3 group agencies (Beyond, Bite, M Booth) • Revenues in the period up over 60% from additional digital work 13 April 14
Slide 14: Progress Against Medium Term Objectives
PROGRESS AGAINST M/TERM OBJECTIVES KPI GROWTH KPI MARGIN KPI % DIGITAL INCREASE PURE AND IMPROVE ORGANIC IMPROVE GROUP HYBRID DIGITAL % GROWTH AFTER FY 2014 MARGINS AFTER FY 2014 REVENUES • Organic growth now 4% • Adjusted op profit margin of • Current rate over 50% vs from low of 1% in 2013 10.6% (
Slide 15: New CFO Impact
NEW CFO IMPACT Done To do • Improved monthly management • New financial year end to reporting (regional and brand improve visibility: KPIs, balance sheet reviews and In synch with client cash-flow forecasts) budget processes • New finance teams for Bite UK In synch with peer group and EMEA • Rev
Slide 16: Financials
FINANCIALS £49m 1,155 27 CLIENTS 12 GROUP REVENUES STAFF GENERATING > $0.5M INTERIM 2014 WORLDWIDE IN INTERIM PERIOD AGENCIES SAN +4% +6% FRANCISCO 17% 57% GROUP ORGANIC INCREASE IN AVG CLIENT NEW YORK US REVENUE GROWTH INTERIM 2014 13% KEY OPERATIONAL CENTRES REVENUE REVENUE REVENUES FROM US GROWTH
Slide 17: Income Statement (Adjusted)
INCOME STATEMENT (ADJUSTED) £M H1 2013 H1 2014 GROWTH % • Strong revenue Billings 54.8 59.7 performance led by US Revenue 46.6 49.3 +6% • Margins on an improving EBITDA 5.6 6.1 +10% trend but held back by Operating profit 4.7 5.2 EMEA and APAC Operating margin 10.1% 10.6% • Tax rate of 27% aided by
Slide 18: Adjustments to Pre Tax Profits
ADJUSTMENTS TO PRE TAX PROFITS £M H1 2013 H1 2014 Adjusted pre tax profits 4.5 5.1 Amortisation of intangibles (0.7) (0.7) Share based payments (0.5) (0.1) Acquisition obligation accounting (0.3) (0.8) Restructuring (0.4) (0.3) Bite Fraud (0.6) Interest hedge 0.1 Reported profit before tax 2.0 3.3 1
Slide 19: Cash Flow
CASH FLOW £M H1 2013 H1 2014 • Net debt of £5.4m after net Inflow from op activities 4.8 6.0 £2.8m spend on acquisitions Working capital (1.3) (4.8) • Working capital outflow due to Net inflow from operations 3.5 1.2 US bonus payments in Tax (1.9) (0.7) October and significant client Net capex (1.2)
Slide 20: Balance Sheet
BALANCE SHEET £m H1 2013 FY 2013 H1 2014 Includes present value of Intangible assets 40.6 41.4 42.5 estimated future earn out Non-current assets 7.5 8.1 7.3 commitments (equity and Current assets 33.8 37.6 36.5 cash) of £10.4m compared with undiscounted cash Non-current liabilities (18.7) (18.5) (8.
Slide 21: Contingent Consideration and Minority Interests
CONTINGENT CONSIDERATION AND MINORITY INTERESTS Prospective cash commitments: 2014 - 2018 • Total cash commitments of £13m 2014 – 2019 and £1.3m of share obligation Cash commitments £m Feb to July 2014 1.3 • Cash can be substituted for share Aug to July 2015 5.6 consideration at Next 15’s discretion
Slide 22: Conclusion
CONCLUSION Summary of the results Trading outlook • Business is returning to • Trading patterns are good across the growth group including Bite UK/ US • US growth extends the trend • Taking cautious view on BBY and Bite from last year EMEA • New CFO in place • US growth continues and UK set for a •
Slide 23: Questions?
QUESTIONS? 23 April 14
Slide 24: Appendix
APPENDIX April 14 N EXT 15
Slide 25: Next 15 – A Digital Communications Group
NEXT 15 – A DIGITAL COMMUNICATIONS GROUP £96m REVENUES 2013 (A) 1,155 STAFF WORLDWIDE (B) 18 COUNTRIES 12 BRANDS LONDON % 70+% HEAD OFFICE 9% 57REVENUES OF REVENUES FROM TECH SAN FRANCISCO CAGR REVS 2008- FROM US (B) CLIENTS NEW YORK 13 (A) KEY OPERATIONAL CENTRES Notes – (a) Full year to July 2013,
Slide 26: Key Clients
KEY CLIENTS amazon 4 @ © #2 BlackBerry Ec eoateae my rc se Schneider cisco AMDEI Catelg iInTUuIT ‘427°%8= — facebook. 1WwHO[DO, 26 April 14 N EXT 5
Slide 27: Our Comparative Advantage
OUR COMPARATIVE ADVANTAGE • Our California presence gives us preferred insight into the direction of digital markets CALIFORNIA PRESENCE • Next 15’s tech client base have been early adopters of the internet and social media…. • …and we have developed special relationships with key digital brands • O
Slide 28: The Digital Upgrade Opportunity
THE DIGITAL UPGRADE OPPORTUNITY NON DIGITAL DIGITAL • The internet is redefining PR from the poor relation of SOCIAL & EARNED marketing services to the objective experts of social media MEDIA, ASTRO TRADITIONAL • Plus trusted adviser status with key clients offers chance to PR TURFING, PR SERVICES r
Slide 29: 5 Year Growth Track Record
5 YEAR GROWTH TRACK RECORD FY Growth % 2008 2009 2010 2011 2012 2013 • Organic growth has remained positive during financial Next 15 organic 7 4 8 11 1 2 recession • H1 2014 up 4% Actual Revs 63.1 65.4 72.3 86.0 91.6 96.1 • 2013/14 showing expansion after low point in FY 2012, led Rev per share (1)
Slide 30: Approximate IR Calendar 2014/15
APPROXIMATE IR CALENDAR 2014/15 Date Event July/ Aug 2014 Trading update for 6m to July 2014 Oct 2014 Unaudited results for period to end July 2014 (2nd interims) Jan 2015 Financial year end 2015 and trading update May 2015 Preliminary results for the 18m period to end Jan 2015 July 2015 AGM 2015 an