HUNTSWORTH PLC RNS Number : 1846F Huntsworth PLC
26 July 2016
Huntsworth plc Interim results for the six months to 30 June 2016 Progress on turnaround, Headline PBT up 21%Huntsworth plc, the healthcare communications and public relations group, today announces its interim results for the six months to 30 June 2016.
Highlights 30 June 2016 30 June 2015Revenue £86.6m £83.2m
Loss before tax £8.9m £45.9m
Basic & diluted loss per share 2.7p 13.5p
Headline operating profit1 £7.3m£6.3m
Headline profit before tax1 £6.4m£5.3m
Headline basic & diluted EPS1 1.4p1.2p
Dividend per share 0.5p 0.5p Net debt £37.1m £33.5m
Headline profit before tax up by 21%
Growth at 3 of the 4 divisions, led by continued strong growth at Huntsworth Health
Continued challenging trading at Grayling
Final phase of Grayling restructuring in process
Interim dividend maintained at 0.5p
Paul Taaffe, CEO of Huntsworth plc, commented:
"Over 20% profit growth in the first half is a product of accelerating growth at Huntsworth Health, Red and Citigate Dewe Rogerson. The final phase of restructuring is now underway at Grayling which should deliver upside in 2017.
Business momentum in Huntsworth Health remains strong, especially in the US, which will offset the impact that the Grayling restructure imposes on growth and any potential fallout from the uncertainty created by the UK's EU membership referendum vote."
Notes:Unless otherwise stated, results have been adjusted to exclude highlighted items. An explanation of how all non-IFRS measures have been calculated is included in Appendix 1.
Like-for-like revenues are stated at constant exchange rates and are adjusted to include pre- acquisition revenues and exclude disposals/closures. A reconciliation of like-for-like revenue growth to IFRS revenue growth is included in Appendix 1.
Enquiries Huntsworth | 020 3861 3999 |
Paul Taaffe, Chief Executive Officer Neil Jones, Chief Financial Officer Citigate Dewe Rogerson | 020 7638 9571 |
Simon Rigby Georgia Colkin | |
Chief Executive's Statement | |
Group overview1 |
Revenues for the first half of 2016 were £86.6 million (2015: £83.2 million), an increase of 4.0% compared to the prior year, 0.3% on a like-for-like2 basis. Profit before tax was £6.4 million (2015: £5.3 million), an increase of 21%.
The first half of the year has seen a continuation of the trading trends seen at the end of 2015, with double-digit growth and market share gains at Huntsworth Health, Red growing well in a flat market and Citigate Dewe Rogerson ('CDR') returning to growth. As noted in March 2016, Grayling is experiencing challenging trading conditions, particularly in the US, which is the main focus of our final phase of restructuring, but also in the Middle East and African ('META') region, which has suffered client losses and delays in client renewals.
Our main focus for growth is Huntsworth Health, which continues to perform strongly. Healthcare is a growing sector as clients seek a more differentiated and increasingly digital offer for their medical and marketing communications needs and we believe the agencies in Huntsworth Health are well positioned to benefit from this trend.
The improved performance of three of the four businesses in the first half has allowed us to accelerate the remaining restructuring and investment within the Group so that all divisions can contribute to their potential in the second half.
The Group's net debt at 30 June 2016 was £37.1 million (2015: £33.5 million), which is comfortably within its banking facilities which are secured until 31 May 2019.
RestructuringOur focus in the first half of 2016 has been to re-shape the US offering in Grayling. In particular we have taken the following actions:
Commencing our exit from the US state lobbying business;
Rationalisation of the US PR offering, with a focus on longer-term and bigger client mandates;
Reduction of overheads.
This exercise will continue into the second half of the year, after which the Group's restructuring programme will be substantially complete.
In light of the underperformance of Grayling, combined with the exit from the US state lobbying business, the Board thought it was appropriate to re-evaluate the carrying value of Grayling's goodwill, which led to an impairment of
£15.0 million.
We expect that the impact of the restructuring in Grayling, along with the re-focus of management and elimination of loss making businesses will see the division improve performance in 2017.
Finally, we continue to adjust the scope and cost of central services, to be more appropriate for a Group of our current size, and we will make further changes during the second half of the year to achieve this.
Divisional overview Huntsworth HealthFirst half-year 2016 revenues grew 18% or 11.4% on a like-for-like basis to £41.5 million, delivering an operating margin of 19.4% (H1 2015 18.7%).
Huntsworth Health continues to perform well above industry averages with double-digit revenue and operating profit growth. This growth is being driven by the US market where our full service digital consumer agency Evoke Health grew like-for-like revenues in H1 2016 by 21.9%, medical communications and market access agency ApotheCom grew like-for-like US revenues by 23.3%, and PR agency Tonic Life Communications grew like-for-like US revenues by 11.3%.
New business momentum remains solid going into H2 with recent large global wins. In keeping with our vision we have won several integrated accounts that involved talented specialists from two or more of our agencies pitching as an integrated team. In addition, and also consistent with our strategic growth plan, we have won business from an expanded client base with wins at genomics, diagnostics, and medical device companies.
Huntsworth Health continues to invest in new organic growth opportunities with a new Evoke Health office in Santa Monica and new strategic consulting group called TraverseHealth Strategy and a digitally-driven, full service, marketing communications agency named FIRSTHAND. We also continue to invest in the very best talent we can find.
Citigate Dewe RogersonCDR's revenues grew by 6.9%, or 4.4% on a like-for-like basis to £10.7 million, delivering margins of 15.1% (H1 2015 14.7%).
In the UK we are beginning to see the benefits of our investments in new talent and building on sector specialisms, with like-for-like revenues up by 5.3% in the first half of the year, despite continued intense price competition and lower volumes of transaction mandates. Margins are slightly lower as a result of these talent investments. In January, CDR's financial division established a New York presence, which adds to its international reach and allows it to access the US market. This office is already contributing positively to the division.
The Continental European business saw an expected fall in like-for-like revenue of 1.7% as a result of tough comparatives in the Netherlands, which saw particularly strong transaction revenues in the first half of 2015. The Asia
Pacific division of CDR performed strongly achieving like-for-like growth of 6% in the first half of 2016 with increased margins as the division continued to develop its regional corporate communications porfolio and transactional business.
In the first half of the year CDR won a number of significant new client mandates including Accor Hotels, British Sugar plc and Hotel Chocolat in the UK as well as FXTM in the UK and China. In France new clients included Biophytis, Adisseo and Eurosic. CDR Singapore completed 4 out of the 7 IPOs listed in the first half, including the IPO of Frasers Logistics and Industrial Trust - the largest IPO in Singapore in 3 years.Despite lower transaction volumes CDR continues to advise on IPO listings and M&A transactions.
GraylingGrayling revenues fell 12.4%, or 14.7% on a like-for-like basis to £27.8 million, resulting in a loss of £0.1 million for the period (H1 2015 profit £0.7 million).
Performance has varied between regions in the first half of 2016. Continental Europe remains the strongest and most profitable part of the division and we are starting to realise the benefits of the changes made to the leadership team in 2015, with management making strides to improve its underperforming operations.
Following a restructure in late 2015 and incremental costs from consolidating its London property porfolio, the UK business is beginning to make progress, both retaining a number of major clients and generating positive net new client wins, which are helping to move the business toward a profitable exit to the year.
The META region has experienced a difficult trading period with the loss of a major client and the end of one of its biggest projects, which have impacted on its profitability. On a more positive note, it has continued to execute its strategy of expanding into new territories in both the Middle East and Africa.
The US business continues to see net client losses in its PR and lobbying businesses as it exits its traditional smaller/ higher churn client base, which will take the remainder of 2016. The US is consolidating and simplifying its model over the next six months, exiting its state and local lobbying activities, in order to pursue higher value PR budgets, digital marketing and branding opportunities, positioning it for a return to growth.
The division is being re-focused to ensure it exits 2016 in profit. The remaining restructuring in Grayling will be substantially completed in the second half of the year.
RedRed performed strongly in the first half of the year with revenues growing by 3.5% to £6.6 million. Operating profit for the half year grew by 10.8% to £1.2 million, improving margins by 1.2% on H1 2015 to 18.2%.
Highlights in the first half of 2016 were increased demand for marketing content led by a major digital publishing initiative for Boots; launch campaigns for travel industry giants Emirates and Royal Caribbean and significant consumer technology and B2B technology awareness driving for Adobe, Samsung and the UK Government's Get Safe On Line campaign. New clients added in the first half included Spotify, Total Jobs and Sanofi. The agency was also named the Media Employer of the Year.
DividendThe interim dividend will remain at 0.5 pence (H1 2015: 0.5 pence).
Group outlookHuntsworth Health continues to perform strongly which, together with more favourable exchange rates, should offset any impact that the ongoing Grayling restructure may create. While there has been no trading impact as yet, the Group's UK PR businesses are seeing some client uncertainty following the EU referendum vote.
Review of Financial Results Summary of financial results for the six months ended 30 June 2016 2016 Like-for- like growth 2015 Revenue £m % £mHuntsworth Health 41.5 11.4% 35.2
Grayling 27.8 (14.7)% 31.7
CDR 10.7 4.4% 10.0
Red 6.6 3.5% 6.4
Total revenue 86.6 0.3% 83.22016 | Margin | 2015 | Margin |
£m | % | £m | % |
Operating profit/(loss) Huntsworth Health | 8.0 | 19.4% | 6.6 | 18.7% |
Grayling | (0.1) | (0.3)% | 0.7 | 2.3% |
CDR | 1.6 | 15.1% | 1.5 | 14.7% |
Red | 1.2 | 18.2% | 1.1 | 17.0% |
Total operations | 10.7 | 12.4% | 9.9 | 11.9% |
Central costs | (3.4) | (3.6) | ||
Operating profit before highlighted items | 7.3 | 8.5% | 6.3 | 7.6% |
Highlighted items (Note 3) | (15.2) | (51.1) | ||
Reported operating loss | (7.9) | (44.8) | ||
Adjusted basic & diluted EPS Reported basic & diluted EPS | 1.4p (2.7)p | 1.2p (13.5)p |
Revenue in the six months to 30 June 2016 increased by £3.4 million to £86.6 million (H1 2015: £83.2 million).
On a like-for-like basis, revenues grew by 11.4% in Huntsworth Health, 3.5% in Red, and 4.4% in CDR. Grayling revenues declined by 14.7%. Overall, Group revenue grew by 0.3% on a like-for-like basis in the first half of the year.
Operating margins have improved in all divisions except Grayling. Overall Group operating profits before central costs increased by £0.8 million to £10.7 million, generating a Group operating margin before central costs of 12.4% (H1 2015: 11.9%).
Highlighted itemsHighlighted operating expenses in the first half of 2016 are the amortisation of intangible assets (£0.4 million), goodwill impairment (£15.0 million), acquisition and transaction related credits (£0.7 million credit) and restructuring costs (£0.4 million).
After total highlighted operating expenses of £15.2 million, the statutory reported operating loss was £7.9 million (H1 2015: loss £44.8 million).
CurrencyThe impact of changes in exchange rates versus H1 2015 was to increase revenues by £3.6 million and increase reported operating profits by £0.1 million.
The weakening of Sterling against the Euro and the Dollar has also resulted in a £10.8 million credit to Other Comprehensive Income and Expense resulting from the retranslation of the Group's overseas assets.
TaxThe total tax credit comprises a pre-highlighted tax expense of £1.8 million together with a credit of £1.8 million on highlighted items. The pre-highlighted tax expense is based on the expected full year tax rate of 29.0% (year ended 31 December 2015: 27.0%). The highlighted tax credit of £1.8 million includes a £1.5 million deferred tax credit relating to the goodwill impairment charge in the period.
Earnings per shareProfits attributable to ordinary shareholders before highlighted items were £4.5 million (H1 2015: £3.8 million). Adjusted basic earnings per share increased to 1.4p (H1 2015: 1.2p) and adjusted diluted earnings per share also increased to 1.4p (H1 2015: 1.2p).
Losses attributable to ordinary shareholders after highlighted items were £8.9 million (H1 2015: loss £43.2 million), resulting in basic and diluted loss per share of 2.7p (H1 2015: loss 13.5p).
DividendsThe interim dividend will be 0.5 pence per share (H1 2015: 0.5 pence). The record date for this dividend will be 30 September 2016 and it is payable on 4 November 2016. A scrip dividend alternative will be available.
Balance sheet and cash flowCash inflow from operations totalled £0.1 million (H1 2015: £7.3 million), before highlighted cash ouflows of £1.4 million. Other principal cashflows during the period were net payments for interest, tax and non-current assets of
£5.2 million (H1 2015: £2.7 million).
Net debt at 30 June 2016 is £37.1 million (30 June 2015: £33.5 million; 31 December 2015: £30.4 million) which is within the Group's available facilities. Financial covenants based on the Group's facility agreements continue to be comfortably met.
Earn-out obligationsFuture earn-out obligations as at 30 June 2016 are estimated to be £nil.
Huntsworth plc published this content on 26 July 2016 and is solely responsible for the information contained herein.
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