REG-Next 15 Group plc Final Results
16/04/2024 07:00
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Final Results
Next 15 Group plc
(“Next 15” or the “Group”)
Results for the year ended 31 January 2024
Record performance delivered by organic revenue growth and M&A execution
Current trading in line with management expectations
Next 15 Group plc (AIM:NFG), the tech and data-driven growth consultancy,
today announces its final results for the year ended 31 January 2024.
Financial results for the year to 31 January 2024
Year ended 31 Year ended 31 % change year on year
January 2024
January 2023
£m
£m
Adjusted results(1)
Net revenue 577.8 563.8 2.5%
Adjusted operating profit 121.1 114.2 6.1%
Adjusted operating profit margin 21.0% 20.2%
Adjusted profit before tax 117.9 112.5 4.8%
Adjusted diluted earnings per share (p) 81.6p 80.4p 1.5%
Statutory results
Net cash generated from operations 105.0 95.2 10.3%
Revenue 734.7 720.5 2.0%
Operating profit 77.1 67.2 14.7%
Profit before tax 80.3 10.1
Diluted earnings per share (p) 50.3p 1.5p
(1)Adjusted results have been presented to provide additional information that
may be useful to shareholders to understand the performance of the Group by
facilitating comparability both year on year and with industry peers. Adjusted
results are reconciled to statutory results within the appendix.
Financial and Operational Highlights
* Group net revenue growth of 2.5% to £577.8m, including organic net revenue
growth(1) of 0.3%, a strong contribution from acquisitions of 3.3%, and an FX
headwind of 1.1%
* Record adjusted operating profit of £121.1m, at a margin of 21.0%
* Adjusted profit before tax up 4.8% to £117.9m
* Statutory revenue up 2.0% to £734.7m. Statutory operating profit up 14.7% to
£77.1m
* Adjusted diluted earnings per share increased by 1.5% to 81.6p
* Final dividend of 10.6p per share, representing an increase of 5%
* Strong balance sheet with net debt of £1.4m at 31 January 2024
* Client spend excluding technology clients increased 11% LFL; technology
clients spend declined by 17% during the year
* Significant new client wins and expanded assignments with Asda, Workday and
Sega
* Completed bolt-on acquisitions for initial consideration of £15.4m, including
Explorer, Rush, Whitespace and Williams Commerce, with £4.5m spent on the
acquisition of Studio La Plage post the year end
* Returned £4.5m to shareholders via the share buyback programme
Current trading and outlook
Trading in the new financial year is in line with management expectations.
Performance continues to be robust across all four business segments despite
the current economic and geopolitical backdrop. The significant Mach49
contract won in early 2022 and recent new client wins, such as Asda for SMG,
give us confidence in further growth in the year ahead and in meeting
management expectations.
The Group’s financial strength and liquidity provides scope for further
investments in AI and bolt-on M&A opportunities to accelerate our
long-term growth, with one bolt-on already completed since year end, and
supports us in achieving our stretch goal of doubling the size of the business
in the next five years.
Commenting on the results, Tim Dyson, CEO of Next 15 said:
“The year saw the benefit of the decentralised and diversified business
model as we delivered record revenues and profits despite a turbulent
macro-economic environment and a pullback in spend by technology customers, as
seen in the wider market. We continue to make strategic investments in our AI
strategy at both a Group level and within the operating businesses. These
investments have already resulted in a number of new products designed to
create greater efficiency and accuracy of the work being produced. These
AI-driven products will enable us to further productise the business and
protect and improve our profitability, whilst also enabling us to expand into
adjacent areas.”
Webcast for analysts and investors
Next 15 will host an analyst and investor webcast at 9:30 today, Tuesday 16
April 2024.
To access the webinar, please contact next15@mhpgroup.com
(mailto:next15@mhpgroup.com)
For further information contact:
Next 15 Group plc
Tim Dyson, Chief Executive Officer
+1 415 350 2801
Peter Harris, Chief Financial Officer
+44 (0) 20 7908 6444
Deutsche Numis (Nomad & Joint Broker)
Mark Lander, Hugo Rubinstein
+44 (0)20 7260 1000
Berenberg (Joint Broker)
Ben Wright, Mark Whitmore
+44 (0)20 3207 7800
MHP (Investor Relations)
Simon Evans, Eleni Menikou, Veronica Farah
Next15@mhpgroup.com (mailto:Next15@mhpgroup.com)
Notes:
Net revenue
Net revenue is calculated as revenue less direct costs as shown on the
Consolidated Income Statement.
Organic net revenue growth
Organic net revenue growth is defined as the net revenue growth at constant
currency excluding the impact of acquisitions and disposals in the last 12
months. For acquisitions made in the prior year, only the corresponding months
of ownership are included in the calculation of growth. Net revenue is
reconciled to statutory revenue within the appendix and a reconciliation of
the movement in the year is included in the net revenue bridge on page 6.
Adjusted operating profit margin
Adjusted operating profit margin is calculated based on the adjusted operating
profit as a percentage of net revenue. Adjusted operating profit is reconciled
to statutory results within the appendix.
This announcement contains inside information as defined in Article 7 of the
Market Abuse Regulation.
About Next 15
Next 15 (AIM:NFG) is an AIM-listed tech and data-driven growth consultancy
with operations in Europe, North America and across Asia Pacific. The Group
has a strong track record of creating and acquiring high-performance
businesses. For acquired businesses it offers an opportunity to take advantage
of the Group’s global operational infrastructure and centralised resources
to accelerate their growth. The Group has long-term customer relationships
with many of the world’s leading companies including Google, Amazon,
Facebook, Microsoft, IBM, American Express and Procter & Gamble.
The business operates across four segments, each of which describes how we
help customers grow in different ways: Customer Insight helps them understand
their opportunities and challenges; Customer Engagement optimises their
reputation and digital assets; Customer Delivery helps them connect with
customers to drive sales; and Business Transformation helps maximise long-term
value through corporate positioning, business design and the development of
new ventures.
At Next 15, success is underpinned by a people-led approach. Our purpose is to
make our customers and our people the best versions of themselves, and our
culture is empowering and respectful.
Our goal is to deliver above-market growth. Our net revenues have grown by
158% over the last five years and our stretch goal is to double the size of
the business in the next five years. This will be driven by the quality of the
businesses, the strength of our customer relationships, the support our model
gives them, and strong tech, data and digital tailwinds.
Chairman and Chief Executive’s Statement
Review of FY24
In FY24 the Group delivered record revenues and profits with all four segments
of our business delivering positive results despite the continued challenging
macro-economic environment. The Group grew its net revenues by 2.5% to
£577.8m and its adjusted profit before tax by 4.8% to £117.9m and we
delivered a record adjusted operating profit of £121.1m at a margin of 21.0%.
Adjusted diluted earnings per share grew by 1.5% to 81.6p. We completed five
bolt-on acquisitions for total consideration of £15.4m to provide further
opportunities for revenue growth in a number of our key businesses.
The statutory operating profit increased by 14.7% to £77.1m (2023: £67.2m)
and diluted earnings per share increased to 50.3p (2023:1.5p).
Acquisitions
The Group has continued to grow by acquisition with the focus of the last
twelve months being on expanding a number of our existing businesses through
bolt-on acquisition. During the period, we completed two acquisitions for
Palladium, expanding its capabilities into the US market and commercial due
diligence. We also completed two acquisitions for Brandwidth, Williams
Commerce in the UK, which expanded their product range into e-commerce web
build and secondly, Rush, a Canadian based performance marketing business.
Finally Savanta acquired Explorer in Canada, a retailer focused market
research business. Post the year end, MHP Group acquired Studio La Plage,
bolstering its creative content creation capabilities.
Returns to shareholders
Our capital allocation philosophy guides our view of returns to shareholders
and usage of excess cash. The first priority for investment is into the
business and we will continue to invest in a targeted manner to support
long-term growth of the Group. We also continue to be acquisitive with a focus
on bolt-on acquisitions to enhance the key business areas. Beyond this, our
priority is to return excess cash to shareholders, through a regular dividend
and, when possible, further returns via a share buyback.
The Board is recommending the payment of a final dividend for the year ended
31 January 2024 of 10.6p per share, which would represent a total dividend of
15.35p for the year. The final dividend represents an increase of 5% on the
final dividend in the prior year.
In September 2023, the Group announced a share buyback programme to a maximum
of £30m, allowing us to return excess cash to shareholders. As announced in
our trading update on 24 January 2024, we had, to that date, invested £4.5m
buying back shares. We also announced we would acquire up to a further £10m
worth of shares by the end of April 2024, of which we have spent £2.1m up to
15 April 2024. The Board has decided to continue this share buyback programme
and extend the time scale until the end of July 2024.
Review of Adjusted Results to 31 January 2024
In order to assist shareholders’ understanding of the performance of the
business, the following commentary is focused on the adjusted performance for
the 12 months to 31 January 2024, compared with the 12 months to 31 January
2023. The Directors consider these adjusted measures to be highly relevant as
they reflect the trading performance of the business and align with how
shareholders value the business. They also give shareholders more information
to allow for understandable like-for-like year-on-year comparisons and more
closely correlate with the cash and working capital position of the Group.
ADJUSTED RESULTS(1) Year Ended Year Ended
31 January 2024
31 January 2023
£’000 £’000
Net revenue 577,839 563,799
Operating profit 121,081 114,169
Operating profit margin 21.0% 20.2%
Net finance expense (3,136) (1,631)
Profit before income tax 117,945 112,538
Effective tax rate on adjusted profit 26.3% 23.3%
Diluted adjusted earnings per share 81.6p 80.4p
(1)Adjusted results have been presented to provide additional information that
may be useful to shareholders to understand the performance of the business by
facilitating comparability both year on year and with industry peers. Adjusted
results are reconciled to statutory results below and within the appendix.
The Group has continued to trade strongly over the last 12 months despite the
macro-economic headwinds with all parts of the business making a positive
contribution to the Group’s performance. Our Customer Delivery, Data and
Insights and Business Transformation segments each delivered organic revenue
growth whilst the Engage segment reported a revenue decline, primarily due to
softness in the Tech sector, but saw an improving performance as the year
progressed.
Our total Group net revenues increased by 2.5% (2023: 56%) to £577.8m, with
organic net revenue growth of 0.3% (2023: 20.7%) reflecting the slowdown in
the Tech sector and the more challenging macro-environment. Our operating
profit increased by 6.1% to a record £121.1m (2023: £114.2m) at an operating
margin of 21.0% (2023: 20.2%). The brands managed their cost bases well
reflecting the trading environment and we exceeded our expected head office
savings from the Engine acquisition. We also benefited from stronger growth
from our higher margin segments.
Net revenue bridge
Net Revenue (£’m) Movement (% of prior year net revenue)
Year to 31 January 2023 563.8
Organic growth(1) 1.7 + 0.3% (FY23: + 20.7%)
Acquisitions 18.3 + 3.3% (FY23: + 25.8%)
Impact of FX (6.0) - 1.1% (FY23: +9.1%)
Year to 31 January 2024 577.8
(1)The definition of net revenue and explanation of how organic net revenue
growth is calculated is included within the appendix.
Reconciliation between statutory and adjusted profit
For the year to 31 January 2024, the Group delivered net revenue of £577.8m
(2023: £563.8m), adjusted operating profit of £121.1m (2023: £114.2m),
adjusted profit before income tax of £117.9m (2023: £112.5m) and adjusted
diluted earnings per share of 81.6p (2023: 80.4p).
Statutory revenue for the year was £734.7m (2023: £720.5m) which resulted in
an operating profit of £77.1m compared with £67.2m in the previous year.
Diluted earnings per share increased to 50.3p (2023: 1.5p), principally
reflecting significantly lower net finance charges in the year, due to the
reduction in the estimated future earn-out payments.
While adjusted operating profit increased by 6.1% to £121.1m (2023:
£114.2m), we made a statutory profit before tax of £80.3m (2023: £10.1m).
When comparing to the adjusted operating profit, the lower statutory profit
before tax was mostly due to acquisition related accounting, including the
amortisation of acquired intangibles, offset by a reduction in the expected
Mach49 earn-out payment.
At each balance sheet date we are required to estimate the value of future
earn-out payments for all of our acquired businesses. The Mach49 estimate is
the largest and most judgemental of these calculations. As at 31 January 2023,
we estimated the total value payable under the earn-out to be the maximum cap
of $300m on an undiscounted basis, but noted at the time this was an area of
significant judgement. When reflecting the historic trading performance and
forecast expectations, we have reduced the estimate of the earn-out to $250m,
a reduction of $50m. Accordingly, in the current year, this resulted in a
£32.3m credit to the profit and loss reflecting the reduction in the
remaining earn-out liability on a discounted basis. This change in estimate
has been included as a credit to the profit and loss account within finance
income.
We also incurred £5.2m of operational restructuring costs as we reacted to
the reduction in demand for our services at a number of our agencies.
Year ended Year ended
31 January 2024
31 January 2023
£’000 £’000
Profit before income tax 80,348 10,109
Acquisition accounting related costs(1) 24,568 89,261
Charge for one-off employee incentive schemes 6,605 596
Costs associated with operational restructuring 5,152 2,302
RCF fees write off 601 -
Deal costs 671 5,521
Property impairment - 4,749
Adjusted profit before income tax(2) 117,945 112,538
(1) Acquisition accounting related costs includes unwinding of discount and
change in estimate on deferred and contingent consideration and share purchase
obligation payable, employment linked acquisition payments and amortisation of
acquired intangibles.
(2) A full reconciliation and further detail is set out in the appendix.
Segment adjusted performance
Customer Engage Customer Delivery Customer Insight Business Head Office Total
£’000
£’000
£’000
Transformation
£’000
£’000
£’000
Year ended 31 January 2024
Net revenue 263,120 107,653 57,476 149,590 - 577,839
Adjusted operating profit/(loss) 53,178 29,117 10,358 48,253 (19,825) 121,081
Adjusted operating profit margin(1) 20.2% 27.0% 18.0% 32.3% - 21.0%
Organic net revenue (decline)/growth (6.3)% 5.1% 4.3% 8.7% - 0.3%
Year ended 31 January 2023
Net revenue 274,951 102,096 51,985 134,767 - 563,799
Adjusted operating profit/(loss) 55,432 30,191 11,049 43,855 (26,358) 114,169
Adjusted operating profit margin(1) 20.2% 29.6% 21.3% 32.5% - 20.2%
Organic net revenue growth 9.3% 12.0% 10.2% 83.3% - 20.7%
(1) Adjusted operating profit margin is calculated based on the adjusted
operating profit as a percentage of net revenue.
The Customer Insights segment includes Savanta and Plinc.
Savanta performed well with its predominantly B2C client base continuing to
recover from the pandemic. The UK business grew by 9% with good growth in the
financial services sector, whilst Savanta US grew by over 20% year on year
supported by strong trading from healthcare and financial services clients and
the acquisition of Explorer, a Canadian based market research agency which
specialises in packaging and shopper research. Plinc grew its retail client
base and continued to develop a suite of new products for its target market.
It invested heavily in sales and marketing to facilitate further growth over
the next couple of years. Total net revenue for the segment increased by 10.6%
to £57.5m with organic growth of 4.3%, whilst the adjusted operating profit
decreased by 6.3% to £10.4m at a reduced adjusted operating margin of 18.0%,
due to the investment in Plinc’s sales and marketing function.
The Customer Engage segment includes M Booth, M Booth Health, Outcast,
Archetype, Nectar, Brandwidth, MHP and House 337.
M Booth Health, MHP and Nectar delivered organic growth in the tough
macro-environment whilst our more tech and project based agencies showed
revenue declines for the year. The segment’s net revenue declined 4.3% to
£263.1m, with an organic revenue decline of 6.3%, and it delivered an
adjusted operating profit of £53.2m at a maintained adjusted operating margin
of 20.2%.
The Customer Delivery segment includes our Activate, Agent3, Twogether and SMG
agencies.
This segment is focused on solving short-term revenue challenges for its
clients usually through digital products which are easier to determine their
return on investment. The end of the Covid pandemic brought a return to more
normal trading conditions as other routes to market opened. Growth moderated
as a result, but the segment still delivered net revenue growth of 5.4% to
£107.7m with organic revenue growth of 5.1%. The adjusted operating profit
decreased marginally to £29.1m at a still very healthy adjusted operating
profit margin of 27.0%.
The Business Transformation segment includes Mach49, The Blueshirt Group,
Palladium and Transform. We saw a mixed performance from this segment as the
significant contract win for Mach49, which we announced in February 2022,
continued to contribute significant revenue and profit growth during the year.
Transform had a very strong year on the back of a major contract win with the
Department of Education, whilst the Blueshirt Group and Palladium suffered
revenue and profit declines due to weakness in the Tech IPO and PE advisory
markets. Overall, the segment delivered net revenue growth of 11.0% to
£149.6m with organic revenue growth of 8.7%. The adjusted operating profit
increased by 10.0% to £48.3m at an adjusted operating profit margin of 32.3%.
Regional adjusted performance
UK EMEA US Asia Pacific Head Office Total
£’000 £’000 £’000 £’000 £’000 £’000
Year ended 31 January 2024
Net revenue 254,281 12,399 294,054 17,105 - 577,839
Adjusted operating profit/(loss) 45,731 2,345 91,139 1,691 (19,825) 121,081
Adjusted operating profit margin¹ 18.0% 18.9% 31.0% 9.9% - 21.0%
Organic net revenue (decline)/growth (0.4)% 6.1% 0.9% (3.6)% - 0.3%
Year ended 31 January 2023
Net revenue 240,971 11,626 293,177 18,025 - 563,799
Adjusted operating profit/(loss) 42,460 2,826 93,463 1,778 (26,358) 114,169
Adjusted operating profit margin¹ 17.6% 24.3% 31.9% 9.9% - 20.2%
Organic net revenue growth 11.3% 16.3% 28.2% 11.0% - 20.7%
(1) Adjusted operating profit margin is calculated based on the adjusted
operating profit as a percentage of net revenue.
In the year to 31 January 2024, total US net revenues grew by 0.3% to £294.1m
from £293.2m which included organic growth of 0.9%. The adjusted operating
profit from our US businesses decreased by 2.5% to £91.1m compared with
£93.5m in the previous 12 months to 31 January 2023, at a still very healthy
operating margin of 31.0% compared with 31.9% in the prior year.
After a very strong performance in the previous year particularly from our B2B
tech businesses, trading in the US slowed last year predominantly due to
weakness in spend from our larger tech clients. Our lead generation agency,
Activate, had a resilient performance throughout the year, outperforming its
immediate competition, whilst our B2C agency M Booth and its sister agency M
Booth Health improved their performances as the year progressed and confidence
returned to their key customers. Mach49 had another year of strong growth on
the back of their big contract win, whilst the Blueshirt Group had a material
fall in revenues due to the demise of Tech IPOs which had contributed to a
very strong performance in the prior year. All the businesses reacted to the
tougher trading conditions by managing their cost bases tightly.
The UK businesses delivered a positive performance over the last 12 months,
with net revenue increasing by 5.5% to £254.3m from £241.0m in the prior
period. Our UK businesses delivered an organic revenue decline of 0.4%. The
adjusted operating profit increased to £45.7m from £42.5m in the prior year
with the adjusted operating margin increasing to 18.0% from 17.6% in the prior
year. This growth was supported by an extra month’s trading from the
Group’s acquisition of Engine in March 2022 and a number of bolt-on
acquisitions for Palladium and Brandwidth.
The EMEA business continued to perform well with net revenue increasing by
6.6% to £12.4m (2023: £11.6m) and an adjusted operating profit of £2.3m at
an adjusted operating margin of 18.9%.
In the APAC region net revenue declined by 5.1% to £17.1m (2023: £18.0m).
The operating profit was broadly flat at £1.7m at an operating margin of
9.9%.
Balance Sheet and Net Debt
The Group’s balance sheet remains strong, moving to a modest net debt
position as at 31 January 2024 of £1.4m (2023: net cash £26.1m) and net
assets of £156.2m (2023: £114.4m). Since the previous year end, intangible
assets have increased by £5.3m due to goodwill and acquired intangible assets
recognised as a result of the acquisitions during the year offset by the
amortisation.
Contingent consideration also saw a significant decrease, due to by £39.1m
settlements during the year and a £32.5m change in estimate, primarily driven
by the revised assumptions for the latest trading performance and forecast
expectations for the Mach49 business. The estimates around the contingent
consideration are considered by management to be an area of significant
judgement, which could result in a material adjustment to the value of these
liabilities in the future years.
The net cash inflow from operating activities before changes in working
capital for the year to 31 January 2024 decreased to £115.7m from £119.6m in
the prior period due to £15.7m settlement of employment linked acquisition
payments compared to £6.6m in the prior year. We had a net outflow from
working capital of £10.7m due to the reduction in deferred income and accrued
expenses across the Group. This resulted in our net cash generated from
operations before tax being £105.0m (2023: £95.2m).
In September 2023, the Group announced a share buyback programme to a maximum
of £30m, allowing us to return excess cash to shareholders. As of 31 January
2024, we have spent £4.5m buying back 603,912 shares which have been
cancelled. The Board continued this policy to acquire up to a further £10m
worth of shares by the end of April 2024, and has now extended this deadline
until the end of July 2024.
Over the year we incurred £70.9m in acquisition-related payments and £7.2m
in capital expenditure.
Cash flow KPIs Year to Year to
31 January
31 January
2024
2023
£m
£m
Net cash inflow from operating activities before changes in working capital 115.7 119.6
Working capital movement (10.7) (24.4)
Net cash generated from operations 105.0 95.2
Income tax paid (25.4) (20.3)
Investing activities (17.9) (67.5)
Dividend paid to shareholders (14.8) (12.7)
Net (debt)/cash (1.4) 26.1
Bank refinancing
The Group refinanced its banking facilities during the year and on 12 December
2023, the Group agreed to a new £150m revolving credit facility (“RCF”)
with a consortium of HSBC, Bank of Ireland, NatWest Bank, Citibank and CIC.
The facility is available until December 2027 with an option to extend for a
further year. As part of the arrangement, the Group has negotiated a £50m
accordion option to facilitate future acquisitions.
The RCF facility is available for permitted acquisitions and working capital
requirements. It is due to be repaid from the trading cash flows of the Group.
The facility is available in a combination of sterling, US dollar and Euro.
The margin payable on each facility is dependent upon the level of gearing in
the business. The Group also has a US facility of $7m (2023: $7m) which is
available for property rental guarantees and US-based working capital needs.
Current trading and outlook
Trading in the new financial year is in line with management expectations.
Performance continues to be robust across all four business segments despite
the current economic and geopolitical backdrop. The significant Mach49
contract won in early 2022 and recent new client wins, such as Asda for SMG,
give us confidence in further growth in the year ahead and in meeting
management expectations.
The Group’s financial strength and liquidity provides scope for further
investments in AI and bolt-on M&A opportunities to accelerate our
long-term growth, with one bolt-on already completed since year end, and
supports us in achieving our stretch goal of doubling the size of the business
in the next five years.
NEXT 15 GROUP PLC
CONSOLIDATED INCOME STATEMENT
FOR THE YEARS ENDED 31 JANUARY 2024 AND 31 JANUARY 2023
Year ended Year ended
31 January 2024
31 January 2023
Note £’000 £’000
Revenue 734,673 720,500
Direct costs (156,834) (156,701)
Net revenue 2 577,839 563,799
Staff costs 407,445 391,798
Depreciation 12,263 12,187
Amortisation 24,360 25,053
Other operating charges 56,652 67,554
Total operating charges (500,720) (496,592)
Operating profit 77,119 67,207
Finance expense 5 (31,393) (63,735)
Finance income 6 34,622 6,637
Profit before income tax 80,348 10,109
Income tax expense 3 (26,403) (7,123)
Profit for the year 53,945 2,986
Attributable to:
Owners of the parent 52,907 1,623
Non-controlling interests 1,038 1,363
53,945 2,986
Earnings per share
Basic (pence) 7 53.3 1.7
Diluted (pence) 7 50.3 1.5
NEXT 15 GROUP PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED 31 JANUARY 2024 AND 31 JANUARY 2023
Year ended Year ended
31 January 2024
31 January 2023
£’000 £’000
Profit for the year 53,945 2,986
Other comprehensive expense:
Items that may be reclassified into profit or loss:
Exchange differences on translating foreign operations (576) (1,323)
Items that will not be reclassified subsequently to profit or loss
Revaluation of investments (6) (448)
Total other comprehensive expense for the year (582) (1,771)
Total comprehensive income for the year 53,363 1,215
Attributable to:
Owners of the parent 52,325 (148)
Non-controlling interests 1,038 1,363
53,363 1,215
NEXT 15 GROUP PLC
ADJUSTED RESULTS: KEY PERFORMANCE INDICATORS (Unaudited)
Year ended Year ended
31 January 2024
31 January 2023
£’000
£’000
Net revenue 577,839 563,799
Operating charges (441,062) (434,213)
EBITDA 136,777 129,586
Depreciation and Amortisation (14,592) (14,052)
Operating profit 122,185 115,534
Interest on finance lease liabilities (1,104) (1,365)
Adjusted Operating profit 121,081 114,169
Operating profit margin 21.0% 20.2%
Net finance expense (3,136) (1,631)
Profit before income tax 117,945 112,538
Tax (31,073) (26,254)
Profit after tax 86,872 86,284
Non-controlling interest (1,038) (1,363)
Retained profit 85,834 84,921
Weighted average number of ordinary shares 99,247,832 97,635,507
Diluted weighted average number of ordinary shares 105,218,101 105,680,687
Adjusted earnings per share 86.5p 87.0p
Diluted adjusted earnings per share 81.6p 80.4p
Net cash generated from operations before tax 105,041 95,206
Cash outflow on acquisition-related payments (70,865) (111,573)
Net (debt)/cash (1,356) 26,070
Dividend (per share) 15.35p 14.6p
Adjusted results have been presented to provide additional information that
may be useful to shareholders to understand the performance of the business by
facilitating comparability both year on year and with industry peers. Adjusted
results are reconciled to statutory results within the appendix.
Per the detail in the appendix (A2), charges for one-off employee incentive
schemes, employment linked acquisition payments, restructuring costs, deal
costs, RCF fees written off and property impairment are adjusted for in
calculating the adjusted operating charges and amortisation of acquired
intangibles is adjusted for in calculating the adjusted depreciation and
amortisation. Interest on lease liabilities and unwinding of discount and
change in estimate of future contingent consideration and share purchase
obligation payables are adjusted for in calculating net finance expense. These
measures are not considered to be adjusted performance measures for the
Company.
NEXT 15 GROUP PLC
CONSOLIDATED BALANCE SHEET AS AT 31 JANUARY 2024 AND 2023
31 January 2024 31 January 2023
Note £’000 £’000
Assets
Property, plant and equipment 10,099 10,882
Right-of-use assets 24,686 28,675
Intangible assets 279,342 274,067
Investments in financial assets 581 590
Deferred tax asset 62,087 67,058
Other receivables 1,040 830
Total non-current assets 377,835 382,102
Trade and other receivables 170,003 164,175
Cash and cash equivalents 8 42,871 47,320
Corporation tax asset 911 829
Total current assets 213,785 212,324
Total assets 591,620 594,426
Liabilities
Loans and borrowings 8 44,227 21,250
Deferred tax liabilities 15,939 14,152
Lease liabilities 23,313 29,482
Other payables 110 169
Provisions 19,591 14,150
Contingent consideration 9 84,693 151,237
Additional contingent incentive 9 1,847 3,829
Share purchase obligation 9 7,277 6,729
Total non-current liabilities 196,997 240,998
Trade and other payables 151,510 160,006
Lease liabilities 10,115 12,286
Provisions 3,066 15,673
Corporation tax liability 6,843 8,159
Additional contingent incentive 9 2,483 2,480
Contingent consideration 9 62,059 38,169
Share purchase obligation 9 2,326 2,255
Total current liabilities 238,402 239,028
Total liabilities 435,399 480,026
TOTAL NET ASSETS 156,221 114,400
Equity
Share capital 2,486 2,462
Share premium reserve 175,144 166,174
Share purchase reserve (2,658) (2,673)
Foreign currency translation reserve 3,304 3,880
Other reserves 608 608
Retained loss (22,904) (56,503)
Total equity attributable to owners of the parent 155,980 113,948
Non-controlling interests 241 452
TOTAL EQUITY 156,221 114,400
NEXT 15 GROUP PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARS ENDED 31 JANUARY 2024 AND 31 JANUARY 2023
Share premium reserve Share purchase reserve Foreign currency translation reserve Other reserves(1) Retained loss Equity attributable to owners of the Company Non-controlling interests Total equity
Share capital
£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000
At 31 January 2022 2,320 104,800 (2,673) 5,203 608 (50,429) 59,829 1,630 61,459
Profit for the year - - - - - 1,623 1,623 1,363 2,986
Other comprehensive expense for the year - - - (1,323) - (448) (1,771) - (1,771)
Total comprehensive (expense)/income for the year - - - (1,323) - 1,175 (148) 1,363 1,215
Shares issued on satisfaction of vested performance shares 8 2,067 - - - (3,053) (978) - (978)
Shares issued on acquisitions 21 10,780 - - - - 10,801 - 10,801
Shares issued on placing(2) 113 48,527 - - - - 48,640 - 48,640
Movement in relation to share-based payments - - - - - 6,711 6,711 - 6,711
Tax on share-based payments - - - - - 1,898 1,898 - 1,898
Dividends to owners of the Parent - - - - - (12,679) (12,679) - (12,679)
Movement due to ESOP share purchases - - - - (3) - (3) - (3)
Movement due to ESOP share option exercises - - - - 3 - 3 - 3
Movement on reserves for non-controlling interests - - - - - (126) (126) 126 -
Non-controlling dividend - - - - - - - (2,667) (2,667)
At 31 January 2023 2,462 166,174 (2,673) 3,880 608 (56,503) 113,948 452 114,400
Profit for the year - - - - - 52,907 52,907 1,038 53,945
Other comprehensive expense for the year - - - (576) - (6) (582) - (582)
Total comprehensive (expense)/income for the year - - - (576) - 52,901 52,325 1,038 53,363
Shares issued on satisfaction of vested performance shares 22 4,024 - - - (6,643) (2,597) - (2,597)
Shares issued on acquisitions 17 4,946 - - - - 4,963 - 4,963
Acquisition of own shares (15) - 15 - - (4,475) (4,475) - (4,475)
Movement in relation to share-based payments - - - - - 11,476 11,476 - 11,476
Tax on share-based payments - - - - - (984) (984) - (984)
Dividends to owners of the Parent - - - - - (14,762) (14,762) - (14,762)
Movement due to ESOP share purchases - - - - (7) - (7) - (7)
Movement due to ESOP share option exercises - - - - 7 - 7 - 7
Movement on reserves for non-controlling interests - - - - - (216) (216) 216 -
Non-controlling interest purchased in the period - - - - - (3,698) (3,698) (204) (3,902)
Non-controlling interest reversed in the period - - - - - - - 29 29
Non-controlling dividend - - - - - - - (1,290) (1,290)
At 31 January 2024 2,486 175,144 (2,658) 3,304 608 (22,904) 155,980 241 156,221
(1 )Other reserves include ESOP reserve, the treasury reserve, the merger
reserve and the hedging reserve.
(2 )Shares issued on placing is shown net of £1.4m issue costs on issue of
ordinary shares
NEXT 15 GROUP PLC
CONSOLIDATED STATEMENT OF CASH FLOW
FOR THE YEARS ENDED 31 JANUARY 2024 AND 31 JANUARY 2023
Year ended Year ended
31 January 2024
31 January 2023
£’000 £’000
Cash flows from operating activities
Profit for the year 53,945 2,986
Adjustments for:
Depreciation 12,263 12,187
Amortisation 24,360 25,053
Finance expense 31,393 63,735
Finance income (34,622) (6,637)
Impairment of property, plant and equipment - 1,172
Loss on sale/impairment of property, plant and equipment 125 68
(Gain)/loss on exit of finance lease (1,313) 2,811
Income tax expense 26,403 7,123
Employment linked acquisition provision charge 10,006 11,971
Settlement of employment linked acquisition payments (15,713) (6,649)
Share-based payment charges 11,476 6,711
Settlement of share based payment in cash (2,597) (971)
Net cash inflow from operating activities before changes in working capital 115,726 119,560
Change in trade and other receivables 837 (16,995)
Change in trade and other payables (12,343) (7,307)
Change in other liabilities 821 (52)
(10,685) (24,354)
Net cash generated from operations before tax outflows 105,041 95,206
Income taxes paid (25,408) (20,301)
Net cash inflow from operating activities 79,633 74,905
Cash flows from investing activities
Acquisition of subsidiaries and trade and assets, net of cash acquired (13,006) (70,268)
Proceeds on disposal of investments in financial assets - 7,452
Acquisition of property, plant and equipment (3,711) (3,485)
Proceeds on disposal of property, plant and equipment 8 2
Acquisition of intangible assets (3,436) (3,491)
Movement in long-term cash deposits (179) (13)
Income from finance lease receivables 1,388 2,228
Interest received 1,051 113
Net cash outflow from investing activities (17,885) (67,462)
NEXT 15 GROUP PLC
CONSOLIDATED STATEMENT OF CASH FLOW (Continued)
FOR THE YEARS ENDED 31 JANUARY 2024 AND 31 JANUARY 2023
Year ended Year ended
31 January 2024
31 January 2023
£’000 £’000
Cash flows from financing activities
Payment of contingent consideration (42,146) (34,656)
Purchase of non-controlling interest in subsidiary (5,059) -
Proceeds on sale of non-controlling interest in subsidiary 29 -
Acquisition of own shares (4,475) -
Issue of share capital - 50,006
Issue costs on issue of ordinary shares - (1,365)
Capital element of finance lease rental repayment (14,175) (16,510)
Increase in bank borrowings and overdrafts 195,564 100,281
Repayment of bank borrowings and overdrafts (171,891) (101,795)
Banking arrangement fees (1,905) -
Interest paid (4,268) (1,794)
Dividend and profit share paid to non-controlling interest partners (1,290) (2,667)
Dividends paid to shareholders of the parent (14,762) (12,679)
Net cash outflow from financing activities (64,378) (21,179)
Net decrease in cash and cash equivalents (2,630) (13,736)
Cash and cash equivalents at beginning of the year 47,320 58,216
Exchange (loss)/gain on cash held (1,819) 2,840
Cash and cash equivalents at end of the year 42,871 47,320
NOTES TO THE YEAR END RESULTS
FOR THE YEARS ENDED 31 JANUARY 2024 AND 31 JANUARY 2023
1) BASIS OF PREPARATION
The financial information in these results has been prepared using the
recognition and measurement principles of International Accounting Standards,
International Financial Reporting Standards and Interpretations adopted for
use in the United Kingdom (collectively Adopted IFRSs). The principal
accounting policies used in preparing the results are those the Group has
applied in its financial statements for the year ended 31 January 2024.
The financial information set out above does not constitute the Group’s
statutory accounts for the years ended 31 January 2024 or 2023, but is derived
from those accounts. Statutory accounts for 2023 have been delivered to the
Registrar of Companies and those for 2024 will be delivered following the
company's annual general meeting. The auditors have reported on those
accounts: their reports were unqualified, did not draw attention to any
matters by way of emphasis and did not contain statements under s498(2) or (3)
of the Companies Act 2006.
Going concern statement
The Directors have, at the time of approving this financial information, a
reasonable expectation that the Company and the Group have adequate resources
to continue in operational existence for the foreseeable future. Accordingly,
they continue to adopt the going concern basis in preparing this financial
information. The Directors have made this assessment in light of reviewing the
Group’s budget and cash requirements for a period in excess of one year from
the date of signing of the annual report and considered outline plans for the
Group thereafter.
2) SEGMENT INFORMATION
Measurement of operating segment profit
The Board of Directors assesses the performance of the operating segments
based on a measure of adjusted operating profit before intercompany recharges
and net revenue, which reflects the internal reporting measure used by the
Board of Directors. This measurement basis excludes the effects of certain
acquisition-related costs and goodwill impairment charges. Head office costs
relate to Group costs before allocation of intercompany charges to the
operating segments. Intersegment transactions have not been separately
disclosed as they are not material. The Board of Directors does not review the
assets and liabilities of the Group on a segmental basis and therefore this is
not separately disclosed.
Customer Engage Customer Delivery Customer Insight Business Head Office Total
£’000
£’000
£’000
Transformation
£’000
£’000
£’000
Year ended 31 January 2024
Net revenue 263,120 107,653 57,476 149,590 - 577,839
Adjusted operating profit/(loss) 53,178 29,117 10,358 48,253 (19,825) 121,081
Adjusted operating profit margin(1) 20.2% 27.0% 18.0% 32.3% - 21.0%
Organic net revenue (decline)/growth (6.3%) 5.1% 4.3% 8.7% - 0.3%
Year ended 31 January 2023
Net revenue 274,951 102,096 51,985 134,767 - 563,799
Adjusted operating profit/(loss) 55,432 30,191 11,049 43,855 (26,358) 114,169
Adjusted operating profit margin(1) 20.2% 29.6% 21.3% 32.5% - 20.2%
Organic net revenue growth 9.3% 12.0% 10.2% 83.3% - 20.7%
(1) Adjusted operating profit margin is calculated based on the adjusted
operating profit as a percentage of net revenue.
NOTES TO THE YEAR END RESULTS (Continued)
FOR THE YEARS ENDED 31 JANUARY 2024 AND 31 JANUARY 2023
2) SEGMENT INFORMATION (continued)
UK EMEA US Asia Pacific Head Office Total
£’000 £’000 £’000 £’000 £’000 £’000
Year ended 31 January 2024
Net revenue 254,281 12,399 294,054 17,105 - 577,839
Adjusted operating profit/(loss) 45,731 2,345 91,139 1,691 (19,825) 121,081
Adjusted operating profit margin¹ 18.0% 18.9% 31.0% 9.9% - 21.0%
Organic net revenue (decline)/growth (0.4%) 6.1% 0.9% (3.6%) - 0.3%
Year ended 31 January 2023
Net revenue 240,971 11,626 293,177 18,025 - 563,799
Adjusted operating profit/(loss) 42,460 2,826 93,463 1,778 (26,358) 114,169
Adjusted operating profit margin¹ 17.6% 24.3% 31.9% 9.9% - 20.2%
Organic net revenue growth 11.3% 16.3% 28.2% 11.0% - 20.7%
(1) Adjusted operating profit margin is calculated based on the adjusted
operating profit as a percentage of net revenue.
3) TAXATION
The tax charge on adjusted profit for the year ended 31 January 2024 is
£31,073,000 (2023: £26,254,000), equating to an adjusted effective tax rate
of 26.3%, compared to 23.3% in the prior year. The Group’s adjusted
effective tax rate was higher than the rate achieved in the prior year largely
due to the increase in the UK rate from 19% in the prior year and due to a
strong performance from our US-based agencies.
The UK statutory rate increased from 19% to 25% from 1 April 2023, which is
reflected by the increase of the adjusted effective tax rate to 26.3%. We
anticipate that overseas international tax pressures will continue to increase
the Group’s adjusted effective tax rate over the coming years.
The statutory tax expense for the year ended 31 January 2024 is £26,403,000
(2023: £7,123,000).
4) DIVIDENDS
A final dividend of 10.6p per ordinary share will be paid on 9 August 2024 to
shareholders listed on the register of members on 5 July 2024. Shares will go
ex-dividend on 4 July 2024. This makes the total dividend for the year 15.35p
per share (2023: 14.6p).
NOTES TO THE YEAR END RESULTS (Continued)
FOR THE YEARS ENDED 31 JANUARY 2024 AND 31 JANUARY 2023
5) FINANCE EXPENSE
Year ended Year ended
31 January 2024
31 January 2023
£’000 £’000
Financial liabilities at amortised cost
Bank interest payable 4,242 1,791
Interest on lease liabilities(1) 1,104 1,365
Financial liabilities at fair value through profit and loss
Unwinding of discount on deferred and contingent consideration and share 24,871 22,885
purchase obligation payable(1)
Change in estimate of future contingent consideration and share purchase 1,150 37,691
obligation payable(1)
Other
Other interest payable 26 3
Finance expense 31,393 63,735
(1)These items are adjusted for in calculating the adjusted net finance
expense.
6) FINANCE INCOME
Year ended Year ended
31 January 2024
31 January 2023
£’000 £’000
Financial assets at amortised cost
Bank interest receivable 1,039 103
Finance lease interest receivable 81 50
Financial liabilities at fair value through profit and loss
Change in estimate of future contingent consideration and share purchase 33,490 6,474
obligation payable(1)
Other interest receivable 12 10
Finance income 34,622 6,637
(1)These items are adjusted for in calculating the adjusted net finance
expense.
7) EARNINGS PER SHARE
Year ended Year ended
31 January 2024
31 January 2023
£’000 £’000
Profit attributable to ordinary shareholders 52,907 1,623
Number Number
Weighted average number of ordinary shares 99,247,832 97,635,507
Dilutive LTIP shares 1,848,787 2,279,528
Dilutive growth deal shares 3,345,900 2,373,445
Other potentially issuable shares 775,582 3,392,207
Diluted weighted average number of ordinary shares 105,218,101 105,680,687
NOTES TO THE YEAR END RESULTS (Continued)
FOR THE YEARS ENDED 31 JANUARY 2024 AND 31 JANUARY 2023
7) EARNINGS PER SHARE (Continued)
Basic earnings per share 53.3p 1.7p
Diluted earnings per share 50.3p 1.5p
8) NET DEBT
The Group refinanced its banking facilities during the year and on 12 December
2023, the Group agreed to a new £150m revolving credit facility (“RCF”)
with a consortium of HSBC, Bank of Ireland, NatWest Bank, Citibank and CIC.
The facility is available until December 2027 with an option to extend for a
further year. As part of the arrangement, the Group has a £50m accordion
option to facilitate future acquisitions.
The RCF facility is available for permitted acquisitions and working capital
requirements. It is due to be repaid from the trading cash flows of the Group.
The facility is available in a combination of sterling, US dollar and Euro.
The margin payable on each facility is dependent upon the level of gearing in
the business. The Group also has a US facility of $7m (2023: $7m) which is
available for property rental guarantees and US-based working capital needs.
31 January 2023
31 January 2024
£’000 £’000
Total loans and borrowings 44,227 21,250
Less: cash and cash equivalents (42,871) (47,320)
Net debt/(cash) 1,356 (26,070)
Share purchase obligation 9,603 8,984
Contingent consideration 146,752 189,406
Additional contingent incentive 4,330 6,309
Net debt and acquisition related liabilities 162,041 178,629
NOTES TO THE YEAR END RESULTS (Continued)
FOR THE YEARS ENDED 31 JANUARY 2024 AND 31 JANUARY 2023
9) OTHER FINANCIAL LIABILITIES
Deferred Contingent Additional Share purchase
consideration
contingent incentive
obligation
consideration
£’000 £’000 £’000 £’000
At 31 January 2022 133 161,541 5,202 11,252
Arising during the year - 1,779 - -
Exchange differences - 13,302 467 136
Utilised (160) (43,009) - (46)
Unwinding of discount 27 20,649 784 1,425
Change in estimate - 35,144 (144) (3,783)
At 31 January 2023 - 189,406 6,309 8,984
Arising during the year - 12,077 - -
Exchange differences - (6,160) (238) (78)
Utilised - (39,075) (3,071) -
Unwinding of discount - 23,049 572 1,250
Change in estimate - (32,545) 758 (553)
At 31 January 2024 - 146,752 4,300 9,603
Current - 62,059 2,483 2,326
Non-current - 84,693 1,847 7,277
The estimates around contingent consideration and share purchase obligations
are considered by management to be an area of significant judgement, with any
changes in assumptions and forecasts creating volatility in the income
statement. Management estimates the fair value of these liabilities taking
into account expectations of future payments. During the year, earnout
liabilities decreased by a net £44.0m, primarily driven by settlements during
the year and a change in estimate of £32.3m relating to the Mach49 business.
This change in estimate was driven by the revised assumptions for the latest
trading performance and forecast expectations for the Mach49 business. At the
previous year end, the Group estimated the total earn-out to be the maximum
cap of US$300m, which has now been reduced to US$250m at 31 January 2024 on an
undiscounted basis.
Changes in the estimates of contingent consideration payable and the share
purchase obligation are recognised in finance income/expense. If the
judgements around future revenue growth, profit margins and discount rates
change, this could result in a material adjustment to the value of these
liabilities within the next financial year. An increase in the liability would
result in an increase in finance expense, while a decrease would result in a
further gain.
Litigation
During the prior year, a former minority shareholder and employee of the
Group’s largest US business filed a legal claim against the founding
shareholders of the subsidiary and the Group amongst others, relating to their
historic entitlement to a share in the business. The claim has progressed
through the discovery phase and depositions are taking place. The Group
continues to strongly dispute these claims and is defending the claim. The
Group has continued to discuss the claim with legal advisors and still
determines a future outflow is not probable and therefore no provision has
been made in relation to the claim.
Although the legal claim continues, there is continued ambiguity as to what
the total settlement amount might be and the amount, if any, that the Group
will be required to pay. IAS 37 Provisions, Contingent Liabilities and
Contingent Assets requires the disclosure of an estimate of the financial
effect of any contingent liability, separate from the effect of any possible
reimbursement. Whilst no specific estimate of potential gross outflow for the
Group can be made given the stage of this claim, the claimant is seeking a
proportion of the earnout valuation of this business, which is disclosed
elsewhere in this note. Given the Group is only subject to certain claims, it
is not clear what proportion of the earnout valuation this will represent, and
how any such claim would be apportioned between the Group and other parties
were it to result in a future outflow.
NOTES TO THE YEAR END RESULTS (Continued)
FOR THE YEARS ENDED 31 JANUARY 2024 AND 31 JANUARY 2023
9) OTHER FINANCIAL LIABILITIES (Continued)
The Group cannot credibly estimate the timing or quantum of any outflow, but
the Directors believe that any financial outflow against Next 15 will be
offset by reimbursement through an indemnity given at the time of the
acquisition and therefore any overall financial impact for Next 15 would be
immaterial. The Group has incurred legal fees in relation to this claim and
has recognised a corresponding asset representing the amount recoverable under
the indemnity given at the time of the acquisition.
APPENDIX – ALTERNATIVE PERFORMANCE MEASURES
FOR THE YEARS ENDED 31 JANUARY 2024 AND 31 JANUARY 2023
Introduction
In the reporting of financial information, the Directors have adopted various
alternative performance measures (‘APMs’). The Group includes these
non-GAAP measures as they consider these measures to be both useful and
necessary to the readers of the financial statements to help understand the
performance of the Group. The Group’s measures may not be calculated in the
same way as similarly titled measures reported by other companies and
therefore should be considered in addition to IFRS measures.
Purpose
The Director’s believe that these APMs are highly relevant as they reflect
how the Board measures the performance of the business and align with how
shareholders value the business. They also allow understandable like-for-like,
year-on-year comparisons and more closely correlate with the cash inflows from
operations and working capital position of the Group.
They are used by the Group for internal performance analyses and the
presentation of these measures facilitates better comparability with other
industry peers as they adjust for non-recurring or uncontrollable factors
which materially affect IFRS measures.
A1: RECONCILIATION OF STATUTORY OPERATING PROFIT TO ADJUSTED OPERATING PROFIT
A reconciliation of segment adjusted operating profit to segment adjusted
operating profit and statutory operating profit is provided as follows:
Year ended Year ended
31 January 2024
31 January 2023
£’000 £’000
Statutory operating profit 77,119 67,207
Interest on finance lease liabilities (1,104) (1,365)
Statutory operating profit after interest on finance lease liabilities 76,015 65,842
Amortisation of acquired intangibles (A2) 22,031 23,188
Charge for one-off employee incentive schemes (A2) 6,605 596
Employment linked acquisition payments (A2) 10,006 11,971
Property impairment (A2) - 4,749
Costs associated with restructuring (A2) 5,152 2,302
RCF fees write off (A2) 601 -
Deal costs (A2) 671 5,521
Adjusted operating profit 121,081 114,169
Adjusted operating profit margin 21.0% 20.2%
Adjusted operating profit margin is calculated based on the adjusted operating
profit as a percentage of net revenue.
APPENDIX – ALTERNATIVE PERFORMANCE MEASURES (Continued)
FOR THE YEARS ENDED 31 JANUARY 2024 AND 31 JANUARY 2023
A2: RECONCILIATION OF STATUTORY PROFIT BEFORE TAX TO ADJUSTED PROFIT BEFORE
TAX
Year ended Year ended
31 January 2024
31 January 2023
£’000 £’000
Statutory profit before income tax 80,348 10,109
Unwinding of discount on deferred and contingent consideration and share 24,871 22,885
purchase obligation payable(1)
Change in estimate of future contingent consideration and share purchase (32,340) 31,217
obligation payable(1)
Charge for one-off employee incentive scheme(2) 6,605 596
Employment linked acquisition payments(3) 10,006 11,971
Costs associated with restructuring(4) 5,152 2,302
Deal costs(5) 671 5,521
Property impairment( 6) - 4,749
RCF fees write off(7) 601 -
Amortisation of acquired intangibles(8) 22,031 23,188
Adjusted profit before income tax 117,945 112,538
(1 )The Group adjusts for the remeasurement of the acquisition-related
liabilities within the adjusted performance measures in order to aid
comparability of the Group’s results year on year as the charge/credit from
remeasurement can vary significantly depending on the underlying brand’s
performance. It is non-cash and its directional impact to the income statement
is opposite to the brand’s performance driving the valuations. The unwinding
of discount on these liabilities is also excluded from underlying performance
on the basis that it is non-cash and the balance is driven by the Group’s
assessment of the time value of money and this exclusion ensures
comparability.
(2 )This charge relates to transactions whereby a restricted grant of brand
equity was given to key management in House 337 Limited, MHP Group Limited,
Transform UK Consulting Limited, M Booth & Associates LLC, Brandwidth
Marketing Limited and Plinc Limited (2023: Elvis Communications Limited and
Publitek Limited) at nil cost which holds value in the form of access to
future profit distributions as well as any future sale value under the
performance-related mechanism set out in the share sale agreement. This value
is recognised as a one-off charge in the income statement in the year of grant
as the agreements do not include service requirements, thus the cost
accounting is not aligned with the timing of the anticipated benefit of the
incentive, namely the growth of the relevant brands.
(3)This charge relates to payments linked to the continuing employment of the
sellers which is being recognised as an expense over the period of employment
as required by accounting standards. Although these costs are not exceptional
or non-recurring, the Group determined they should be excluded from the
underlying performance as the costs relate to acquiring the business. The
sellers of the business are typically paid market salaries and bonuses in
addition to these acquisition-related payments and therefore the Group
determines these costs solely relate to acquiring the business. Adjusting for
these within the Group’s adjusted performance measures gives a better
reflection of the Group’s profitability and enhances comparability
year-on-year.
(4)In the current year the Group has incurred restructuring costs all relating
to staff redundancies as we pro-actively reduced our cost base to take account
of macro-economic trends and anticipated efficiencies arising out of the
adoption of AI. Only costs that relate to roles permanently being eliminated
from the business with no intention to replace are adjusted for. In the prior
year, the costs primarily related to rebranding and redundancy costs for the
specific transformational events of creating the three new brands from the
acquisition of Engine Acquisition Limited (“Engine”). In both years, the
costs do not relate to underlying trading of the relevant brands and have been
added back to aid comparability of performance year on year.
(5)These costs are directly attributable to business combinations and
acquisitions made during the year. The charges are excluded from performance
as they would not have been incurred had the business combination not occurred
and a higher or lower spend has no relation on the organic business. They do
not relate to the trading of the Group and are added back each year to aid
comparability of the Group’s profitability year on year.
APPENDIX – ALTERNATIVE PERFORMANCE MEASURES (Continued)
FOR THE YEARS ENDED 31 JANUARY 2024 AND 31 JANUARY 2023
A2: RECONCILIATION OF STATUTORY PROFIT BEFORE TAX TO ADJUSTED PROFIT BEFORE
TAX(Continued)
(6)In the prior year the Group recognised charges relating to the
reorganisation of the property space across the Group. The majority of the
charge is impairment of right-of-use assets and leasehold improvements. As a
result of the acquisition of Engine and understanding of the ongoing office
space required, the Group identified excess property space within the
portfolio and therefore took an impairment charge relating to those offices.
The Group adjusted for this cost, as the additional one-off impairment charge
did not relate to the underlying trading of the business and therefore added
back to aid comparability.
(7)In the current year the Group refinanced its banking facilities and agreed
to a new £150m revolving credit facility (“RCF”) with a consortium of
five banks. The refinance occurred before the old facility agreement ended and
therefore there was £0.6m of capitalised fees remaining on the balance sheet
in relation to the previous facility agreement that had yet to be amortised.
As a result of the new agreement, the old RCF fees were written off as a
one-off charge to the income statement. The Group adjusted for this
significant cost as the charge is non-recurring and therefore added back to
aid comparability of the Group’s profitability year on year.
(8)In line with its peer group, the Group adds back amortisation of acquired
intangibles. Judgement is applied in the allocation of the purchase price
between intangibles and goodwill, and in determining the useful economic lives
of the acquired intangibles. The judgements made by the Group are inevitably
different to those made by our peers and as such amortisation of acquired
intangibles been added back to aid comparability.
Adjusted profit before income tax has been presented to provide additional
information which may be useful to the reader. Adjusted earnings to ordinary
shareholders is a measure of performance used in the calculation of the
adjusted earnings per share. This measure is considered an important indicator
of the performance of the business and so it is used for the vesting of
employee performance shares.
A3: RECONCILIATION OF ADJUSTED TAX EXPENSE
Year ended Year ended
31 January 2024
31 January 2023
£’000 £’000
Income tax expense reported in the Consolidated Income Statement 26,403 7,123
Add back tax on adjusting items:
Costs associated with the current period restructure and office moves 1,248 1,210
Unwinding of discount on and change in estimates of contingent and deferred (2,220) 12,978
consideration
Share-based payment charge 273 -
Amortisation of acquired intangibles 5,369 4,943
Adjusted tax expense 31,073 26,254
Adjusted profit before income tax 117,945 112,538
Adjusted effective tax rate 26.3% 23.3%
APPENDIX – ALTERNATIVE PERFORMANCE MEASURES (Continued)
FOR THE YEARS ENDED 31 JANUARY 2024 AND 31 JANUARY 2023
A4: RECONCILIATION OF ADJUSTED EARNINGS PER SHARE
Year ended Year ended
31 January 2024
31 January 2023
£’000 £’000
Profit attributable to ordinary shareholders 52,907 1,623
Unwinding of discount on future deferred and contingent consideration and 24,871 22,885
share purchase obligation payable
Change in estimate of future contingent consideration and share purchase (32,340) 31,217
obligation payable
Charge for one-off employee incentive scheme 6,605 596
Costs associated with restructuring 5,152 2,302
Property impairment - 4,749
RCF fees write off 601 -
Amortisation of acquired intangibles 22,031 23,188
Employment linked acquisition payments 10,006 11,971
Deal costs 671 5,521
Tax effect of adjusting items above (4,670) (19,131)
Adjusted earnings attributable to ordinary shareholders 85,834 84,921
Number Number
Weighted average number of ordinary shares 99,247,832 97,635,507
Dilutive LTIP shares 1,848,787 2,279,528
Dilutive growth deal shares 3,345,900 2,373,445
Other potentially issuable shares 775,582 3,392,207
Diluted weighted average number of ordinary shares 105,218,101 105,680,687
Adjusted earnings per share 86.5p 87.0p
Diluted adjusted earnings per share 81.6p 80.4p
Adjusted and diluted adjusted earnings per share have been presented to
provide additional information which may be useful to shareholders to
understand the performance of the business by facilitating comparability both
year on year and with industry peers. The adjusted earnings per share is the
performance measure used for the vesting of employee performance shares.
A5: RECONCILIATION OF NET REVENUE
Year ended Year ended
31 January 2024
31 January 2023
£’000 £’000
Revenue 734,673 720,500
Direct costs (156,834) (156,701)
Net revenue 577,839 563,799
Organic net revenue growth is defined as the net revenue growth at constant
currency excluding the impact of acquisitions and disposals in the last 12
months. For acquisitions made in the prior year, only the corresponding months
of ownership are included in the calculation of growth.
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