Next Fifteen Communications
Edison | Jan 29, 2015 06:41AM ET
Strong overall trading, plus £4.3m share placing
Next Fifteen (LONDON:NFC) released a positive trading update saying that it continues to see strong overall trading. With the group changing its year end to January, management says that the results for the 12 months to January 2015 are anticipated to be above the top end of expectations. Its US businesses, which contribute over half of the group’s revenues, are again delivering double-digit revenue growth. We have realigned our estimates to the January year end for FY15 and FY16 – these reflect the trading update and incorporate the benefit of the relative recent strength of the US dollar. In addition, the group is placing 3.09m shares at 145p, raising a net £4.3m, to add to the group’s resources – management expects to complete a number of identified infill acquisitions in H116.
New January year-end FY15e and FY16e initiated
In addition to the strong growth in the group’s US businesses, management says simplification of operations in Asia and mainland Europe are progressing ahead of plan and are already delivering improved returns, plus the UK has seen improved profit margins due to both management action and infill acquisitions. The group is due to report in April its results for the 18 months to January 2015 as it changes to its new fiscal year end. Our now initiated FYJan15e and FYJan16e reflect strong overall trading and the benefit of the c 8% strength in the US dollar since early October 2014. These estimates equate to an upgrade to group operating profit of c 2% for FYJan15e and growth, including acquisitions, of 24% for our new FYJan16e (EPS growth 14.5% after increased minorities and the placing), though excluding any benefit from further accretive acquisitions in FY16.
Share placing raises £4.3m for acquisition firepower
The group is placing with existing and new institutions 3.09m shares at 145p, raising £4.3m net. Continuing the group’s strategy of infill acquisitions, the group has identified a strong pipeline of potential further infill acquisitions and investments in pursuit of its digital expansion strategy in the UK and the US, including three which management expects to complete in the next six months.
Valuation: Fairly valued on strong performance
Next Fifteen’s share price has performed strongly over the past three months and has re-established its historic premium rating, now that the group is demonstrating that it is back on the growth track. This outperformance also reflects the group’s increased focus on the fast-growing digital marketing services space together with revenue and profitability benefiting from the relative strength of the US dollar against sterling in recent months.
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