Next Fifteen’s H1 results have provided more colour on the strong financial performance indicated in the recent trading update. All the group segments are delivering strong YoY organic growth, bolstered by recent acquisitions. The performance of the Delivery segment continues to be eye-catching, especially in terms of margin. As previously flagged, the structural margin gains from property and post pandemic cost efficiencies have now been fully captured with the group now re-investing back into headcount and capacity. Given the strength of current trading, we have upgraded our FY22 expectations by a further 3% although we do not see further margin gains until FY23. Productisation is a growing theme for Next Fifteen as it looks to break clear of the margin constraints typically associated with agency business models. C.40% of group revenue is already derived outside of “time and materials” and delivers a materially higher margin. The pathway to the group generating EBITA margins in excess of 25% is becoming clearer and will be driven by a combination of internal investment, M&A and current revenue growth trends being maintained. Next Fifteen currently trades on a FY23E PE of 20.7x which, despite the strong recent run, still represents a material discount to a number of peers. Given the strength of delivery and the medium-term outlook, this discount continues to feel anomalous.
11 Oct 2021
H1 results: +3% revenue / PBT upgrade
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H1 results: +3% revenue / PBT upgrade
Next 15 Group plc (NFG:LON) | 894 98.3 1.2% | Mkt Cap: 889.0m
- Published:
11 Oct 2021 -
Author:
Iain Daly -
Pages:
9
Next Fifteen’s H1 results have provided more colour on the strong financial performance indicated in the recent trading update. All the group segments are delivering strong YoY organic growth, bolstered by recent acquisitions. The performance of the Delivery segment continues to be eye-catching, especially in terms of margin. As previously flagged, the structural margin gains from property and post pandemic cost efficiencies have now been fully captured with the group now re-investing back into headcount and capacity. Given the strength of current trading, we have upgraded our FY22 expectations by a further 3% although we do not see further margin gains until FY23. Productisation is a growing theme for Next Fifteen as it looks to break clear of the margin constraints typically associated with agency business models. C.40% of group revenue is already derived outside of “time and materials” and delivers a materially higher margin. The pathway to the group generating EBITA margins in excess of 25% is becoming clearer and will be driven by a combination of internal investment, M&A and current revenue growth trends being maintained. Next Fifteen currently trades on a FY23E PE of 20.7x which, despite the strong recent run, still represents a material discount to a number of peers. Given the strength of delivery and the medium-term outlook, this discount continues to feel anomalous.