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Next Fifteen Communications Group

Final Results – Strong H2 organic growth; good start to the new year

NFC’s full year results did not contain any surprises following the January trading update. The key point was the continuation of the H2 high single digit organic revenue growth into the first two months of the new year. Whilst this by no means guarantees the full year outcome; it is a good start and underpins current year expectations. If this momentum is maintained and barring no further material FX volatility this suggests current year estimates could be conservative. NFC shares are currently trading near all time highs, which is no great surprise given the strength of the group’s performance over the last four years. Yet, the valuation does not look stretched relative to the peer group despite a superior track record and future growth outlook.

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  • 20 Apr 18
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Communisis

Cross Channel Communications

Like its peers, Communisis is managing a structural transition from the analogue to digital world. This process has not been without its challenges. However, the proof is in the pudding and the performance over the last four years has been impressive. Despite the headlines surrounding declines in traditional print marketing; revenue and profit have grown consistently as has cash generation. The net result is a balance sheet that is de-gearing and a clear path to further improving the overall business mix. Communisis has a particularly strong track record when it comes to winning and retaining high value, multi-year contracts which speaks volumes for the credibility and the breadth of the proposition. The progress made has seen the shares re-rate significantly as investors have sharpened their focus on the returns latent within the business. An attractive, and well covered, dividend yield is the icing on the cake.

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  • 08 Mar 18
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Next Fifteen Communications Group

Trading update – UK momentum; dollar headwinds; estimate upgrades

NFC has provided a full year trading update with FY18E expected to be in line with expectations. Beneath the surface this breaks down into a better than expected UK performance; a return to healthy 5% plus organic growth in the US; but softened by the recent strength of Sterling relative to the dollar. Group net debt is expected to be lower than £12m at the year end, £2m better than our original expectation of £14.3m. We are taking this opportunity to revise our forecasts to factor the recent Brandwidth acquisition; UK strength and dollar weakness. The net result is a 2% upgrade to our FY19E EPS estimate. NFC currently trades on a FY19E PER of 13.5x, EV/EBITDA of 8.3x and a dividend yield of 1.7%. The PER discount to the Small Cap Agency peer group has widened to 13%.

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  • 20 Feb 18
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Next Fifteen Communications Group

Interim Results – Solid H1; good start to H2

Given poor news-flow from elsewhere in the peer group (a WPP online advertising wobble is never helpful for sentiment, despite very little direct read across for NFC); these interim results were reassuringly solid. The key North American business continues to deliver healthy organic growth whilst the UK is experiencing both organic growth and M&A contribution. The second half has started well and management tone can best be described as cautiously optimistic. NFC has been a beneficiary of Dollar strength in recent years and the outlook here is mixed. NFC now trades at a 3% PE discount to the Small Cap Agency peer group despite a superior growth outlook and solid balance sheet.

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  • 04 Oct 17
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Next Fifteen Communications Group

M&A strategy – Accretive, Value Focus, Lower Risk

Next Fifteen (NFC) has announced the acquisitions of Velocity Partners and Circle Research for a combined net initial consideration of £9m (£7.9m in cash). Both acquisitions are in line with the NFC M&A strategy; single digit acquisition multiple; entrepreneurial continuing management, digital focus with North American ambitions. We have argued before that NFC’s M&A track record is one of the best in the peer group, with an emphasis on value, innovation and quality over scale. We have upgraded our estimates in response. NFC continues to trade on a well-deserved 6% PE premium to the Small Cap Agency peer group.

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  • 08 Aug 17
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Next Fifteen Communications Group

Final results ahead of expectations

Final results were ahead of our, and market, expectations at several levels reflecting strong organic growth; a good performance from acquisitions; US dollar benefit and, not least, operational efficiencies across the group. Whilst North American growth captured most of the headlines; the contribution from the UK, EMEA and APAC was significant. The balance sheet was stronger than expected leaving the group well positioned to capitalise on further M&A opportunities. The key question for investors is whether the current F Y18E PE of 15.1x fully captures growth prospects (we look for 11% EPS growth); current or future upgrades; benefit from future acquisitions or continuing US dollar strength.

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  • 11 Apr 17
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