By Arun Sudhaman
LONDON: Next Fifteen CEO Tim Dyson has revealed that the holding group is to diversify beyond its technology offering into healthcare, after reporting encouraging earnings for its latest fiscal year.
Dyson told the Holmes Report that Next Fifteen is looking to acquire healthcare agencies in the £7 to £10 million range in either the US or UK. In an expansive interview, he also revealed why he cannot rule out the prospect of the holding company being sold, or even going private.
Next Fifteen reported revenue growth of 10.6 per cent to £72.3 million for the year ending 31 July 2010. £9.4 million of this growth, though, came from the two main acquisitions: New York consumer firm M Booth and Asia-Pacific tech shop Upstream Asia.
Those two buys joined a roster of agencies that includes Text100, Bite, Lexis PR, the Outcast Agency and 463 Communications.
Profits reached a record high of £6.6 million, up 26 per cent over 2009, while organic growth was up 7.7 per cent in the second half of the year.
Next Fifteen also announced that it has acquired an 85 per cent stake in The Blueshirt Group, a San Francisco financial comms firm that services the tech sector, for an initial consideration of £3 million rising to $11 million over the next four years.
In a presentation to investors, Dyson outlined his plans to expand Next Fifteen beyond technology, which currently accounts for 69 per cent of the group’s revenues. The foray into healthcare marks Next Fifteen’s first move into a different industry, after previously diversifying into disciplines that can service tech clients – such as consumer, corporate and financial.
“We want healthcare to be 10 percent of our revenues by 2013,” said Dyson. “It’s likely we’ll do some sort of acquisition in that space.”
Dyson also revealed that, after the Blueshirt deal, Next Fifteen is also hunting for a financial comms purchase in the UK. The overall goal, he said, is for technology to drop to a 50 percent share. He expects digital – which currently accounts for five percent – to double over the next three years.
“What we’ve seen is that what we are good at as a business is managing relatively specialised agencies,” said Dyson. “Where we’ve not been successful is in managing something that’s too broad in scope.”
Dyson is expecting particular growth from Beyond, the digital agency which Next Fifteen created via a hybrid model that combined a start-up with an acquisition, of digital firm Type3. Next Fifteen owns 51 per cent of Beyond, with Dyson pointing to the outfit’s strength in analytics as being a key “differentiator”.
“We definitely come with an earned media approach, and this analytics approach plays into that,” he explained. “What we’re not doing is just coming and saying we’d like to talk to you about your Twitter and Facebook community – they expect PR agencies to do that.”
Dyson added that most PR agencies do not undertake the level of online research into conversations that Beyond is touting. “They may lie to you and tell you they are doing that. They can do some simplistic analysis, but certainly not to the level that is possible and we believe is valuable. The problem is that a head of comms is not given the resources to produce that whereas the CMO is.”
Next Fifteen’s investment in Beyond, around £250,000 excluding the acquisition, means that Dyson is “bullish” about the future. Even when the topic of a sale comes up, following high-profile bids from Huntsworth Group and Chime Communications last year.
“One of the sad realities of being a public company is you don’t get to choose – you have to look at the interests of your shareholders. I don’t want to sell the company right now – I’m excited about what we’re trying to do.”
“But equally, I’m obliged to listen to anybody who comes and says, we’d like to acquire your company. If I believed it would enable us to get to where we need to get more quickly than we could get to ourselves, then yes, let’s have that conversation. I’m not precious about that. I want to run Next 15 because I want it to be successful, and if it could be more successful somewhere else, I don’t want to stand in the way of that.”
Following the delisting of PR agency Freshwater in the UK and Engine Group’s postponement of its IPO, Dyson was equally candid about the lure of going private. “We‘ve looked at it at different points, when our rating has gone really low. There was a point when our market cap dropped to £18 million and we knew it was worth more than that – we thought why not just take it private?”
In particular, Dyson pointed to the fact that public ownership has not necessarily helped Next Fifteen access more capital. “That part is not working for us – hopefully that will change as we become a bigger company.”
However, Dyson said while “there are days when I loathe being public and days when I love it”, reverting to private ownership carries a number of risks. “Effectively you put a for sale sign up, so there’s a risk that somebody like WPP comes in and buys you.”