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Europe, Bite Drag Down Next 15 Earnings
Arun Sudhaman
Holmes Report
President/Editor-in-Chief

Europe, Bite Drag Down Next 15 Earnings

A steep decline in European revenue meant that Next 15 only posted growth of one percent in the first half of its fiscal year.

Arun Sudhaman

LONDON--A steep decline in European revenue meant that Next 15 only posted growth of one percent in the first half of its fiscal year.

Next 15 CEO told the Holmes Report that European revenues at the holding group, which owns Bite Communications, Text 100, M Booth, Lexis and OutCast, dropped by around 10 percent.

The loss of Next 15's multi-market Nokia mandate, handled jointly by Bite and Text 100, was a key factor in the European slowdown, said Dyson, along with "general cutbacks in client expenditure."

"If you take Europe out of the equation, then actually the growth was really quite strong," said Dyson, pointing to a five percent improvement in the US. 

Dyson also noted that a general slowdown at Bite, the firm most affected by the Nokia less, had impacted group profitability. Bite has restructured operations in the US and Europe recently, which included merging its UK presence with sibling digital firm Bourne.  

In addition, Bite has suffered losses of almost £2m because of alleged fraud by a former employee at  the firm's US operation. The Holmes Report understands that the former executive from Bite's financial department is currently being investigated by the FBI and IRS.

"If you took Bite out globally, then you would have high single-digit growth," said Dyson, noting that the merger would Bourne signalled the "remedy" for the agency. "Now it’s just about making it work. Things are heading in the right direction - you have to be patient once you’ve done the right things."

Overall, revenues for the six-month period reached £46.6m, with profit up six percent to £4.5m.

Growth, said Dyson, was again driven by digital, with Next 15 redefining reporting segments to reflect the changing nature of media consumption. Technology and consumer PR are now grouped under 'integrated communications', accounting for 85 percent of group income and reporting a two percent decline in the six-month period.

The remainder, called 'specialist agencies', grew by 20 percent.

The group also announced that it will spend £2m over the next two years to accelerate its transition into a more full-service digital offering, via "restructuring, investment and acquisition"

After spending around £1m on digital firms in the past four years, and launching in-house digital firm Beyond, Next 15 acquired DC digital shop Connections Media during the first half of its year and bolstered investement into data/insight business Agent3, led by former Bite CEO Clive Armitage.

"In the knowledge that staff changes can lead to some client disruption, we anticipate only modest organic revenue growth and some margin pressure over this two-year period as we reduce our dependency on revenue from traditional services," said Dyson.

"In addition, we expect pure and hybrid digital services to grow to represent more than 50 percent of group revenues (approximately 43 percent at this point). Put simply, the investment should create attractive returns. By way of illustration, our investment in the start-up digital agency Beyond paid for itself in less than two years."

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