Arun Sudhaman 27 Nov 2012 // 12:00AM GMT
LONDON--Next Fifteen has reported revenue growth of six percent for its 2012 fiscal year and taken a charge of £1.8m as a result of internal fraud.
The group last month said it had discovered "complex fraud" at one its agencies, Bite Communications, which delayed the release of its full-year results.
In today's earnings announcement, Next Fifteen chairman Richard Eyre said that the consequent investigation has revealed "an act of personal embezzlement by a long-standing member of the finance team in a trusted position."
"The required accounting adjustment has been to write off as an exceptional item £1.8m relating to unrecoverable assets and unrecorded liabilities, reflecting cash stolen from the business," added Eyre. "The fraud continued into the early part of the current financial year, which will require a further write-off of £0.1m. This crime is now being investigated by the FBI and the SFPD."
The fraud resulted in Next Fifteen's profit before tax declining by 21 percent to £6m, on revenues that grew six percent to £91m.
Technology PR, which accounts for two-thirds of revenues, grew by just over two percent, amid the loss of key client HP at Bite Communications.
However, consumer PR, which represents around a sixth of Next Fifteen's revenue, declined by six percent. Eyre attributed the poor performance to a "tough year" for London PR shop Lexis, and said the firm has been "re-staffed and retooled considerably during the year."
Eyre noted that Lexis' acquisition of Paratus in May has resulted in a "return to growth for the agency and respectable profit margins."
The group's corporate communications division, which accounts for around seven percent of revenue, grew by an impressive 31 percent, aided by a full-year contribution from the Blueshirt Group.
Meanwhile, the 'pure' digital/research segment was up 67 percent, thanks in part to a full-year contribution from digital firm Bourne, which grew 34 percent. This segment now accounts for around 10 percent of Next Fifteen's revenues.
Eyre also noted that Next Fifteen generated only three percent of its revenues from research and analytics in the last year, ahead of the launch of a new research business led by outgoing Bite CEO Clive Armitage.
Next Fifteen CEO Tim Dyson said that the firm remains committed to its 'transition' from traditional PR to a digital communications model that recognises the fundamental shifts in marketing and media consumption.
He pointed to growth of eight percent at Next Fifteen's Asian operations as evidence that markets like China and India are "leapfrogging aspects of traditional marketing."
"We are seeing the sales of traditional services remain at best flat, while the sales of new digital services are expanding rapidly," said Dyson. "In the next few years I expect this trend to accelerate, but only if we continue to make the right investments."
However, Dyson cautioned that these investments should "complement" the group's existing strengths.
"Right now it would be easy for us to stray away from our core business and start selling a wide range of unconnected but nevertheless digital services. We will not do that. Instead we will focus our investment around businesses that complement the agencies we already own."