Next Fifteen Communications Group PLC

Next Fifteen Communications Group PLC (LON: NFC) is an FTSE AIM UK 50 index listed Media Company. The Company provides communication services in the United Kingdom and the international markets.

NFC will pay a final dividend of 7.0 pence per share for FY21 on 13 August 2021, while the ex-dividend date will be 08 July 2021.

The Annual General Meeting of NFC is scheduled for 24 June 2021.

Investment Rationale for Valuation – SELL at GBX 858.00

• On the profitability front, the operating margin and net margin has not exceeded the respective industry median of 10.3% and 5.3% since FY16.
• The return on equity and return on assets remained in a negative zone for FY21, while the industry median was falling in the positive territory.
• NFC had reported diluted earnings per share of negative 5.3 pence per share during FY21, while it was 2.5 pence per share for FY20.
• From a technical perspective, a 20-days exponential moving average of GBX 861.00 is indicating a correction in the stock price.

Key Risks

• The media industry is exposed to global political and economic events and trends, leading to a risk to business operations from external factors.
• The recent announcement regarding an extension of Covid-19 restrictions in the UK by four weeks would hamper the top-line business of NFC.
• The Company may lose clients in case it failed to retain key creative commercial and management talent.

Recent Developments

Acquisition of a significant stake in BCA – On 04 May 2021, the Company had announced the acquisition of a controlling stake in Blueshirt Capital Advisors LLC (‘BCA’). Moreover, NFC had exercised the option of increasing the shareholding from 20% to 51%. The Company also had the option to increase the shareholding to 80% in two years’ time.

FY21 Financial Highlights (for 12 months ended 31 January 2021, as of 13 April 2021)

(Source: Company result)

• On an adjusted basis, the revenue grew by around 7%, while the statutory revenue rose by almost 8% during FY21.
• The net cash from operations had increased by approximately 47% to £72.9 million during FY21.
• The statutory operating profit went down by around 29% during FY21.

One Year Share Price Chart

(Analysis done by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (NTM) (Illustrative) 

Conclusion

NFC expects the acquisition of Shopper Media Group Ltd to be earnings accretive from FY22. However, the Company had demonstrated an adverse turnaround and slipped to pre-tax loss during FY21. The Company had reported a statutory loss before tax of negative £1.3 million during FY21 because of the adverse impact of £10 million property impairment charge due to surplus office space. The stock made a 52-week High and Low of GBX 934.16 and GBX 330.00, respectively.

Considering the statutory loss during FY21 and unfavourable valuations shown above, we have given a “SELL” recommendation on Next Fifteen Communications Group at the current market price of GBX 858.00 (as of 22 June 2021, at 07:30 AM GMT), while we will suggest reinvesting when we identify further growth catalysts for the Company.

*The reference data in this report has been partly sourced from REFINITIV.

*All forecasted figures and Peers/ Industry information have been taken from REFINITIV.

*Dividend Yield may vary as per the stock price movement.

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