Anatomy of a
growth consultancy
Next Fifteen Communications Group plc
Annual Report 2022
Strategic report
Corporate governance
Financial statements
We are growth
consultants.
In August 2021, in the midst of the pandemic, Next 15 turned 40. In an era where many companies
have relatively short lives, we’re quietly proud of that. We took a moment to look back over four
decades and celebrate the people and the work that have made us who we are today.
We have also been looking forward. For this year’s report we have revised our strategy section to
provide a clearer, simpler insight into what we do and who we do it for. We’ve also introduced a new
Environmental, Social and Governance ('ESG') section that brings together our efforts to be good
corporate citizens for our people, the environment and the communities in which we participate.
This improved report demonstrates and supports our purpose to strive constantly to make our people
and our customers the best versions of themselves they can possibly be.
More about our business
www.next15.com
More about growth
www.next15.com/growth
Strategic report
Corporate governance
Financial statements
Financial highlights
Contents
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Adjusted
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Adjusted profit
before tax♦
£79.3m
+62%
Adjusted
diluted earnings
per share♦
59.7p
+47%
Net
revenue♦
£362.1m
+36%
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Statutory
operating profit
£40.0m
+192%
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Net cash from
operating
activities
£78.8m
+22%
Dividend
per share
12.0p
+71%
Alternative Performance Measures
The report provides alternative performance measures ('APMs') which are not defined or specified under IFRS.
♦ Measures with this symbol are defined in the Glossary section on page 196.
Financial highlights
About us
Our business
Chair’s statement
Our values
Chief Executive’s statement
Strategic report
1
2
3
7
9
11
15 Our market
16 Our strategy
20 Key performance indicators
22
28
30
33
54
Financial review
Stakeholder engagement
Section 172(1) statement
ESG report
Principal risks and uncertainties
Corporate governance
65 Board of Directors
Introduction
68
70 Corporate governance statement
76 Nomination Committee report
Audit Committee report
77
83 Directors’ remuneration report
101 Report of the Directors
105 Directors’ responsibilities statement
Independent auditors’ report
Financial statements
106
118 Consolidated income statement
120 Consolidated balance sheet
122
Consolidated statement of changes
in equity
124 Consolidated statement of cash flow
126 Notes to the accounts
184 Company balance sheet
186 Company statement of changes in equity
Notes forming part of the Company
187
financial statements
Glossary – Alternative
Performance Measures
206 Five-year financial information
196
Other information
208 Shareholder information
209 Advisers
210 References
1
Next Fifteen Communications Group plc | Annual Report 2022
Strategic report
Corporate governance
Financial statements
About us
Next 15 has turned 40. I read recently that most
companies these days only last 17 years. To have
lasted this long and to be thriving is a fantastic
achievement, and is in large part because the
Company was founded on some simple but really
powerful principles; meritocracy, integrity, doing the
best work you can possibly do and, of course, being
incredibly competitive.
The first five years were insane, I don’t think there’s
another word for it. The computer industry was in its
infancy, we were still figuring everything out, learning
what to do and how to run a company. As the years
rolled by, we made some really good decisions and
we made decisions that in hindsight were terrible. We
started offices around the world, often with the wrong
people and often at absolutely the wrong time. We
hired people that were amazing and some people
who were not amazing. We made decisions that were
terrible, like Microsoft offered us friends and family
stock in lieu of fees just before they went public and
we didn’t get around to it – big mistake. We made huge
bets on people that nobody else would, which was a
really good decision. Most of these people turned out
to be brilliant and have stayed with us for a very long
period of time. In short, we were really measured by our
willingness to take risks and our faith in people, and I
don’t think those things have changed. I think what it
really taught us was that hiring the right people is the
most important decision you’ll ever make.
In the last 40 years, I’ve seen us evolve from a start-up
into a business that’s very much owning its future. The
last decade has seen the most growth and arguably the
most innovation, but the values that Next 15’s founders,
Tom Lewis and Mark Adams, instilled 40 years ago are
very much alive and kicking.
I’m really excited about the next chapter. We’re building
a completely new kind of growth consulting business
and we’ve really only just got started with that. We also
have a purpose that is just starting to be lived. Lastly, we
are very much hoping to become a B Corp.
In short, the future is exciting, fascinating and
challenging, and I for one cannot wait to see what the
next chapter looks like.
Tim Dyson
Chief Executive Officer
Watch our 40th anniversary
employee video
Watch our 40th anniversary interview
with Clive Armitage, CEO of Agent3
Brands
0
22
Employees
6
2,983
Countries
1
15
Top: The founders of Next 15,
Mark Adams and Tom Lewis, in 1984.
Above: A company photo taken in
the summer of 1984, shortly before
Tim Dyson joined.
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Next Fifteen Communications Group plc | Annual Report 2022 Strategic report
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Financial statements
Our business
We are a technology
and data‑based growth
consultancy that delivers
value to its clients through
best in class specialists.
We divide Next 15 into 4 groups of
growth consulting capabilities that
work individually or together to solve
customers’ problems.
Employees
2,983
2021: 2,077
2020: 2,183
Offices
41
2021: 47
2020: 49
Countries
15
2021: 15
2020: 15
Above: Savanta
Customer Insight
Data and analytics, and the insights they reveal, are
critical for helping our customers make the best
growth decisions. We apply this thinking not only to
our customers, we actively foster innovation and the
development of products and tools in our businesses
so that we can do (and prove that we do) the best
possible work for clients. Our continued, significant
investment in data-driven growth consulting is at the
heart of our ability to help clients solve problems,
innovate and spot new opportunities.
What we do
• Carry out primary market research
• Track opinion about brands and politics
• Manage transaction data to surface trends
More about our brands
next15.com/portfolio
• Use data to predict behaviours and
recommend actions
Case study
A large UK-based multi-category retailer approached
Planning-inc with a common business challenge. They
were looking to consistently measure the revenue impact
of their large-scale, complex CRM program; the more they
could prove performance, the more budget would be
open to them. However they lacked the analytical resource
to cover every campaign in a high-frequency program, and
also to ensure that the insight for the campaigns they did
analyse reached the marketing teams fast enough for
them to react or report in a timely fashion.
To solve this issue, Planning-inc implemented their
proprietary Campaign Analyser solution. Integrating with
the client’s MarTech stack, Campaign Analyser automates
measurement of cross-channel campaigns. Advanced
data science processes measure the incremental
revenue generated by the campaigns to show the true
benefit of marketing. The solution continues to automate
the work of senior analysts by showing which customer
groups engaged with each comm and through which
channel. Crucially, live data flows meant marketers could
rapidly access the insight they needed.
By using the automation of Campaign Analyser, this
client saw a 5x increase in the number of campaigns
measured, saw a 15x reduction in insight to action
timelines and saved an estimated £6 of analyst
resource for every £1 spent on the solution.
Our brands in Customer Insight
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Our business continued
Case study
In 2020, Brandwidth were asked to rapidly transform
Dow’s customer experience to unlock the full potential
of direct to customer (‘D2C’) commerce and digitally
transact 50% of their sales by 2023. To put that into
perspective, Dow’s annual revenue is c.US$43b, with a
significant contribution derived from traditional channels.
So a co-ordinated, global strategy was required to
elevate the end-to-end customer journey, improving
metrics at every touchpoint on the path to purchase.
The success criteria called for both a cultural and
measurable digital experience shift, remodelling
the way sales and marketing functions apply digital
practices. This involved a professional development
programme; a foundational re-structuring of data
architecture; the harnessing of Dow’s MarTech stack
to deliver personalised content and a transition to
immersive product exploration and selection as
components of a unified customer experience.
Through a single-point relationship with Brandwidth,
Dow could access the specialist expertise of brands
in three of Next 15’s segments, exactly tailored to their
needs and scalable globally. Savanta (Customer Insight)
provided market intelligence, Conversion Rate Experts
(Customer Delivery) focused on transaction completion
rates and Archetype (Customer Engagement)
deployed specialist regional expertise in APAC.
The long-term outlook for our partnership with Dow is
to further accelerate to digital innovation, commerce
and operational capabilities as they continue to invest
in growth, whilst remaining committed to their target of
becoming a net-zero enterprise by 2050.
Our brands in Customer Engagement
Above: ELVIS
Customer Engagement
The body of content, ideas and expectations
surrounding a product is what constitutes a brand.
Developing digital content that travels gracefully
across technology platform, application and language
is essential to consistent brand marketing. Creativity
doesn’t just apply to content creation though; it also
applies to the development of the digital assets that
will be used to engage with customers. For many of
today’s businesses, these digital points of engagement
are now their most valuable assets.
What we do
• Create and amplify brands
• Manage reputations and deal with crises
• Build digital brand assets such as
websites and apps
• Create brand content and thought leadership
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Case study
Splunk had historically faced a tough battle in
dislodging an incumbent competitor in the cloud
monitoring and observability space.
by-account personalisation, Agent3 left those target
accounts feeling like Splunk was much, much more
invested in their business.
However, following an acquisition, its solutions were
sufficiently bolstered to be able to offer customers the
same level of monitoring capabilities for native cloud
applications as it historically had on-premise. Splunk
needed to persuade on-premises customers that
it could compete in the cloud, so they approached
Agent3 to solve this challenge and help drive cross-sell
deals into a targeted account list of existing on-premise
customers who would be ripe targets for Splunk’s
expanded cloud proposition.
The strategy was to focus on the unique differentiators
of the Splunk+acquisition story in order to arm its
sales teams to better pitch to on-premise customers.
By using account-specific propensity data, Agent3
was able to point Splunk at the accounts where they
would win biggest and fastest. Most importantly, by
implementing a scalable approach to deep account-
• Pipeline was driven across 244 accounts, while still
supporting individual accounts with unique insights
and content. In addition, the campaign:
• Delivered 751,500 impressions
• Generated 1,291 combined contacts and leads
• Generated 725 net new leads
Ultimately, this ABM campaign represented an
incredible 116x ROI for Splunk, exceeding all
expectations and winning three major industry awards:
• ANA B2 Awards, Best Use of ABM: Gold award
• ITSMA MEA Awards, Optimising ABM campaigns,
Diamond award
• B2B Marketing Elevation Awards, Best Use of
Account-Based Marketing: Gold award
Our brands in Customer Delivery
5
Above: SMG
Customer Delivery
Building brands is a long-term process and requires
a rich set of skills and programmes. But as sales
and marketing converge our clients are looking for
ways to identify people ready and willing to buy their
products and services, and to harness that intent. A
well-engineered mixture of first party data, content
and algorithms provides much needed fuel for
corporate growth.
What we do
• Demand generation
• Account-centric marketing
• Conversion rate optimisation
• Media buying and selling
• ecommerce
Next Fifteen Communications Group plc | Annual Report 2022 Strategic report
Corporate governance
Financial statements
Our business continued
Case study
Boston Scientific approached Palladium for help
with optimising their supply chain and system for
delivering TheraSphere, a low-toxicity cancer therapy
that is designed to effectively treat liver cancer while
minimising side effects.
The main issues they were facing were: a highly
complex supply chain and short half-life of the product;
low level of in-house technology maturity and primarily
manual processes; and legacy systems, processes
and structures that were not fit-for-purpose and
susceptible to error.
Boston Scientific needed a digital solution to scale
existing ordering processes through technology rather
than people, delivered using agile methodology and
new ways of working to reduce time to market and cost
of delivery. The answer was to design and build a new
user-focused and streamlined ordering and supply
chain platform called ‘TOP’.
For Boston Scientific, the main goal was to reduce
patients’ waiting times for life-saving treatment.
The implementation of TOP resulted in:
• A tripling of TheraSphere orders processed per
year with the same headcount.
• 0 missed patient treatments in the last two years,
down from 204 per year previously.
• Onboarding and training new employees in the
ordering process is 9.5 days faster than before.
• Shortens manufacturing process from three days
effort per week to 0.5.
• 160,000 minutes saved per year in order processing.
• An annual opportunity cost saving of US$3.2m.
24,000 successful orders have been processed
through TOP to date, improving the lives of the many
receivers of TheraSphere.
Our brands in Business Transformation
Above: The Blueshirt Group
Business Transformation
Our marketing heritage helps customers build desire
for their products. But the pace of change is such that
it is no longer enough simply to paint the best face
on a brand through clever marketing. To be effective
we have to stand back, think like founders and help
redesign the Company and its products for success
in fast-changing markets. Our consulting capability is
now helping our customers transform their existing
businesses or create entirely new ones to grasp
emerging opportunities.
What we do
• Create new, scale businesses
• Build corporate venture funds
• Help private equity companies optimise the
value of their portfolios
• Help companies launch on the public markets
• Redesign public services for the digital era
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Chair’s statement
Being intentional
“ Once again our people
rose to the challenge and
delivered amazing results.”
Penny Ladkin-Brand
Chair
Dear Shareholders,
If 2020 was about being cautious in the face of
the pandemic, this last year has been about being
intentional and using the valuable lessons learned
during that time to seize the very real opportunities in
front of us. In 2020 we reorganised the Group around
the challenge of how we help our customers grow. This
year we have delivered growth in every sense of the
word. Net revenue growth has been impressive. We
delivered £362m up from £267m last year, a pleasing
36%, of which 26% was organic. Growth in adjusted
profit before tax was also strong at 62% higher at
£79.3m. Statutory revenue rose by 45% to £470m
(2021: £324m) and statutory operating profit increased
by 192% to £40m (2021: £13.7m). Fully diluted adjusted
earnings per share showed growth of 47% to 59.7p.
The Group also had net cash of £35.7m (2021: £14.0m).
When you compare these figures against any major
player in our sector, these are excellent results. But
our financial growth has been matched by significant
steps to build a stronger, more resilient business model,
capable of sustaining this type of growth in the future.
The Board has spent a considerable amount of time in
the last year on the long-term ambitions of the Group.
This has resulted in investments in building new
products, access to data and in our own infrastructure.
We have also recently expanded the Board by adding
Jonathan Peachey, our COO. Jonathan has made a
huge contribution to the business in the last few years
by bringing his considerable experience of managing
data-driven product businesses. He has also helped
significantly expand the central team’s ability to support
the needs of the Group’s portfolio of businesses. We
have also appointed Dianna Jones as an additional
Non-Executive director. She brings not just additional
bandwidth, but an important North American
perspective to the Board. I encourage you to read their
profiles in the Board section on page 65.
Our impressive results were driven by strong
performances from all four areas in which the Company
does business. Our Customer Insight business, which
uses data tools to help customers understand the
challenges and opportunities they face, saw growth of
18.6%. Customer Engagement, which helps businesses
build the digital brand assets that drive brand reputation,
customer awareness and loyalty, saw growth of 15.7%.
Customer Delivery, which is the part of our business
that uses data to help drive sales, saw growth of 40%.
Lastly, Business Transformation saw growth of 99.9%.
This part of the group uses products and consulting
services to help customers build or reinvent part of the
business to maximise their value.
During the year the Group continued to make strategic
investments in talent, technology and data products.
We also made further acquisitions to expand our
capabilities in key areas. Of note was the acquisition
of Shopper Media Group, a business that works with
ecommerce and physical retailers to maximise their
digital and physical media assets. In addition, they
work with businesses selling through these channels
to help them understand where and how their
promotional efforts should show up in these places to
be most effective.
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Financial statements
Chair’s statement continued
Since the year-end, we announced the Group’s largest
acquisition, Engine UK. Engine’s assets comprise
three businesses with roughly equal revenues that
on a combined basis total approximately £88m. The
businesses add a significant strategic communications
business in the UK through MHP Mischief, an innovation
consulting business through Engine Transformation and
digital creative business through Engine Creative. The
latter of these is being combined with our ODD agency
to create a powerful new digital creative offering in the
UK. This acquisition was funded through a placing that
raised approximately £50m, leaving the Group with a
robust balance sheet and the flexibility to make further
acquisitions in the coming year.
As we look to the year ahead, the Board remains
optimistic about the prospects for the Group. I said
last year that the pandemic tested the character of the
team that leads Next 15 and the 2,000+ (now 3,000+)
people that work for the Group across the world. Once
again our people rose to the challenge and delivered
amazing results. Like many organisations, we are
reshaping the way we work as new team models
emerge. No longer are we running teams by location.
While this does bring some challenges it also opens up
new ways of building teams that better serve the needs
of our customers. It is also creating a more flexible way
of working for the talent in our businesses.
The last thing I want to note is the progress we have
made with regards to ESG. We are making a much fuller
ESG disclosure in this year’s annual report in line with
the Group’s stated aim to become B Corp Certified. This
move has been embraced by the brands, all of whom
are participating in the necessary changes to the way
we operate. While our staff see this as simply the right
thing to do, we also appreciate that for our customers
and many investors it is also of increasing importance.
I want to close by thanking all the people that make up
Next 15. You have once again gone above and beyond,
and I know the Board greatly appreciates the incredible
work you’ve delivered over the last year. Thank you!
Penny Ladkin-Brand
Chair
4 April 2022
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Our values
Our culture is a key component of our success
At the end of the financial year, we formally articulated our values. Whilst Next 15’s
values were implicit, management recognised the importance of clearly defined
values that inform everything we do. During FY23 these values will be embedded
into our processes, including who we hire, who we do business with and how we
measure and reward performance.
Be
human
In a technology-driven world, we
put the ‘who’ before the ‘what’. We
strive to be compassionate, inclusive
and kind. We bring our whole selves
to work every day. We support and
encourage each other. We listen
to and respect each other’s
ideas, regardless of seniority
or tenure.
Make
it better
We aim to work in a sustainable
and responsible way, aiming to create
a healthy and positive legacy. We
pursue growth that we are proud of for
our brands, each other and ourselves.
We use creativity and innovation to
find a better way.
Leave
your mark
We use our own initiative to
make decisions. We take ownership
and personal responsibility for our
work. We are not afraid of making
mistakes – we test and learn as we
go. We are proactive and have an
entrepreneurial spirit. We don’t
stick to the status quo – we
try to shape the future.
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“We believe we are building a set of businesses
“We believe we are building a set of businesses
that can solve the most important growth
that can solve the most important growth
challenges our customers face.”
challenges our customers face.”
1010 Next Fifteen Communications Group plc | Annual Report 2022
Next Fifteen Communications Group plc | Annual Report 2022 Strategic report
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Corporate governance
Corporate governance
Financial statements
Financial statements
Chief Executive’s statement
The Big Shift
“ Performance like
this doesn’t happen
by accident and it
doesn’t come easily.”
Tim Dyson
Chief Executive Officer
The pandemic has changed the world as we knew it. It
has forced every business and organisation to rethink
the way they interact with customers, shareholders,
employees, partners and the various government
agencies they might deal with. And, as with every
discontinuous change, major problems have come
in its wake. The phrase ‘supply chain management’
was an arcane and rather dry topic that rarely got a
mention in the news pre-Covid. Now, it’s mentioned
daily as ships line up at ports around the world to load
or unload their cargo. This is a highly tangible sign of
the ‘big shift’ businesses are going through but there
are many more that are less newsworthy but just as
profound: the process of hiring and training staff; the
way physical retail stores have become an extension
of ecommerce rather than an alternative; the way we
consume content; and the way we receive professional
services. All of these have changed in ways that would
have seemed incredulous a few years ago.
It is against this background that Next 15 and its four
groups of businesses have been operating. It has
been a stellar year for the Group in financial terms with
record revenues and profits, and exceptional levels
of organic and absolute growth. Performance like this
doesn’t happen by accident and it doesn’t come easily.
It has come by offering the products and services our
customers need and by demonstrating that our work
is helping solve the challenge they came to us with. In
almost every case the challenges we’ve been tasked
with solving have been growth challenges.
Our customers are anxious to solve obvious financial
growth challenges but connected to that are the
ways that they reach and interact with customers
in an increasingly digital world. Equally, they want to
understand how to shift their organisations from ones
that are designed to work with customers in person,
to ones that may have little, or no, human interaction.
Likewise, they are grappling with how to use data more
effectively while also using it ethically to figure out how
they can better interact with the groups of people
connected to their business. These are changes that
were happening anyway but, in many cases, have
happened seemingly overnight – another sign of the
seismic shift I referenced earlier.
As a Group designed to help companies solve their
growth challenges and opportunities, we are organised
around four divisions. The first of these is Customer
Insights. Here we are helping customers understand
through data the world in which they operate. They
need to know what problems their customers face and
whether what they are doing is working. The next area
is Customer Engagement where we build the digital
assets that make a customer aware of a brand and
drive loyalty to it. Thirdly we have Customer Delivery.
In this part of our business we are helping customers
drive sales. Marketing programmes are nothing if
customers don’t sign on the bottom line. Lead/demand
generation tools and Account-based Marketing (‘ABM’)
are the areas seeing explosive growth in this part of our
business. Lastly, we have Business Transformation.
Next Fifteen Communications Group plc | Annual Report 2022
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Strategic report
Corporate governance
Financial statements
Chief Executive’s statement continued
As the name would suggest, these are a set of
consulting services and products designed to help
customers build or reinvent parts of their business to
maximise their value. Not surprisingly this part of our
business has seen exceptional growth as the pandemic
has endured.
Structurally you are unlikely to see the Group change
any time soon. We believe we are building a set of
businesses that can solve the most important growth
challenges our customers face. However, that doesn’t
mean we have finished building out our offering.
Going forward you can expect us to continue to invest
in each of the four areas. In some cases, these will
be investments in data tools and the development
of technologies that can automate aspects of the
services we currently deliver. A good example of this
is a software tool that was developed by our Palladium
business so that its private equity customers can do
their own due diligence on potential acquisition targets.
Historically this time-consuming work was important but
repetitive. Now a large part of that work can be done far
more quickly and without tying up valuable resources.
We will also continue to invest further in talent as an
underpin for our success. Planned further investment
will mean bringing in new digital and data capabilities,
but it will also mean developing the talent we already
have by giving them new skills.
Looking forward you can expect us to remain organised
around the four areas I described earlier. However,
the way that we deliver products and services to
customers will continue to evolve at pace. We see most
of our revenues coming from what we called Packaged
Services and TaPaaS. Packaged Services are service
offerings based around structured methodologies that
enable them to be delivered at optimal pace while
also maintaining the quality of delivery. TaPaaS is an
acronym for Technology and People as a Service. This
is where we embed technology into our processes
to speed up delivery and in some cases enable our
customers to have self-service tools that can solve
aspects of their challenges.
Putting ESG considerations at the heart of our
business is central to succeeding in this fast-moving
environment. It will still require us to focus on delivering
strong financial returns to shareholders but this will be
an outcome of the time and resources we put behind
supporting our customers, environment, people and
communities, reinforced by effective governance.
Using the B Corp framework as part of our journey
towards an effective ESG strategy has already had
some positive impacts. For example, employees can
see that a diverse workforce produces a better set of
ideas and solutions for customers. Equally, customers
want solutions that reach real world audiences, and this
requires solutions developed by diverse teams.
“ Putting ESG
considerations at
the heart of our
business is central
to succeeding in
this fast‑moving
environment.”
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Financial statements
“ I want to thank our
amazing teams and
everyone connected
to Next 15 for their
help in making
the last year
so successful.”
As we announced on 2 March 2022, we have now
acquired Engine UK. This adds significant capabilities
for Next 15 to offer growth consultancy services to UK
and international clients and fits well with our track
record and strategy of adding growth businesses which
then contribute to our target of doubling the size of the
Group in the next three to five years.
To close I want to thank our amazing teams and
everyone connected to Next 15 for their help in
making the last year so successful. They have done an
incredible job despite the challenges of the pandemic,
especially because their workplace has so often been
the challenging world of Google Meet, Microsoft Teams
and Zoom. I would also like to thank the children and
pets that have appeared on the many video links I’ve
been on this last year. You may not have done any work,
but you have put a much-needed smile on my face.
Tim Dyson
Chief Executive Officer
4 April 2022
Watch our results video
ar22.next15.com
13
Next Fifteen Communications Group plc | Annual Report 2022 Strategic report
Corporate governance
Financial statements
There have never been so many conflicting
pressures on businesses. How do they grow with
sustainability in mind?
14
Next Fifteen Communications Group plc | Annual Report 2022 Strategic report
Corporate governance
Financial statements
Our market
Growth consultancy is a huge and growing market.
We divide it into four major capabilities.
Customer
Insight
Customer
Engagement
Customer
Delivery
2020 market size:
£117.3b
CAGR growth 2020-25:
9.56%
FY22 Next 15 net revenue:
£42.1m
2020 market size:
£285.1b
CAGR growth 2020-25:
5.32%
FY22 Next 15 net revenue:
£187.6m
2020 breakdown
(growth 2020‑25 CAGR %)
2020 breakdown
(growth 2020‑25 CAGR %)
Customer experience:
£12.5b (11.7%)
2020 market size:
£182.6b
CAGR growth 2020-25:
15.51%
FY22 Next 15 net revenue:
£80.0m
2020 breakdown
(growth 2020‑25 CAGR %)
E-commerce implementation:
£20.7b (9.1%)
Market research:
£52.4b (5%)
Data management:
£12b (est) (8.5%)
Data analytics & implementation:
£17b (22.8%)
Customer Relationship
Management implementation:
£36b (8.0%)
Content, communications & creative:
£251.92b (4.6%)
Search Engine Optimisation:
£34b (20%)
Media buying & planning:
£39.9b (6%)
Social media management:
£10.5b (23.6%)
Lead generation:
£98.1b (17% – 2020‑27)
Business
Transformation
2020 market size:
£698.3b
CAGR growth 2020-25:
7.61%
FY22 Next 15 net revenue:
£52.5m
2020 breakdown
(growth 2020‑25 CAGR %)
Strategy consulting:
(inc Environmental, Social and Governance
& People Change Management)
£128.3b (10.4%)
Digital transformation:
£42.5b (16.2%)
Big data & analytics:
£53.4b (11%)
Other*:
£510.5b (5.05%)
*
2020 data has been used as a baseline to ensure a uniform comparison across the data given an absence of publicly published data for 2021 in several of the above capabilities.
Sources for this page are on page 210.
15
Next Fifteen Communications Group plc | Annual Report 2022 Strategic report
Corporate governance
Financial statements
Our strategy
Delivering growth for our
clients with sustainability
in mind
There are four key elements to Next 15’s
strategy. They boil down to: building or
buying the capabilities our clients need to
solve their growth challenges, recognising
that we can go further together as we grow
as a Group, developing our key talent, and
leaving the world a better place than
we found it.
FY22 saw significant progress on
all fronts and FY23 promises even
bigger developments.
16
Build our growth
consultancy model
We have a clear vision for the blend of consultancy and marketing execution
that will drive exceptional growth for our customers. We will continue to invest
in talented, entrepreneur-led businesses that bring new capabilities that our
customers need. Our focus remains primarily UK and US.
Progress in 2022
• Acquired Shopper Media Group (‘SMG’)
Priorities for 2023
• Integrate the UK assets of Engine UK which we
who bring data-led capabilities to monetise
retailers’ in-store and online media. SMG also
help FMCG companies optimise their ability to
activate consumers.
• Acquired several smaller companies that add new
capabilities and services to our existing brands.
• Launched our annual Growth Report based on
client research that sets out an anatomy of growth
and identifies what’s going to be important in
the future.
acquired just after year end. The Engine UK Group
will greatly extend our Business Transformation
capabilities in the UK and our ability to service
B2C customers in our Engage segment. Engine
also adds new communications capabilities to
our offer, and diversifies our client base with the
addition of significant public sector clients.
• Support Mach49’s growth as they start to deliver
the largest contract in the history of Next 15:
US$400m over five years for a stealth client
to build innovation-led, technology-driven,
sustainable ventures across the globe.
• Continue to invest in new Growth Consultancy
capabilities, particularly in our Business
Transformation segment where our brands address
clients’ most complex growth challenges.
• Continue our productisation initiative so that our
brands can offer clients the benefit of smart tech,
data and automation led services.
Next Fifteen Communications Group plc | Annual Report 2022
Strategic report
Corporate governance
Financial statements
Use the power
of Next 15
We will use our shared insight, scale and capabilities to better serve customers
without losing our Group’s deep specialist expertise. We invest in tech, data
and products that our businesses can share.
Progress in 2022
• In FY22 we won a major contract with Dow
by bringing together the capabilities of Next
15 brands: Brandwidth, CRE, Archetype and
Savanta, to solve a challenge that none of them
could have addressed on their own.
• Our brands self-organised to develop NextEFX,
a platform that uses insight about inbound client
opportunities to find the best Next 15 brand to
solve the client’s problem.
• Developed a Group-wide productisation
strategy that will see us focusing investment in
Technology and People as a Service (‘TaPaaS’)
initiatives that allow our brilliant people to have
greater capabilities at their fingertips.
Priorities for 2023
• Rollout of our CRM platform so that all existing
and new brands have access to our collective
insight and networks.
Market cap
£575.0m
FY21
£1,141.7m
FY22
• Join up our thinking on data, productisation,
marketing and B2C capabilities through
cross-group working parties.
• Consolidate our brands into single London and
New York property hubs to enhance collaboration.
Brands
21
FY21
Employees
2,077
FY21
22
FY22
2,879
FY22
17
Next Fifteen Communications Group plc | Annual Report 2022 Strategic report
Corporate governance
Financial statements
Our strategy continued
Focus on
doing better
Our values are important to us. We want to work with customers, suppliers and staff
who share them. More so than ever, we choose our work carefully, look to maximise
the positive impact that our work has, and are not afraid to say ‘no’ to work that is
financially positive but planet or people negative. Internally, we are now using the
internationally recognised B Corp framework to guide our initiatives.
Progress in 2022
• Established an Ethics Group to help our brands
make values-based choices about which clients
and projects to take on.
• Started a major project to better understand our
supplier base so that we can make sure they are
compliant with laws and regulations and ensure
diversity of ownership.
• Pledged apprenticeship funds to help creative
industries grow.
Priorities for 2023
• Set out a clear, target-driven ESG strategy for the
first time.
• Create a Board ESG committee to oversee
development and delivery of our ESG strategy.
• Significantly progress our plans for certifying
Next 15 as a B Corp.
• Developing more structured giving programmes
through charitable donation, matching staff giving,
and encouraging volunteering programmes.
18
Next Fifteen Communications Group plc | Annual Report 2022 Strategic report
Corporate governance
Financial statements
Celebrate and
develop our people
We are a group of businesses built on the talent of our people. We use our growth
consultancy model internally to attract, develop and retain the best staff. When we
acquire new businesses we trust entrepreneurial talent to drive their own businesses
and consult with us, we do not tell them what to do.
Progress in 2022
• Started the rollout of the Next 15 Academy, an
online learning platform that covers the whole
of Next 15 giving staff access to the technical,
managerial and soft skills they need to succeed.
• Continued our focus on work to understand and
improve our ability to build Equity, Diversity and
Inclusion across Next 15.
• Implemented new technology to support
cross-group recruitment and reduce bias in
the hiring process.
• Launched our first cohort of ‘Leader as Coach’
training in conjunction with Circl who matched us
with underprivileged talent from Future Leaders.
Priorities for 2023
• Partner with external specialist advisers to help
us make progress on our ED&I strategy.
• Create a leadership programme that targets
our highest potential people to give the skills
and experiences they need to accelerate their
career development.
• Create a mentorship programme to continually
improve knowledge sharing across the Group.
• Board succession planning.
19
Next Fifteen Communications Group plc | Annual Report 2022 Strategic report
Corporate governance
Financial statements
Key performance indicators
How we measure
our performance
We have included KPIs in the annual report
for the first time this year. They represent
the most important metrics we as a
management team use to evaluate and
compare the performance of Next 15
brands, and of the Group as whole. As
described elsewhere in this report we are
developing our ESG strategy and, as a
result, it may be that KPIs in this area
change over FY23 to better reflect the
outcomes we want to achieve.
See also:
Our strategy
Corporate governance
p16
p64
20
Financial KPIs
%
9
.
1
2
%
5
8
1
.
Adjusted
operating
margin♦
1
2
2
2
21.9%
%
1
.
6
2
Organic
net revenue
growth♦
26.1%
2
2
%
4
3
-
.
1
2
Operating margin is a key measure of the health
of our business that balances our drive to be
efficient with the need to continually reinvest in our
businesses to grow and evolve their offer.
Performance
In FY22 margins improved significantly for a number
of reasons including: efficiency decisions made in
FY21, an overall reduction in our property base and
reduced travel. Growing pressure on staff pay was a
balancing factor.
As a Growth Consultancy, organic growth is
exceptionally important because it shows that
our brands are offering what customers want,
and focused on the activities that will allow them
to outperform.
Performance
Compared with Covid-impacted FY21, FY22 saw a
recovery from customers seeking to kick-start their
recovery by spending on marketing and other new
initiatives that we are well placed to benefit from.
♦ Alternative performance measures. Measures with this symbol are defined in the Glossary section on page 196.
Next Fifteen Communications Group plc | Annual Report 2022 Strategic report
Corporate governance
Financial statements
Non-financial KPIs
m
5
2
£
m
7
1
£
%
7
7
7
.
%
9
6
7
.
1
2
2
1
Clients spending
over £2.5m
Number of £2.5m
revenue clients
working with more
than one Brand
1
2
2
2
£25m
1
2
2
2
21
Staff
retention
1
2
2
2
76.9%
Average client spend is a good proxy for the depth
and importance of our client relationships as it takes
time and continual ROI to grow a relationship to the
£2.5m+ level and beyond.
Performance
In FY22 we saw a very significant increase in the
number of major relationships in Next 15. This is largely
driven by our success in helping clients re-engage with
their target audiences post-Covid.
As we grow our Growth Consultancy model the
number of customer relationships that are serviced
by more than one of our brands is becoming more
important. As the Dow case study on page 4 shows,
we are able to tackle much more strategic problems
when Next 15 specialists work together.
Performance
The number of multibrand client relationships has
significant increased in FY22. Some of these are the
result of deliberate account planning. Others provide
us with an opportunity to ‘join the dots’ and offer a
broader range of help to key clients.
We are a people-first business and our ability
to attract and retain key talent is paramount.
Performance
Despite the impact of the ‘great resignation’, FY22
actually saw only minimal falls in staff retention rates
compared to Covid-impacted FY21. That is a result of
concerted effort by all our CEOs to build cultures and
workplaces that encourage talented people to build
their career with Next 15.
21
Next Fifteen Communications Group plc | Annual Report 2022 Strategic report
Corporate governance
Financial statements
Financial review
“ The Group has traded
very strongly over the last
12 months with each of our
four segments making a very
positive contribution to the
Group’s performance.”
Peter Harris
Chief Financial Officer
Audit Committee
Report
p77
Financial
Statements
p106
22
A year of strong trading
The Group has traded very strongly over the last
12 months with each of our four segments making a
very positive contribution to the Group’s performance.
Having produced a resilient trading performance
during a Covid impacted FY21, our agencies saw
the opportunity to accelerate their growth in FY22
by delivering a range of products and services which
helped their clients meet their growth challenges in a
post-pandemic world. The trading performance was
strongest in our relatively new Customer Delivery and
Business Transformation segments as clients focused
on maximising their revenue growth and adapting their
business models to a digital-first environment, whilst our
Customer Insights and Customer Engage segments also
saw encouraging revenue growth on the back of their
expanding customer base.
The Group strategy is to acquire and then enhance
entrepreneurially led businesses, where management
teams are incentivised to deliver growth over the
medium term. This often results in the Group acquiring
companies in the early stages of their development
where their future performance is uncertain, leading to
large changes in the estimates used for future earn-
out payments. During the year, we have taken the time
to examine the impact of these material changes in
estimates on the statutory results, and have created an
additional glossary to the annual report to separately
show the alternative performance measures used.
The glossary section set out at the end of the report
and accounts provides reconciliations between the
statutory and the adjusted results in order to help the
readers of the accounts to interpret the results.
Adjusted results♦
Adjusted net revenue
Adjusted operating profit after interest on finance lease liabilities
Adjusted operating profit margin
Adjusted profit before income tax
Adjusted diluted earnings per share
Statutory results
Revenue
Operating profit
Loss before income tax
Net cash generated from operations
Diluted loss per share
Year to
31 January
2022
£m
Year to
31 January
2021
£m
Growth/
(decline)
%
362.1
79.3
21.9%
79.3
59.7p
470.1
40.0
(80.1)
92.9
(74.9)p
266.9
49.5
18.5%
49.1
40.7p
323.7
13.7
(1.3)
72.9
(5.5)p
36%
60%
62%
47%
45%
192%
27%
♦ Alternative performance measures. Measures with this symbol are defined and reconciled in the Glossary section on page 196.
Next Fifteen Communications Group plc | Annual Report 2022 Strategic report
Corporate governance
Financial statements
A year of strong trading continued
In order to assist shareholders’ understanding of
the performance of the business, I have focused my
comments on the adjusted performance of the business
for the 12 months to 31 January 2022, compared with
the 12 months to 31 January 2021, in particular the net
revenue performance, adjusted operating profit and
adjusted diluted earnings per share.
The Directors consider these adjusted measures to be
highly relevant as they reflect the trading performance
of the business and align with how shareholders value
the business. They also allow understandable like-for-
like, year-on-year comparisons and more closely
correlate with the cash and working capital position of
the Group. The Group also presents net revenue which
is calculated as statutory revenue less direct costs as
shown on the Consolidated Income Statement and is
more closely aligned to the fees the Group earns for
their product and services.
In line with industry peers, the adjusted profit measures
take account of items which are not related to trading
in the current year including amortisation of acquired
intangibles, property-related impairments, brand
equity incentive schemes, costs associated with
restructuring, the repayment of furlough grants from
the UK Government and certain other items.
In February 2022 we announced that our wholly
owned subsidiary Mach49, the growth incubator
for global businesses, had entered into a five-year
strategic alliance with a global technology and digital
company. Over the term of the contract, total fees
including third-party expenses are expected to be in
excess of $400m, with revenues in the first year to be
Reconciliation of adjusted operating profit to statutory operating profit
Statutory operating profit
Interest on lease liabilities
One-off charges for employee incentive schemes
Employment-related acquisition payments
Deal costs
Costs associated with restructuring
Gains on investment activities
Property impairment
UK Furlough
Amortisation of acquired intangibles
Adjusted operating profit after interest on finance lease liabilities
Year to
31 January
2022
£m
Year to
31 January
2021
£m
40.0
(1.1)
5.9
15.2
0.5
—
(0.5)
0.2
1.4
17.7
79.3
13.7
(1.4)
2.4
8.0
0.4
2.8
—
10.0
(1.4)
15.0
49.5
approximately $50m. This has materially increased the
earn-out payable to Mach49’s equity holders and the
discounted increase in the potential liability has been
included in our statutory profit and loss account as a
finance expense.
While adjusted operating profit increased by 60%
to £79.3m (2021: £49.5m), reflecting the very strong
trading of the Group, the statutory loss before tax was
£80.1m (statutory loss in 2021: £1.3m). The statutory
loss was mostly caused by the significant anticipated
increased in the Mach49 earn-out. The statutory
operating profit increased by 192% to £40.0m (2021:
£13.7m) partly due to the one-off property related
impairment charge in the prior year and also due to
improved trading in the current year. Diluted loss per
share was 74.9p, compared with loss per share of 5.5p
in the previous year.
Review of adjusted results to 31 January 2022
Group profit and loss account
Our total Group net revenues increased by 36%
in total and by 26% on an organic basis, whilst a
combination of very high organic revenue growth
and our proactive approach to managing our cost
base resulted in an increase in the operating profit
margin to a record 21.9% from 18.5% in the prior year.
All of our agencies performed well last year with the
standout performances being from Activate, Mach49,
M Booth, Brandwidth and the Blueshirt Group, which
each grew their revenue above 30% and showed good
margin progression. Our B2B agencies performed very
strongly whilst our B2C agencies including Savanta
continued to recover from the impact of the pandemic
in the prior year.
23
Next Fifteen Communications Group plc | Annual Report 2022 Strategic report
Corporate governance
Financial statements
Financial review continued
As shown in the previous table, we incurred £5.9m of
one-off charges for employee incentive schemes on
new growth shares for Brandwidth and Publitek as well
as an additional new incentive scheme for the sellers of
Activate, and £15.2m in relation to employment-related
acquisition payments. We incurred £0.5m of deal costs
in relation to acquisitions. Amortisation of acquired
intangibles was £17.7m in the period. We incurred an
overall charge of £0.2m in relation to the reorganisation
of the property space across the Group and a gain of
£0.5m as a result of investment activities.
Taxation
The adjusted effective tax rate on the Group’s adjusted
profit for the year to 31 January 2022 was at a rate of
21.6% (2021: 20.2%), compared to the statutory rate of
18.1% (refer to note 8). The adjusted effective tax rate
was higher than the rate achieved in the previous
period largely due to a strong performance from our
US based agencies, where the rate of corporation tax
is typically higher than in the UK.
The Group notes that Governments around the world
are likely to increase their rates of corporation tax
materially over the next few years to help pay for the
cost of economic support in light of the pandemic.
Therefore it is likely that the Group’s adjusted effective
rate of tax will increase materially over the next few
years reflecting these increases. At the year end,
the Group did not have any open tax audits, nor did
it have any complex structures in place to manage its
taxes which could give rise to future challenges from
tax or competition authorities. The Board takes a low
risk attitude to tax compliance and endeavours to pay
the appropriate level of tax in all markets the Group
operates in.
24
Earnings
Diluted adjusted earnings per share has increased by
47% to 59.7p for the year to 31 January 2022 compared
with 40.7p achieved in the prior year, as a result of the
improved profitability on an adjusted basis.
Segmental review
In order to assist shareholders’ understanding
of the key growth drivers of the Group, we have
included an analysis of the results by the operational
segments we used to monitor the performance of the
business for the year ended 31 January 2022. The
four operational segments were Customer Insight,
Customer Engagement, Customer Delivery and
Business Transformation.
Customer Insight
This segment includes Savanta and Planning-inc.
Savanta performed well as its predominantly B2C
client base recovered from the pandemic. Their UK
business was strengthened by the acquisition of
YouthSight, which expanded their client offering into
the hard to reach youth market, whilst Savanta US grew
by over 50% year on year helped by the acquisition of
MSI, which is focused in the healthcare and financial
services sectors. Planning-inc continued to grow their
retail client base and developed a suite of products
which should facilitate further growth over the next
couple of years. Total net revenue increased by 27.3%
to £42.1m with organic growth of 18.6%, whilst the
adjusted operating profit increased by 85% to £9.0m at
an improved adjusted operating margin of 21.4%.
Net revenue bridge (£m)
+39.8
+14.9%
-14.3
(5.4%)
362.1
+35.7%
400
350
300
250
200
69.7
+26.1%
266.9
Year to
31 January 2021
Organic growth
Acquisitions
Foreign exchange
Year to
31 January 2022
Next Fifteen Communications Group plc | Annual Report 2022 Strategic report
Corporate governance
Financial statements
Segmental review continued
Customer Engagement
This segment includes M Booth, Outcast, Archetype,
Nectar, Beyond, Brandwidth, ODD and ELVIS. M Booth
and Brandwidth were the stand-out performers as
they expanded their relationships with a broad cross-
section of clients including P&G, Bed, Bath and Beyond,
Google and Dow Chemicals. However, all of the
agencies increased their revenues and margins during
the period. The segment produced a very positive
performance overall with net revenue growing by 12.6%
to £187.6m, with organic growth of 15.7%, and delivered
an adjusted operating profit of £40.4m at an adjusted
operating margin of 21.6%.
Customer Delivery
This segment includes our Activate, Agent3, Twogether
and SMG agencies. SMG was acquired during the
year. This segment is focused on solving short-term
revenue challenges for its clients and the pandemic
has brought this client growth challenge to the fore,
hence the exceptional performance of this segment.
Overall, the segment delivered net revenue growth
of 61.3% to £80.0m with organic revenue growth of
40.0%. The adjusted operating profit increased by 87.1%
to £28.5m at an improved adjusted operating profit
margin of 35.6%.
Business Transformation
This segment includes our Mach49, Palladium, Blueshirt
and BCA agencies. We increased our shareholding
in BCA from 20% to 51% in the period. We saw
exceptional performances from each agency in this
segment as clients sought our agencies’ advice on
how to maximise the value of their business from either
re-inventing their operating model or through a Capital
Markets transaction. Overall, the segment delivered
net revenue growth of 196.1% to £52.5m with organic
revenue growth of 99.9%. The adjusted operating profit
increased by 289.7% to £15.2m at an improved adjusted
operating profit margin of 29.0%.
Year ended 31 January 2022
Net revenue♦
Organic net revenue growth♦
Adjusted operating profit / (loss) after
interest on finance lease liabilities♦
Adjusted operating profit margin♦
Year ended 31 January 2021
Net revenue
Organic net revenue (decline)/growth
Adjusted operating profit / (loss) after interest
on finance lease liabilities
Adjusted operating profit margin
Customer
Engage
£’000
Customer
Delivery
£’000
Customer
Insights
£’000
Business
Transformation
£’000
Head
Office
£’000
Total
£’000
187,566
15.7%
79,951
40.0%
42,109
18.6%
52,477
99.9%
—
—
362,103
26.1%
40,434
21.6%
28,501
35.6%
9,023
21.4%
15,221
29.0%
(13,832)
—
—
—
79,347
21.9%
266,886
(3.4%)
33,073
(3.6%)
17,722
9.0%
166,534
(9.2%)
36,866
22.1%
49,557
17.2%
15,232
30.7%
4,876
14.7%
3,906
22.0%
(11,394)
—
49,486
18.5%
♦ Alternative performance measures. Measures with this symbol are defined in the Glossary section on page 196.
25
Next Fifteen Communications Group plc | Annual Report 2022 Strategic report
Corporate governance
Financial statements
Financial review continued
Geographical review
US
Our US businesses have continued to perform
exceptionally well. In the year to 31 January 2022,
total US net revenues grew by 44.0% to £199.3m from
£138.4m which equated to organic growth of 33.2%,
taking account of movements in exchange rates and
the increased investment in BCA during the year and
the acquisition of Mach49 in the prior year.
Our lead generation agency, Activate, had an
exceptionally strong performance throughout the year,
whilst our B2C agency M Booth grew its revenues
predominantly by winning new business from
existing clients.
We also took decisive action on the cost base with staff
reductions and a property re-organisation in our key
markets of New York and San Francisco. The adjusted
operating profit from our US businesses increased by
70.8% to £58.4m compared with £34.2m in the previous
12 months to 31 January 2021, with the operating margin
increasing to 29.3% from 24.7% in the prior year.
UK
The UK businesses have delivered a very impressive
performance over the last 12 months, with net revenue
increasing by 29.5% to £137.5m from £106.2m in the
prior period. This growth was helped by the Group’s
acquisition of SMG and Savanta’s acquisition of
YouthSight. Our UK businesses achieved organic
Year ended 31 January 2022
Net revenue♦
Organic net revenue growth♦
Adjusted operating profit / (loss) after
interest on finance lease liabilities♦
Adjusted operating profit margin♦
Year ended 31 January 2021
Net revenue
Organic net revenue decline
Adjusted operating profit / (loss) after interest
on finance lease liabilities
Adjusted operating profit margin
UK
£’000
Europe
and Africa
£’000
US
£’000
Asia
Pacific
£’000
Office
£’000
Total
£’000
137,491
18.3%
30,910
22.5%
106,247
(6.4%)
22,402
21.1%
10,041
199,348
21.3%
33.2%
15,223
11.9%
—
—
362,103
26.1%
2,504
24.9%
58,355
29.3%
1,410
9.3%
8,610
(4.7%)
138,383
(0.8%)
13,646
(5.5%)
(13,832)
—
—
—
79,347
21.9%
266,886
(3.4%)
1,997
23.2%
34,150
24.7%
2,331
17.1%
(11,394)
—
49,486
18.5%
♦ Alternative performance measures. Measures with this symbol are defined in the Glossary section on page 196.
26
revenue growth of 18.3%. The adjusted operating profit
increased to £30.9m from £22.4m in the prior year with
the adjusted operating margin increasing to 22.5%
from 21.1% in the prior year.
EMEA
The EMEA business recovered very well from a Covid
impacted FY21 with net revenue increasing by 16.3%
to £10.0m (2021: £8.6m) and adjusted operating profit
increasing to £2.5m at an improved adjusted operating
margin of 24.9%.
APAC
In the APAC region net revenue increased by 11.8% to
£15.2m (2020: £13.6m), however the operating margin
decreased to 9.3% from 17.1% in the prior period, due to
a significant investment by Mach49 in creating an Asian
hub for their business. The operating profit declined to
£1.4m as a result of this investment.
Next Fifteen Communications Group plc | Annual Report 2022 Strategic report
Corporate governance
Financial statements
Cash flow
The net cash inflow from operating activities before
changes in working capital for the year to 31 January
2022 increased to £92.7m from £66.4m in the prior
period. Our management of working capital continued
to be strong with an inflow from working capital of
£0.2m. This resulted in our net cash generated from
operations being £92.9m (2021: £72.9m). Income taxes
paid increased to £14.1m from £8.4m.
Due to the pandemic we decided to cancel the
dividends which we would have normally paid to
Next 15 shareholders in the year to 31 January 2021.
However we resumed to payment of dividends during
the year to 31 January 2022. Dividends paid to Next 15
shareholders during the year was £9.8m, reflecting
the stronger than expected financial performance.
Net interest paid to the Group’s banks reduced to
approximately £0.3m (2021: £0.8m).
Cash flow KPIs
Government support
During the prior year to 31 January 2021, the Group
utilised various Government support schemes,
primarily the UK furlough scheme and deferral of
US social security. In total across the Group, £2.1m of
government assistance was recognised as a reduction
in costs during the year ending 31 January 2021. During
the year to 31 January 2022, we repaid the furlough
monies received from the UK government in full of
£1.4m, which has been treated as an exceptional item
in the results for both years.
Balance sheet
The Group’s balance sheet remains in a strong position
with net cash excluding lease liabilities as at 31 January
2022 of £35.7m (2021: £14.0m) and net assets of £61.5m
(2021: £116.9m).
Net cash inflow from operating activities
Changes in working capital
Net cash generated from operations
Income taxes paid
Investing activities
Dividend paid to shareholders
Net cash
Net increase/(decrease) in bank borrowings
Year to
31 January 2022
£m
Year to
31 January 2021
£m
92.7
0.2
92.9
(14.1)
(32.2)
(9.8)
35.7
9.6
66.4
6.6
72.9
(8.4)
(27.0)
—
14.0
(24.9)
Treasury and funding
The Group renegotiated its banking facilities during
the year and now operates a operates a £60m
revolving credit facility (‘RCF’) with HSBC and Bank
of Ireland available until September 2024 with an
option to extend for a further two years. As part of the
arrangement the Group has a £40m accordion option
to facilitate future acquisitions. Subsequent to the year
end, £20m of this accordion has been committed and
is available within the RCF. The £60m facility is primarily
used for acquisitions and is due to be repaid from the
trading cash flows of the Group. The facility is available
in a combination of sterling, US Dollar and euro at an
interest margin dependent upon the level of gearing
in the business. The Group also has a US facility of
$7m (2021: $7m) which is available for property rental
guarantees and US-based working capital needs.
As part of the facilities agreement, Next 15 has
to comply with a number of covenants, including
maintaining the multiple of net bank debt before earn-
out obligations to adjusted EBITDA below 1.75x and the
level of net bank debt including earn-out obligations to
adjusted EBITDA below 2.5x. Next 15 has ensured that
it has complied with all of its covenant obligations with
significant headroom.
Peter Harris
Chief Financial Officer
4 April 2022
27
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Stakeholder engagement
How we engage with
our stakeholders
At Next 15, we are mindful of the necessity
to engage with our key stakeholders. We are
committed to creating an environment that
supports open dialogue for our internal and
external stakeholders alike, and we are
acutely aware that as we grow, we need to
embed more formal frameworks and systems
that guide and inform all parties. We have
spent time assessing the needs of our
stakeholders and in the coming year we will
take the actions to continue to engage as
required given our structure and growth.
See also:
Our strategy
p16
Corporate governance
p64
28
Employees
Our business is built on the talent of our people, and we know our
success is fundamentally driven by their skill, commitment and passion.
This has always been the case and will continue to be a guiding
principle. Engaging employees across a diverse group is not easy and
we seek to continually improve the way in which we communicate
and engage with our people globally. The pandemic changed the way
people work and we have had to take action to ensure we continue to
engage with employees given this change.
How we engage
• Monthly Company newsletter sent to all employees.
• Regular team meetings, both in person and virtually.
• The launch of ‘Leader as Coach’ training in conjunction with
an external provider Circl.
• Using the output of Equity, Diversity and Inclusion audits to help
Customers
Client focus is critical to the success of each of our businesses.
By their nature our businesses work in collaboration with their clients:
we embed teams within client organisations, use agile processes,
and build businesses to better serve client needs based on what
they tell us.
How we engage
• Client updates from executive management to the Board.
• We have refreshed our client onboarding process which helps us
better understand them.
• As part of our annual survey process, we reached out to our
customers via e-mail and LinkedIn networks to explore what
‘growth’ meant to them in the fast-changing world we live in.
Priorities for FY23
• Roll out a customer relationship management system to all
shape how we engage with an inclusive workforce.
of our brands.
Priorities for FY23
• Regular town halls open to all employees and hosted by Tim
• Continue to look at ways in which our businesses can collaborate
to better serve the needs of our clients.
• Client satisfaction scoring process will be rolled out to our brands.
Dyson quarterly.
•
‘Ask us anything’ Slack channel where employees can ask
management questions which includes the ability to remain
anonymous.
• Review and refresh engagement processes in light of the Group’s
increasing size and change in working patterns.
•
Implement a nominations-based award scheme called the
Board Award, open to all employees, recognising exceptional
achievements and contribution to the business.
• Complete the rollout of the Next 15 Academy – an online
learning platform.
Next Fifteen Communications Group plc | Annual Report 2022 Strategic report
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Financial statements
Investors
The Board recognises the critical importance of open dialogue
and fair consideration of the Company’s members. Our executive
management engages with shareholders regularly throughout the
year to discuss strategy and financial results. Institutional investors
made up approximately 88% of the Company’s shareholder base as
at 31 March 2022.
How we engage
• Our annual report and accounts, full-year and half-year results
announcements, and trading updates.
• Our Annual General Meeting.
• Our investor results presentations.
• Our website.
• Direct consultation on matters such as remuneration.
• Ad-hoc meetings with executive management upon request.
Priorities for FY23
• Continuing to develop the social media platforms and other online
communication with investors.
• A revised and improved website.
• A new ESG section now included in our annual report
and accounts.
Suppliers
Because of the nature of our business, our long-term success as a
Group is not dependent on any one supplier. We work with a number of
suppliers to ensure we can provide the services to our clients. We want
to ensure that our suppliers are engaged on suitable terms and meet
the expectations of the Group.
Our brands
As we grow, we want to maintain the personal connection with our
brands that has been key to our success. It is also crucial for all our
leaders to have an opportunity to get to know the Board and where
appropriate, our shareholders, as part of their career progression and
personal development.
How we engage
• Continuously review and refresh the data held, in particular in
How we engage
• Monthly meetings for all Group CEOs.
line with the implementation of a new PO based payment system
which included additional ESG-based due diligence.
• Monitor and review our relationships, including maintaining direct
relationships with account managers.
• Engage in supplier led service reviews upon request.
Priorities for FY23
• Continue to review which suppliers provide services around the
Group and work with them to ensure appropriate engagement for
all parties.
• Regular 1:1 meetings with Next 15 Executive Directors.
• Regular meetings across multiple Group functions to address
matters such as data, EDI, productisation, and financial controls.
• Annual strategy sessions with the Next 15 Board.
Priorities for FY23
• Continue our cadence of meetings with Brand CEOs.
• Put in place processes and procedures to ensure the brands
interact with the Next 15 Board and Head Office function
to get the right level of support, guidance and appropriate
governance levels.
29
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Financial statements
Section 172(1) statement
The Directors are fully aware of their duty to
promote the success of the Company for the
benefit of its members as a whole in accordance
with section 172 of the Companies Act 2006,
and in doing so to have regard to the matters
set out in section 172(1) (a) – (f). as set out below:
(a) the likely consequences of any decision in the long term;
(b) the interests of the Company’s employees;
(c) the need to foster the Company’s business relationships
with suppliers, customers and others;
(d) the impact of the Company’s operations on the
community and the environment;
Directors receive training to ensure they are aware of their responsibilities
in making decisions. In coming to a Board decision there is a thorough
process that is followed:
•
Information is provided to the Board in the form of Board papers
which provide the necessary information and state clearly what
is required from the Board. The potential impact of various
stakeholder groups will be included in such papers.
• The Board will discuss the papers, making sure there is sufficient
information to ensure that actions are within strategy and will
take into account section 172 factors. If there is not sufficient
information, management will be actioned to provide further input.
• Once the Board is satisfied that it has taken into account the
section 172 interests it will make a decision and any actions will
be documented.
• Board decisions are communicated to stakeholder groups
(e) the desirability of the Company maintaining a reputation
as required.
for high standards of business conduct; and
(f) the need to act fairly as between shareholders
of the Company.
Engagement with our stakeholders is detailed on pages 28 and 29 as well
as in the Corporate governance statement on pages 74 and 75.
The principal long-term risks to the Group are set out on pages 54 to 63,
together with the mitigating actions explained on those pages detailing
how the Directors consider those risks and the resulting actions taken.
Set out below are examples of how the Board considered certain matters
and reached decisions, demonstrating how they had regard for section
172 when discharging their decisions during the year:
ESG strategy
Matters discussed
The Board determined that there was a need to communicate a clear
ESG strategy to stakeholders.
Section 172 considerations
(a) (b) (c) (d) (e)
How the Board considered section 172
The Board was aware of the increasing importance of ESG matters to
shareholders, employees and clients and the need to set a strategy and
communicate this effectively. It sought advice from external advisers in
reviewing the ESG approach to date and planning the next steps required
to develop a robust ESG strategy. The external advisers took counsel
from the Board, employees of the business and major investors and
helped draft the ESG section of this report to ensure it was appropriately
communicated.
Outcomes
• Various ESG initiatives developed, as set out in this Report.
• Remuneration Committee to consider ESG objectives for Executive
Directors in FY24.
• Decision taken to set up a Board ESG committee to oversee the
development and delivery of a robust ESG strategy in FY23. This
strategy will be underpinned by KPIs and targets for each of the
priority areas identified as part of a materiality assessment.
See also:
ESG report
Corporate governance
p33
p64
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Acquisitions through the year
Matters discussed
The Board discussed a number of potential acquisition targets as either
stand-alone acquisitions or bolt-ons to existing businesses.
Decision to work towards B Corp
Matters discussed
The Board considered whether working towards B Corp certification
was right for the Company.
Section 172 considerations
(a) (b) (c) (e)
Section 172 considerations
(a) (b) (c) (d) (e)
How the Board considered section 172
The Board receives a rationale paper from management setting out the
ways in which the target business adds value to Next 15 and how Next 15
can add value to the target business. It considers how it fits into the long-
term strategy of the Company, whether it is earnings enhancing and the
payback period. Any employee issues will be highlighted and considered.
Following due diligence, which covers commercial, financial, employment,
technology & data privacy, legal and ESG, a report is prepared for
the Board to consider the findings and approve if the transaction
should proceed.
Decisions were made to not pursue certain acquisitions due to the
outcome of due diligence which identified that the target business would
not fit with our values, culture or level of maturity.
Outcomes
• The Company has made a number of acquisitions that add
capabilities and services to existing brands.
• The Company acquired Shopper Media Group which brings new
capabilities to the Group in terms of monetising retailers in-store
and online media as well as helping FMCG companies optimise
their ability to activate consumers.
How the Board considered section 172
The Company is values-driven and has been investigating the B Corp
certification for a while. It had to consider if the B Corp certification is in
the best interest of all stakeholders. It was acknowledged that B Corp
certification is much broader than just a single social or environmental
issue and the view of the Board was that it should help to build trust with all
of its stakeholders, whether they are shareholders, employees, customers,
suppliers or the community generally.
Outcomes
• The Company has established a B Corp Champions Group of
colleagues from around the business who regularly meet to move
forward the B Corp certification process.
• Actively make decisions through the lens of section 172
and B Corp
Recruitment decision considering
section 172 matters
We have partnered with the interim lawyers and
paralegals service provider Flex Legal to take
part in their Flex Trainee scheme. The scheme
attempts to solve a number of legal industry-
wide problems, by helping deserving future
lawyers from disadvantaged backgrounds qualify.
Alongside many well known brands, Next 15 is
taking on a candidate for at least a year of their
qualifying work experience. At the end of the
year, the candidate will either stay on for a second
year or move to another in-house team.
Flex is partnering with Barbri, who will deliver
the prep for the Solicitors Qualification Exam
(SQE) to trainees while they work. It sourced
its trainee candidates, all graduates with an
interest in a legal career, through two social
mobility charities, Strive and Talent Tap. Flex
interviewed 25 hopefuls before selecting the
final six, and we were delighted to welcome our
first trainee in 2021.
The Solicitors Qualifying Exam (SQE) is a new
route for law graduates to become solicitors and it
is a great move forward for the legal profession. It
will allow inhouse paralegals to become qualified
solicitors more easily. We are pleased that our
employed paralegal will also qualify via this route.
Next 15 is happy to be part of this exciting scheme
which is at the heart of our commitment to equity,
diversity and inclusion.
31
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The voices of the next generation have become
The voices of the next generation have become
increasingly insistent on issues such as climate
increasingly insistent on issues such as climate
change, inequality and circularity. So, how should
change, inequality and circularity. So, how should
we change the way we do business?
we change the way we do business?
32
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ESG report
Why ESG is important
to Next 15
Last year we made a public commitment to becoming
more values-driven. While we have long been led by
our values and our desire to do the right thing, until then
we had not articulated that aspiration formally.
Progress highlights
from FY22
• Decision to work towards B Corp status and use
it as framework for all ESG activities.
• Establishing an internal Ethics Group to help our
brands make values-based choices about which
clients and projects to take on.
• Undertaking Equity, Diversity & Inclusion (‘ED&I’)
audits of every part of Next 15 and establishing a
cross-Group council to drive action.
• Designing and beginning rollout of better
supplier assessment for sustainability and ethics.
• Engaging carbon specialists Green Element to
capture carbon data.
This, our first dedicated ESG (Environment, Social and
Governance) section in our annual report, summarises
how we’re applying an ESG lens to all aspects of our
business model and how we intend to extend that
ambition in the months and years ahead.
Our sector is fast beginning to understand its
responsibilities as an influencer of culture and
behavioural norms, and the key role it can play in
creating a more sustainable world. This is an
industry-wide challenge, and we intend to be at the
heart of this transformation.
We took a significant step forward this year by
committing to B Corp certification and by mapping our
carbon footprint. There is still much to do, but we have
a dedicated team, determined to ensure that we deliver
growth for our customers while staying true to our
values. The road ahead will likely be long and
challenging, but we are excited for the journey and the
opportunities it will deliver.
Tim Dyson
Chief Executive Officer
Tim Dyson
Chief Executive Officer
4 April 2022
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ESG report continued
“ Becoming part of this
amazing B Corp community
is really important to us,
but certification is only the
beginning of the work we’re
going to do in this space.”
Tim Dyson
Defining our ESG priorities
We have used the BIA and consulted with internal
stakeholders to set Next 15’s ESG priorities. In addition
to pursuing our B Corp certification, our priorities are to:
• Support customers to improve their impact
• Reduce our carbon emissions
• Champion ED&I (Equity, Diversity & Inclusion)
In line with best practice, in FY23, we will conduct a
formal materiality assessment to incorporate our
stakeholders’ views on the priority ESG topics for Next
15. We will share the outcomes of this assessment in
next year’s annual report. The B Corp framework –
including Customers, Environment, Workers (called
People throughout this report), Community and
Governance – provides the structure for this section of
the report.
Our ESG priorities
The road to becoming a B Corp
In 2021, the Next 15 Board, with strong support from our
investors and employees, approved our plan for B Corp
certification. We chose B Corp for several reasons, the
biggest of which were its focus on action, and its whole-
company approach to environmental, social and
governance topics. B Corp’s heritage, authenticity and
rigorous approach also convinced us that it would
prove to be a genuine force for good and help us avoid
meaningless box-ticking.
Support from our Board and brands for our B Corp
journey has been overwhelmingly positive. In March
2021, we set up a B Corp Champions group of
colleagues from around the business, meeting every
six weeks to drive progress towards certification.
That the journey to certification will stretch and
challenge us is a given, however we consider that to be
one of the key benefits. Those involved are already
finding the BIA (B Impact Assessment) questions
invaluable for generating ideas and highlighting the
linkages between environmental, social and
governance issues.
34 Next Fifteen Communications Group plc | Annual Report 2022
Strategic report
Corporate governance
Financial statements
The Next 15 ESG strategic priorities
Use our
business as
a force for good
by delivering
sustainable growth
for our clients
Customers
Support clients to
improve their social and
environmental impact
Work with clients who
share our values
Place sustainable
growth at the
heart of our
client conversations
Environment
Play our part in the
low-carbon transition
Reduce our carbon
emissions in line with a
1.5°C pathway
Support clients to play
their part in the low-
carbon transition
People
Put diversity and
wellbeing at the heart
of our work
Create a work
environment where
diversity is valued at
every level
Champion diversity
through our client work
Community
Support our local and
global community
Support causes that are
aligned with our values
Drive sustainability
throughout our
supply chain
Governance
Run our business as
a force for good
Work towards
B Corp certification
Acquire brands who can
drive sustainable growth
Ensure Next 15 is a great place to work
Foster a culture of sustainability across the business
Champion transparency
35
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ESG report continued
“ Our strategy is to deliver
Our ESG priorities continued
sustainable growth for our
customers, placing diversity,
community, wellbeing and
the low‑carbon transition
at the heart of our work.”
Read the report
The Changing Faces
of Business Growth
36 Next Fifteen Communications Group plc | Annual Report 2022
Redefining growth
Next 15 is a growth consultancy. We help the world’s
best companies with their growth challenges.
One thing is certain: growth is now about much more
than mere financial results. Our strategy is to deliver
sustainable growth for our customers, placing diversity,
community wellbeing and the low-carbon transition at
the heart of our work.
In July and August 2021, we reached out to our
customers via e-mail and LinkedIn networks, to explore
what growth truly means to them in a fast-changing
world. 250 people responded, ranging from Marketing
Managers to CFOs and CEOs.
We uncovered tensions between senior- and junior-
level employees on what growth should mean, and
how it is lived within businesses. And, perhaps most
importantly, we discovered how diversity, sustainability,
and employee wellbeing are all being placed front and
centre in post-pandemic growth strategies.
We are still exploring what sustainable growth
looks like in practice. But we are committed to building
environmental, social and governance (‘ESG’)
considerations into every area of our work
with customers: through Customer Insight,
Customer Engagement, Customer Delivery and
Business Transformation.
Impact Area: Customers
We aim to support clients to improve their social
and environmental impact
Working with values-aligned clients
Our decision to work towards B Corp certification was
driven by our desire to make a positive impact on the
world, and we want to work with clients who share our
values and commitment. For that reason, we do not
work with clients in the tobacco, pornography, weapons
and ammunition, or fossil fuel extraction sectors, unless
it is to help them materially change the course of
their business.
However, determining if a project or potential new
client is values-aligned isn’t always straightforward.
That is why in 2020, we began tracking our revenue
by sector.
ESG issues are often more complex than simply
avoiding contentious sectors. There is also a strong
case for helping companies in potentially contentious
sectors to transition their operations in a more
sustainable direction.
In December 2020, we established the Next 15 Ethics
Group to provide guidance and support to help our
brands make values-based choices about which clients
and projects to take on.
Made up of senior leaders from Next 15 and our brands,
the Ethics Group’s role is to:
Strategic report
Corporate governance
Financial statements
• Act as a sounding board and actively participate in
ethical debates
• Ask challenging questions
• Add knowledge and/or experience of a particular
sector and its impact
• On occasion, provide a clear decision where there
is a disagreement between stakeholders
In the coming year, we will encourage employees to
use the Ethics Group through a Group-wide
communications campaign. As part of our drive towards
greater transparency, we will continue to monitor and
report our revenue by client sector.
Helping clients to improve their social and
environmental impact
Marketing has been a positive force in recent history.
In the 1950s, it inspired the post-war generation to
imagine a better world. However, in helping to define
what is normal and aspirational, marketing has
become a driver of mass consumerism, inequality and
carbon emissions1.
This tension between the role of marketing in driving
growth for clients and the reality of finite planetary
resources is something that the industry is only just
beginning to explore. We believe that marketing has an
unrivalled opportunity to inspire sustainable lifestyles.
Creativity is urgently needed to help people imagine an
exciting, more sustainable tomorrow. In FY23, we will
begin to explore how we can partner with others to
address this at an industry level.
As a business, we are evolving from execution to
strategy. We are increasingly asked by clients to help
shape the brief, and to apply our skills to help them
solve strategic challenges. The following case studies
illustrate how we have helped clients to make a
positive impact.
Mach49
Accelerating growth in sustainable solutions
Mach49, the growth incubator for global businesses,
was founded on the belief that, through venture
building and venture investing, businesses can solve
the world’s most pressing problems, including
climate change, water, poverty, health, and education.
The company has seen an influx of activity in
Environmental, Social, and Governance (‘ESG’)-
focused investments as the global push for a clean
energy economy, including the US Government’s
plan to cut greenhouse gas emissions in half by
2030, drives resources towards climate solutions
and sees start-ups and large corporations both
doubling-down on green solutions.
1. https://www.next15.com/about-us/b-corp-journal/
Last year, sustainable investments in the US alone
jumped to US$17.1 trillion, up 42% from 2018.
Sustainability and ESG-focused corporate venturing
is the fastest growing sector of Mach49’s business.
Notable clients include Airbus, Goodyear, Halliburton
Labs, Hitachi, Schneider Electric, TDK Ventures
and Xerox.
With a focus on execution, Mach49 partners with
clients to bring their sustainability initiatives to
market. As Linda Yates, Founder and CEO of
Mach49 observes, “We have entered into a new era
of cleantech investment.”
Above: Linda Yates, Mach49 CEO, with Erin Spring, Head of Corporate Investing
and Venture Building at Goodyear, at the GCVI summit
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ESG report continued
Beyond
The Global Fibre Impact Explorer
The fashion industry is one of the largest
contributors to the global climate and
ecological crisis, accounting for up to
8% of global greenhouse gas
emissions2 and using around 1.5 trillion
litres of water annually3. Other concerns
include chemical pollution, the rising
levels of garment-related microplastics
in the environment, and the fair and
ethical treatment of workers in the
supply chain.
A large proportion of the environmental
impact of the fashion industry occurs at
the raw materials stage of the supply
chain, in the production of fibres for
fabrics. However, when brands source
these materials, they often have little to
no visibility of their environmental impact.
Next 15 brand, Beyond, is the digital
agency that Google commissioned to
develop its Global Fibre Impact
Explorer (‘GFIE’). Born out of a
partnership between Google and the
WWF, the GFIE will help brands to
make more sustainable sourcing
decisions. The tool will also provide
recommendations on how to address
issues through individual company and
collective action.
Google and WWF are now transitioning
GFIE to Textile Exchange, a global non-
profit focused on positively impacting
climate through accelerating the use of
preferred fibres across industry. Textile
Exchange will work towards an industry
launch in 20224.
2 https://blog.google/outreach-initiatives/sustainability/helping-fashion-brands-make-more-sustainable-decisions/
3 https://www.theguardian.com/fashion/2020/apr/07/fast-fashion-speeding-toward-environmental-disaster-report-warns
4 https://blog.google/outreach-initiatives/sustainability/helping-fashion-brands-make-more-sustainable-decisions/
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ELVIS
Cadbury Creme Egg –
The Golden Goobilee
Next 15 brand ELVIS, developed a through
the line campaign to mark the Creme
Egg’s 50th birthday. With inclusivity at its
core, the campaign launched with a
60-second film featuring a diverse group
of people.
In casting the couple seen sharing a
Creme Egg, the team searched for a
real-life, same-sex couple to improve
the representation of this often and
underrepresented community within
advertising. They also cast someone
with a physical disability to help
normalise the conversation around this
subject. There was diversity of talent
behind the camera too: 54% of the crew
identified as female and/or black, Asian,
or minority ethnic.
While the talent in the ad represented a
range of diverse characteristics, press
and consumer interest centred on the
scene featuring a same-sex couple.
The Advertising Standards Authority
received a petition against the ad
signed by 30,000 people, and over
40 complaints. However, the ad also
received significant levels of support.
A Change.org petition attracted almost
50,000 signatures. It was also nominated
for the British LGBT Awards.
The petition to boycott the ad shows that
the diversity conversation in the UK is far
from settled. However, the campaign
also succeeded in generating a strong
ROI for the client and sparked an
important debate about representation
in advertising.
39
Next Fifteen Communications Group plc | Annual Report 2022 Strategic report
Corporate governance
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ESG report continued
Savanta
The Savanta Eco Index
Change relies on insight. And powerful insights begin with good data. In order
to support their customers in the transition to the low-carbon economy, in
2020, Savanta launched their first Eco Index survey to explore public attitudes
and expectations on climate change.
Repeated in 2021, the Index sought the views of 6,000 respondents in the
UK, US, and Canada.
There is clear consensus that climate change is already harming the world
around us, and the majority are concerned (67% UK, 66% Canada, 59% US).
Gen-Z, who by 2050 will likely experience more impact in their lifetime than
other generations, are the most concerned (72% UK, 70% Canada, 69% US).
On the subject of who should take the lead in encouraging sustainability, the
clear verdict is governments. Worryingly, though, the consensus is that
countries won’t meet their 2050 net-zero emission targets (51% Canada, 47%
US, 46% UK).
Second on the list of who should take responsibility is the public, with
businesses third. However, in the UK in particular, this is a close call (16%
public, 15% businesses). While governments are expected to set the national
agenda, brands must prepare for the public to hold them accountable.
With three-quarters of respondents (80% Canada, 78% UK, 76% US) believing
that businesses use environmentally friendly credentials to promote their
image, without taking real action, there is work to be done to build trust.
The 2022 report will be published in spring 2022 and directly address how
brands can build trust, and support customers to make sustainable choices.
40
Read the full 2021 report here:
UK report
Americas report
Next Fifteen Communications Group plc | Annual Report 2022
Strategic report
Corporate governance
Financial statements
Changing the way we work
With our people working from home more often, we
have consolidated our offices in the UK and US over
the last year from 47 to 41, reducing costs and our
environmental footprint. We will continue to consolidate
our office space in FY23.
Business travel was dramatically reduced as a result of
the pandemic. We have found new ways to work and
do business and while our business travel may increase
slightly once all travel restrictions have ended, we will
continue to encourage our employees to avoid all but
essential business journeys. A centralised booking
system will be rolled out in FY23 that will provide us
with greater oversight of our travel-related emissions.
Our Environment Policy sets out our environmental
commitments and applies to home and office-
based working.
Impact Area: Environment
We aim to play our part in the low‑
carbon transition
Climate action
In last year’s annual report, we committed to establishing
climate impact goals. In February 2021, we engaged an
external partner, Green Element, to measure our scope
1 and 2 emissions (including electricity and gas) and
elements of our scope 3 emissions (including water,
waste, commuting and business travel) with a view to
setting robust carbon reduction targets in line with the
Science Based Targets initiative’s reduction trajectory.
See charts on page 43.
We already have a target for FY23 to reduce emissions
by 13% CO2e per person from our FY20 baseline, and
are on-track to achieving it. Our focus over the coming
year will be to support our brands to both set science-
aligned carbon targets and deliver against them.
While reducing our carbon emissions is our first priority,
we are also developing an offsetting strategy for
residual emissions. Our commitment here is that any
offsetting we do is robust, proven, and independently
verified. Our offsetting strategy will apply to Next 15 and
all of our brands.
2 https://blog.google/outreach-initiatives/sustainability/helping-fashion-brands-make-more-sustainable-decisions/
3 https://www.theguardian.com/fashion/2020/apr/07/fast-fashion-speeding-toward-environmental-disaster-report-warns
4 https://blog.google/outreach-initiatives/sustainability/helping-fashion-brands-make-more-sustainable-decisions/
41
Next Fifteen Communications Group plc | Annual Report 2022 Strategic report
Corporate governance
Financial statements
ESG report continued
Impact Area: Environment continued
Understanding the scale of our emissions
As a business, our emissions come from our direct
business operations (offices, home-working, business
travel) and indirect emissions such as production,
media and data processing.
We acknowledge that, through our client work, we have
some influence over carbon emissions beyond these
– for example, carbon emissions resulting from the
growth of our clients.
Our sector is only just starting to grapple with the
implications of these emissions. We are keen to work
with our peers in the industry, and with our clients to
understand how we can develop a unified approach.
We are in the process of measuring our direct
emissions. We have set the boundary of what is
included within our current footprint based on several
factors including the level of impact, ability to take
action and availability of information.
Environmental management
While we believe climate change to be amongst our
priority issues (which will be reviewed as part of our
forthcoming materiality assessment), we are also
concerned about materials use, water and biodiversity.
Water and waste
We have included water and waste emissions in our
Scope 3 total emissions per brand calculations.
Over the past 12 months, we have worked with Next 15
office managers and landlords to collect data on water
usage and waste. Based on total office space, we have
actual data on water usage for 46% of Next 15’s offices.
On waste, we have data for 62% of Next 15’s offices. We
have included water and waste emissions in our Scope
3 total emissions on page 45. Our aim is to move to
complete data in the coming years.
The consolidation of our office space, combined with
home and hybrid working, has reduced the volume of
water used by 90% and waste generated by 80% since
FY20. While this is welcome, we want to understand
what more can be done to manage these impacts.
To that end, as part of our six monthly quantitative
data collection, we speak to office managers about
opportunities to improve energy, waste and
water efficiency.
Currently included within reporting boundary
Not currently measured
Scope 1
Company facilities
including purchased gas
Company owned vehicles
Scope 2
Purchased electricity
Scope 3
Energy transmission
and distribution
Waste
Water
Business travel
Commuting
Working from home
Scope 3
Purchased goods and services
Building work
Transport and distribution
Off-site data centres
Production
Media planning and buying
Emissions resulting from the growth
of our clients
42
Next Fifteen Communications Group plc | Annual Report 2022 Strategic report
Corporate governance
Financial statements
Water and waste reduction measures
The majority of Next 15 offices implement a range
of measures to reduce water and waste, including:
Water
• dual function flushes in washrooms
• low-flow and motion sensor taps, toilets and urinals
• air tap spray heads in kitchens
• flow restrictors on showers and taps
Waste
• employees encouraged not to print unless essential
• printers default to double-sided, black and white
• facility-wide recycling collection points for all
standard materials and waste streams
• additional recycling schemes provided for e.g.
printer cartridges, coffee pods, and batteries
UK and North America emissions per year
Since the baseline year of FY20, there has been a
significant reduction in the emissions associated with
measured activities as a whole and when normalised
per full-time member of staff. Overall, compared to
FY20, emissions have decreased by 62% and per
person by 71%.
During FY22, we can see that the majority of emissions
for the Group was due to business travel, 50% of
emissions. This increased compared to FY21, but
decreased by 71% compared to pre-pandemic
levels in FY20.
Working from home forms the next largest source of
total emissions, contributing 31%. The remaining
emissions were related to company facilities which
was 15% and commuting which was 4%.
The following table shows our UK and North America
emissions from the sources currently measured. We
are in the process of collating our Europe, Africa and
Asia Pacific emissions.
UK and North America emission reduction targets
(tCO2 e/FTE)
We have currently set near-term targets for FY30 to
reduce tCO2e by 42% (against a baseline of FY20),
aligned with the Science Based Targets initiative’s
reduction trajectory. The change in working patterns
due to the pandemic has meant that we achieved the
FY21 and FY22 targets in the two years since the
baseline was set. This target will be reviewed annually.
Overall Emissions (tCO2e)
Emissions per person
(tCO2e/FTE)
FY20
FY21
FY22
e
2
O
C
t
6,000
5,000
4,000
3,000
2,000
1,000
0
5,535
1,556
2,092
FY20
FY21
FY22
Overall Emissions (tCO2e)
Emissions per person (tCO2e/FTE)
3.3
0.9
0.9
E
T
F
/
e
2
O
C
t
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0
FY21
FY22
FY23
FY30
E
T
F
/
e
2
O
C
t
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0
Reductions achieved to date
-73%
-71%
Future targets aligned with SBTi
-13%
-42%
FY
20
FY
21
FY
22
FY
23
FY
24
FY
24
FY
28
FY
32
FY
36
FY
40
FY
41
FY
42
FY
43
FY
44
FY
48
Emissions per person (tCO2e/FTE)
43
Next Fifteen Communications Group plc | Annual Report 2022
Strategic report
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ESG report continued
Impact Area: Environment continued
Streamlined Energy and Carbon Reporting (‘SECR’)
Next 15 has reported Scope 1 and 2 (and associated
Scope 3) greenhouse gas (‘GHG’) emissions in
accordance with the requirements of SECR. This
includes emissions for the 12 months to 31 January 2022.
GHG sources included in the process:
• Scope 1: Natural gas for energy generation
(there was no gas usage in either Next 15 or
Savanta offices)
• Scope 2: Purchased electricity (location-
based method)
Methodology
Responsibilities of Next 15 and Green Element
Next 15 was responsible for the internal management
controls governing the data collection process. Green
Element was responsible for data collection, data
aggregation, GHG calculations and the emissions
statements. Emissions were calculated according to the
Greenhouse Gas Protocol Corporate Greenhouse Gas
Accounting and Reporting Standard. Data was gathered
from exact information where possible, with some
information based on pro-rata extrapolation where
verifiable data was not available.
Scope and subject matter
The report includes sources of environmental impacts
under the operational control of the Next 15 Group in
the UK. This includes two UK organisations in FY22:
• Scope 3: Business travel in employee owned or
hired vehicles
Types of GHG included, as applicable: CO2, NO2, CH4.
The figures were calculated using DEFRA conversion
factors, expressed as tonnes of carbon dioxide
equivalent (tCO2e).
Energy efficiency action
During the reporting period, we have continued to
focus on ensuring our offices are using a low baseload
of energy during periods of low occupation. Several
sites, including our Head Office, have now moved to
renewable electricity supply. We have undertaken
energy audits of several offices with the aim to
implement the recommendations during the
coming year.
• Next 15
• Savanta
In accordance with the UK Government’s Environmental
Reporting Guidelines, these companies meet the
mandatory reporting requirements and others within
the Next 15 Group have not been included.
44
Next Fifteen Communications Group plc | Annual Report 2022 Strategic report
Corporate governance
Financial statements
Streamlined Energy and Carbon Reporting (‘SECR’)
Next 15 SECR FY2022 mandatory reporting, as follows:
Energy consumption used: (kWh)
Electricity (kWh)
Gas (kWh)
Transport fuel (kWh)
Other energy sources (kWh)
Total
UKFY
2021
UKFY
2022
99,545.9 58,502.3
15,116.5 20,900.7
—
—
—
—
Emissions (tCO2e)
Scope 1
Emissions from combustion of gas
Emissions from combustion of fuel
for transport purposes
2.8
—
Scope 2
Emissions from purchased
electricity – location based**
114,662.4 79,403.0
Scope 1 & 2
Total Scope 1+2 emissions
(location-based method)
Scope 3
Emissions from business travel in
rental cars or employee vehicles
where company is responsible for
purchasing the fuel
Emissions from upstream
transport and distribution losses
and excavation and transport of
fuels – location based
Total location based tCO2e
UKFY
2021
UKFY
2022
Intensity ratios
Number of full-time employees
within financial year (FTE)
Intensity ratio: tCO2e from Scope
1,2 and 3 (fuel for business travel
only)/FTE (Location Based)
3.8
—
UKFY
2021
UKFY
2022
302
300
0.11
0.07
23.2
12.4
Certification
Calculated as accurate by Green Element Limited and
Compare Your Footprint Limited, UK
26.0
16.2
tCO2e is tonnes of carbon dioxide equivalent gases.
*
** Location-based electricity (Scope 2) emissions using the average grid fuel mix
in the region or country where the electricity was purchased and consumed.
For SECR, location based is mandatory.
—
—
5.8
31.8
5.3
21.5
45
Next Fifteen Communications Group plc | Annual Report 2022
Strategic report
Corporate governance
Financial statements
ESG report continued
Talent all over
the world
The best people in the best roles,
no matter where they live
46
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Corporate governance
Financial statements
Impact Area: People
We aim to put diversity and wellbeing at the
heart of our work
At Next 15, our success is fundamentally driven by the
talent and effort of our workforce. That is why we put
our people first. We want our people to live our values
in everything we do. From the experience of working
with us, the value we bring to our client work, to the
diversity of their colleagues.
We have four clear priorities:
• ED&I (Equity, Diversity & Inclusion)
• Fair remuneration
• Progressive policies
• Staff attraction, engagement and retention
Equity, Diversity & Inclusion (‘ED&I’)
Our goal is to create a work environment where
everyone can bring their whole selves to work every
day, where inclusivity is baked into our culture at every
level. We understand that change of that magnitude will
take time, however, this journey started many years ago
when we set out to ensure our Board was gender
balanced. We currently have a majority female Board
including a female Chair.
In FY22, we continued that journey. We created new
frameworks to underpin all our businesses and embed
the changes we need to make. We also began tracking
our diversity data.
In May 2021, our external partner Bold Culture
completed ED&I audits on all our brands. The
conclusions were shared with the Board and brand
CEOs in July 2021.
Strategic framework
Focusing our attention on the sum of the parts – leadership, inclusion, equality, openness and belonging –
provides a strategic framework for which both Next 15 and brands can be responsible and accountable.
Above: Next 15 employees in the Bermondsey Street office volunteering to collect
and recycle litter in the local area.
Leadership
Inclusion
Equality
Openness
Belonging
Increase diverse
representation in leadership
roles and future skills
Build accountability for
inclusion into our DNA
through applying an
inclusion lens to
everything we do
Enable equality of
opportunity through
transparency and fairness in
processes and system
Tackle bias and
discrimination to ensure
a great environment for
every individual
Understanding of the value
our people bring and why
their contribution matters
47
Next Fifteen Communications Group plc | Annual Report 2022 Strategic report
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ESG report continued
Impact Area: People continued
Equity, Diversity & Inclusion (ED&I) continued
Using the insights from the audits, we created a
strategic framework based on the five pillars of:
Leadership, Inclusion, Equality, Openness, and
Belonging. Through the framework, we then set out the
first milestones on our journey to become a more
inclusive organisation, and how we will use our audit
data to monitor and report on our progress.
ED&I Council
In August 2020, we set up an ED&I Council. Comprising
27 people from across the brands and representing all
levels of business and industry experience, it provides
diversity of thought, race, ethnicity, gender, sexual
orientation and disability. Chaired by Next 15 HR
Business Partner, Florence Paloschi, the ED&I Council
acts as our internal indicator of change, reporting on
activity and measuring the adoption of new processes
and programmes.
Inclusive hiring
Next 15 employees have received Diversity and
Inclusion awareness. All brands have adopted inclusive
hiring practices and, depending on their journey, have
been offering inclusive hiring training, anti-bias training
and training on being an ally. In the coming months, a
strategy to embed inclusivity across the Group will be
created as the full set of audit data becomes available.
In FY22, we began producing a monthly People
Dashboard. This provides a snapshot of staff turnover,
EEO data, and gender split per level within the
organisation. This data also allows us to create stronger
strategic people plans and highlight areas of risk as
well as develop benchmarks for best practice.
The dashboard is evolving as more data becomes
available to include elements such as pay gap, age and
turnover by length of service.
Fair remuneration
We believe in fairness, which is why fair remuneration
is one of our priorities. Next 15 benchmarks
remuneration across the Group, and provides guidance
on the topic to our brands. As our brands and markets
are diverse, it is often challenging to standardise
compensation packages. For that reason, brands retain
the freedom to give discretionary bonuses and/or
incremental benefits on a fair and equitable basis.
We pay above minimum wage in all jurisdictions and,
where applicable, living wage for an individual.
Progressive policies
Policies are important because they communicate an
organisation’s culture, values and priorities. They also
ensure a fair, standardised approach across the Group.
An extensive review of people policy was concluded in
2021 as part of the project to revise and update the
employee handbook. Appropriate policies and
procedures are in place to ensure the Group complies
with relevant legislation and regulations, along with
guidance around hybrid working, global mobility and
inclusive practices. In FY23, the Next 15 Academy, an
online learning platform, will be used to update
standard policies when applicable, as well as introduce
any new guidance required to operate in a post-Covid
environment.
48
“ An investor recently asked
me who was the most
important: customers,
shareholders or employees.
Our people are the most
important. If they love
what they do, are well
rewarded and feel
supported by the
organisation to build a
great career with us, then
they will build a phenomenal
business. And that
phenomenal business
will be good for everyone.”
Tim Dyson, CEO
Next Fifteen Communications Group plc | Annual Report 2022
Strategic report
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Financial statements
Staff attraction, engagement and retention
Our people are at the heart of everything we do. A key
pillar of our business strategy is to use our growth
expertise internally to create an environment in which
highly talented teams can deliver their best work.
An active succession planning and talent management
strategy is important to ensure that we are not
vulnerable to business disruption from the loss of key
personnel, and it is a priority to build on our
plans for FY22.
The events of 2020/21 have reinforced our belief that a
diverse and inclusive workforce is not just a social
good, but a commercial advantage. Fair practices in
hiring and talent development, as well as maintaining
safe and supportive company cultures, are key to the
Group’s success.
The scale of the environmental crisis and growing
awareness of societal inequality is something our
people care deeply about. Without demonstrable
action, there is a risk that we will struggle to retain and
recruit talent, as well as retain and win innovative,
sustainable clients. We have always sought to be a
great place to work and we will continue this
focus in FY23.
Training and development
Next 15 understands that the expectations of employers
and what employees want from a job is changing and a
failure to evolve may result in a loss of key talent or a
lack of experienced talent filtering up the business. We
are therefore committed to developing our staff and
helping carve out a career within the wider Group if
so desired.
The introduction of the Next 15 Academy, a learning
management system, allows every brand to customise
their learning space. Brands will also benefit from the
shared content created across the Group which is
integral in building an accessible learning culture for the
entire organisation.
Succession planning
During a year that has continued to be disrupted by the
pandemic and where markets have experienced what
has been labelled ‘The Great Resignation’, succession
planning has been a key area of discussion and focus.
FY22 has seen only slightly higher than average
turnover across the Group and our growth has
introduced new challenges and opportunities. We have
new talent as part of acquisitions and this has increased
our pool of emerging leaders.
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ESG report continued
Employee engagement
Knowing what our people think and feel is key to our
growth as a Group. Our businesses monitor
engagement and act on feedback in a variety of
different ways, including yearly engagement surveys,
pulse surveys, 360-degree appraisals and central
reporting of HR issues. We have worked to centralise
data and reporting so we can correlate people trends
with other business metrics. In FY23 we are planning on
sending out a survey to brands to establish our
employee net promoter score and report progress
against targets on a consistent basis.
A number of incentive arrangements operate across
the Group to reward colleagues for the contribution
they are making, as a result of their efforts to grow
the business. We keep our incentives under frequent
review to ensure that they drive the right behaviours
within our businesses. Employees are kept informed
of the Group’s financial performance via our internal
communications channels.
Impact Area: People continued
Supporting our people
The pandemic changed the way the world operated.
We supported our people to work from home, providing
all the necessary kit for safe working. Where local
conditions allowed, we opened selected offices to
provide safe working space for anyone unable to work
from home. Many people took the opportunity to re-
evaluate their careers and lives during the pandemic.
The dawn of truly flexible working combined with
homeschooling, caring for family members or generally
struggling with personal health and wellbeing, has
made this a necessity for some of our people and we
have adapted accordingly. Our philosophy is to provide
the freedom to people to manage workloads and
support them to be the best versions of themselves.
As a Group, the introduction of remote working has
meant that we’ve been able to hire people from
different communities and backgrounds where we may
not have been their employer of choice due to our
location and work styles pre-pandemic. For instance,
people who may not have gone to university, but have
years of experience or relevant skills, and women who
may have not come back to work because of childcare
restrictions but can now work from home.
While we anticipated a greater demand for part-time
working, in many cases the data shows the opposite
trend – employees moving from part-time to full-time
hours now that the necessity of commuting has been
removed. Anecdotally, we know our people have also
enjoyed volunteering within their local communities.
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Impact Area: Community
We aim to support our local and global community
No organisation exists in isolation. Next 15 remains
passionate about using business as a force for good
for our people, communities, customers, environment,
and shareholders.
Using the B Corp impact areas as our guide, this section
on Community includes both the communities in which
we operate, and the suppliers and distributors within
our supply chain.
Community engagement
Next 15 promotes positive action within our
communities. We know our people have many charities
that are close to their hearts, so we support them
through match funding and promoting causes local to
hub offices. Brands also give time or money to local,
national and international causes that are aligned to
their values.
Volunteering
In August 2021, we partnered with onHand, a tech for
good organisation that matches fully vetted volunteers
with community projects targeting issues such as
loneliness and food waste in London.
In FY22, Next 15 employees completed 84 missions in
six months via onHand, supporting organisations
including, the British Red Cross, The Trussell Trust, and
Hubbub. Feedback from volunteers has been
overwhelmingly positive. While the individuals using the
service benefit from the support, Next 15 and other
corporate partners benefit from the boost to employee
wellbeing brought about through contribution.
2022, all material global suppliers (as measured by
spend), will be asked to complete a new online
questionnaire. All new suppliers will also be asked to
complete it as part of the onboarding process.
In FY23, while we plan to extend our volunteering with
onHand, we will begin the search for a volunteering
partner in the US.
We will engage with any suppliers not fully aligned with
our ethical, social and/or environmental values and we
will work with them on a programme of improvement,
requiring defined progress in an agreed timeframe.
Ethical procurement
We rely on our suppliers for the products and services
we need to keep our business running. The Group has
a zero-tolerance approach to practices which are at
odds with our values and culture, for example
corruption, bribery and modern slavery.
We are committed to acting ethically and with integrity
in all business dealings and relationships and to
implementing and enforcing effective systems and
controls to ensure such practices are not taking place
anywhere in our businesses or supply chain. We
believe in treating our suppliers fairly, for example by
ensuring that we pay promptly.
Last year, we began the process of auditing our
suppliers to establish how local, diverse and compliant
with laws and regulations they are. From February
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ESG report continued
Impact Area: Governance
We aim to run our business as a force for good
ESG governance diagram
Board
ESG project management team (oversight)
ESG pillar owners
Customers
Environment
People
Community
Governance
B Corp Champions from each of our brands
Effective governance is critical to the long-term success
of the Company. A number of shareholders say they
want us to show clearer leadership on Environmental,
Social and Governance (‘ESG’) issues. Our response
includes providing a transparent insight into our ESG
activities in our annual report for the first time.
This section focuses on ESG governance. You’ll find the
corporate governance report on pages 68 to 75. The
Chair’s corporate governance statement, which sets
out how the Directors have engaged with the Group’s
shareholders, employees and wider workforce,
customers, suppliers and wider communities, and the
environment, is available at www.next15.com
Transparency and disclosure
We want our shareholders to have confidence in the
decisions we make about running our business. We
also want to be a role model for change, by going
beyond disclosures required by law.
Transparency and disclosure are the cornerstones of
robust ESG governance. Our focus for the coming year
will be on setting KPIs (Key Performance Indicators) and
targets for our priority governance issues.
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Acquisition and onboarding
Next 15 is an active acquirer of entrepreneur-led
businesses. It is important to us that the businesses we
acquire share our values. During the early stages of
acquisition, the target company’s ESG approach is
considered and flagged to the Board.
ESG is a mandatory element of Next 15’s integration and
onboarding process. All brands are required to adopt
policies, practices and training that will help the Group
attain and maintain ESG certifications and standards.
Standardisation
We chose B Corp certification, in part, because it
provides a robust framework and clear expectations.
Next 15 brands have strong entrepreneurial and
autonomous cultures, and we trust them to deliver ESG
activities in their unique ways. Our journey to
certification provides our brands with lots of
opportunities to be involved and, by providing Group-
level support on the more standardised, essential
elements of policy and best practice, we free up our
brands to focus on what they do best.
In FY23, ESG will become a more formal part of our
corporate risk assessment process. In line with our
commitment to greater transparency and disclosure,
we will also focus on turning goals into targets and KPIs
for next year’s annual report.
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Financial statements
Principal risks and uncertainties
How we manage our risks
Next 15 is exposed to a variety of risks that can have
financial, operational and regulatory impact on our
business performance, reputation and prosperity. The
Board recognises that creating shareholder returns is
the reward for taking and accepting risk. The effective
management of risk is therefore critical to supporting
the delivery of the Group’s strategic objectives.
Governance
At Next 15, our risk governance relies on defined
decision and information flows, which recognise the
diverse requirements across our brands while
maintaining the overarching integrity of the governance
hierarchy and decision rights for risk management.
Oversight of the effectiveness of our enterprise risk
management approach lies with our Board of Directors.
The Board is responsible for reviewing, monitoring and
providing guidance on our overall approach to risk, but
also on our legal and regulatory compliance, quality of
our internal processes and industry best practice.
The Board has oversight of our operations to ensure
that internal controls are established and are
working effectively.
Day-to-day risk management and control is the
responsibility of the Group Executive Team. As part of
their risk management responsibilities, Group
management provide direction and leadership to the
brands and Group-level risk owners so that they can
operate in accordance with the Group’s risk appetite.
approach, as new local risks and themes may evolve to
become Group-level risks.
Approach to risk management
We take an integrated view of risk management. In
practice, this means that Group senior management
own the design of the overall approach to risk (top-
down), but the core of our assessments is expected to
be produced at functional and brand level, where local
risks are identified and mitigating actions are
embedded (bottom-up). This combined approach
supports effective operations in a continuously
changing business environment.
Evolving risk management
As our business continues to grow and we expand our
portfolio of brands, we want to ensure that our risk
approach evolves at the same pace and continues to
be fit for purpose. Over the coming year, we will be
enhancing the Group-level risk framework to drive
consistency of policy and practice across functions and
brands and providing relevant support to our brands to
reflect an increased awareness and maturity of their
understanding of risk management.
Top-down risk process
At Group level, we consider the broad risk profile,
identifying and assessing risks that impact our entire
business. The bottom-up process augments our overall
As part of our top-down risk process, the Group
Executive Team identified, assessed and prioritised our
top 14 corporate risks, retiring those that no longer pose
corporate-level concern and also including a new
emerging risk register that captures risks that are likely
to have near-future impact on our operations.
Emerging risks
In setting our strategic priorities, we carry out regular
horizon-scanning exercises and rely on external
insights, which support our management of our
evolving risk profile. In addition to our principal risks, we
also consider risks that are emerging and may bear
impact on our business in the near to medium future.
We identify such risks through ongoing review of our
strategy (considering risks we have not previously
mapped), keeping our finger on the pulse of external
events, assessing findings emerging from internal and
External Audit and other third parties we work with, and
by taking part in knowledge sharing events in
our industry.
This year, our emerging risks are:
• Climate impact
• Ability to professionally scale whilst maintaining
entrepreneurial culture
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Financial statements
Group Internal Audit provides assurance over the
Group’s control environment. The results of internal
audit activities are reported directly to the Audit
Committee and the risk-based internal audit plan is
updated to respond to the risks faced by the Group.
Risk appetite
In addition to our revision of the overall risk
management process, the Board has also refined our
view of our risk appetite. All our principal risks this year
have been scored against an agreed risk appetite
scale. This approach allows us to have better visibility
of where we need to invest resources to reduce risk
(where we are risk-averse), or drive opportunity (where
we have more open tolerances for risk).
Risk and strategy
Our newly articulated principal risks are detailed on
pages 56 to 63. Our strategy was also renewed and
revised in FY22. In the coming year, management will
be formally bringing risk and strategy together in a
meaningful way.
Climate change is already affecting every layer of
society, and some of its direct impacts are already partly
mapped through our principal risk register. We are
continuing to explore these trends in order that we
incorporate and address any relevant risks and
opportunities in business strategy.
We have grown significantly over the last few years and
recognise that we need to scale our internal processes
and systems appropriately to ensure we can continue
to manage risks as we grow. We see this as an area
where we will need to continue to be vigilant in order to
match control with protecting the entrepreneurial
culture that is at the heart of Next 15.
Bottom-up risk process
A bottom-up risk process drives the overall mapping of
local and Group risks. As we evolve our risk framework,
we have taken an interim approach to identify our
bottom-up risks this year. Having undertaken an
extensive risk assessment exercise at brand level the
year before, this year our focus has been on a series of
thematic risk deep dives across all brands, as well as
broader audits of specific brands. The sampling aspect
of the exercise captures a broad sample of relevant
brand categorisations, so we are confident that we are
getting a comprehensive view of bottom-up risks.
The Group Executive Team owns the overall risk
management processes and directly reports to the
Board on their approach and the risks identified.
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Principal risks and uncertainties continued
Board, Audit Committee
and risk management
Group-level (top-down) risk process
At Group level, we consider the themes and risks emerging from the review of our bottom-up risk processes and augment this risk profile
with Group-level risks that have been identified and are owned by our senior management.
Our risk profile
Current risks
These are the risks that we have identified as
having a likelihood of disrupting the
achievement of our strategic plans.
Emerging risks
These risks have been considered to have
likely future impact on our business. We
monitor these risks to understand when they
need to move to our broader principal
risk landscape.
What we evaluate
• Likelihood and impact: a consistently
applied 5X5 scoring scale
Our risks
We have identified 14 principal risks across
five broad categories:
• Gross risk: our risk score before we
apply mitigating controls
• Mitigating activities: activities we
undertake to reduce our risk
• Net risk: our risk score following
introducing control activities
• Risk appetite: defined to reflect our
openness to risk and our tolerance
thresholds for such risk
• Risk ownership: each principal risk has
an executive owner
• Four strategic risks
• Three operational risks
• Four financial, regulatory and
compliance risks
• Three risks concerning people and
our culture
Top-
down
design
Bottom-
up
process
Brand-level (bottom-up) risk process
A bottom-up risk process drives the overall mapping of local and Group risks. This year our focus has been on a series of thematic risk deep
dives across all brands, as well as broader audits of specific brands to capture a comprehensive view of bottom-up risks.
56 Next Fifteen Communications Group plc | Annual Report 2022
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Financial statements
The Board has evaluated the principal risks that are
likely to affect the Group. These are described in the
table on the following pages.
Principal risk
Strategic risk
Macroeconomic uncertainty and
societal change
There is a risk that external factors
or changing societal trends impact
the ability of the Group to deliver on
its strategic objectives.
Potential impact
Our mitigating actions
Our business and, more broadly, our industry are facing into an evolving and
changing risk landscape generated through external conditions and shifting
societal attitudes.
In addition to the continued impact of the Covid-19 pandemic, which has
directly and indirectly triggered a war for talent (a key consideration for our
business model) and influenced the future of the ways we work, we are
also facing into uncertainties around the impact of climate change and rapid
technological disruption.
Macroeconomic uncertainties of such proportions can have deep and lasting
consequences for our business, including loss of revenue, talent and strategic
control when we do not act quickly enough to adjust to these shifts. For
some of our brands, the exposure will be more severe depending on their
business model.
Although the threat to our business from this risk is considered high, we also
consider the opportunity for competitive advantage in instances where we
proactively manage this type of uncertainty. For this reason, our approach to
this risk is multi-pronged:
• We look for the opportunities that such risks bring. For example, stronger
privacy laws are both a threat to some business models and an opportunity to
create new ones;
• We are investing in our technological infrastructure to develop new ways of
working and secure our data and IP;
• We continue to invest to drive our culture and values, whereby our people feel
secure and valued even during periods of change and transition;
• We continue to diversify our portfolio of brands to minimise overall impact at
Group level, if a specific service or territory is impacted;
• We evolve our Board strategy and three-point plans to consider potential
macroeconomic risks; and
• We maintain a conservative balance sheet to be able to absorb short-term
economic shocks.
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Principal risks and uncertainties continued
Principal risk
Potential impact
Our mitigating actions
Strategic risk continued
Reputation and brand
There is a risk that an issue arises
which attracts press or social
media attention and damages
the reputation of Next 15 or an
individual brand in the eyes of
our stakeholders.
Reputational risk is a considerable worry for most businesses, but for a
business like ours built on trusted relationships it can be particularly damaging
if we do not meet the expectations of our shareholders, clients and employees.
Negative media or social media coverage either at a Next 15 level or individual
brand level could have a number of adverse consequences including:
Because reputational risk can arise from various root causes, including
project failure, working with clients who have their own reputational issues,
poor financial performance and failure to live our own values internally, it can
be difficult to control. However, managing the risk to our reputation is at the
heart of our overall approach to risk and how we manage all the other risks
set out here.
• directly impact our share price;
•
influence existing and future clients from doing business with us;
Our main tools for managing reputational risk include:
• Strengthening our corporate governance position and actively engaging
• curtail our ability to build our acquisition portfolio; and
with shareholders;
•
inhibit our ability to recruit and retain talent.
• Developing standardised policies and procedures that help our staff be
responsible for day-to-day management of risks that could impact
our reputation;
• Taking a centralised approach to data privacy and cyber and IT security
controls. This area was strengthened this year with the appointment of an
outsourced specialist Data Protection Officer; and
• Ensuring whistleblowing mechanisms are accessible to our employees to
report any form of misconduct in the workplace.
Failure to innovate and evolve
offering to customers and to
attract acquisition targets
There is a risk that Next 15 may fail
to innovate and evolve its product
and service offering resulting in
the business offering being less
attractive or relevant to existing and
new clients.
In addition a failure to support a
culture of innovation may result
in reduced appeal to acquisition
targets, which in turn may impact
our ability to scale our business.
As our business continues to grow rapidly, there is a risk that we do not
prioritise and provide sufficient investment into the evolution of our service and
product offering. This may stem from the fact that we are delivering significant
volumes of work that address today’s issues for our clients, and we do not
have sufficient time and resources to dedicate to growing future service lines.
Additionally, we may not provide sufficient attention to the pace of disruption
and technological change in our industry.
Managing this risk is critical to the overall success of our business and we do
so through:
• Horizon-scanning so that we understand the likely future impact of new
technologies, behaviours and regulations on our clients, people and brands;
• Continuous conversations with our clients to understand their emerging
pain points;
This risk may lead to a reduced ability to fulfil our strategy and business
plan, inhibiting our ability to grow our market share. Additionally, if we are
not perceived as innovation leaders in the field, we may suffer loss of client
confidence and potential inability to continue to scale our business.
• Fostering a culture of innovation through our Group and brands that aligns to
our long-term strategy;
• Robust challenge by the Board of our management team; and
• Close monitoring and response to existing and emerging gaps in our
personnel that may impact the ability of bringing in new ideas and skills.
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Principal risk
Potential impact
Our mitigating actions
Reliance on key clients
There is a risk that individual brands
may become over-reliant on a small
number of key clients, leading
to a potential loss of revenue,
shareholder value and talent, should
they fail to retain that relationship.
Operational risk
Cyber and information security
There is a risk that we fail to
maintain the confidentiality, integrity
and availability of information and
key systems.
An unexpected loss of a major client can have a significant impact on individual
brands’ and, potentially, overall Group revenue and profitability. The impact of
this will depend on the particular brand involved and the nature of the client.
At Next 15, we work to diversify both our customers and suppliers, as well
as put into place a risk management system that will help foresee future
disruptions and prepare for them.
The loss of a major client may create significant pressure if not replaced by
new accounts or an increase in business from existing clients.
A key feature of our risk management of this risk focuses on proactive
steps, including:
A cyber-attack or data security breach could lead to a loss of customer,
colleague or Group confidential data, business disruption, reputational damage
and significant fines.
The external threat vector and risk environment is challenging with increased
levels of sophisticated cyber-crime, complex regulatory requirements and our
use of several third parties.
A failure to comply with the General Data Protection Regulation (‘GDPR’), which
came into force in May 2018, could result in significant penalties and could
have adverse impact on customer confidence in the Group.
• Ensuring that our brands have good business development capabilities;
• Monitoring customer concentration risk. Our Top 10 customers accounted for
22% of revenue in FY22 and no individual customer is more than 6%;
• Keeping in regular contact with our key clients to ensure satisfaction regarding
the quality of product and service offering; and
• Supporting our brands in the scaling and growth of their businesses to ensure
a diverse client portfolio.
Next 15’s Data Steering Group has the responsibility for overseeing data
management practices, policies, regulatory awareness and training. This
includes change management activities and a review of third parties managing
data on our behalf.
We have also appointed a Data Protection Officer, who is responsible for
providing a breadth of subject matter expertise and oversight of the Group’s
data privacy programme.
We continue to ensure that information security policies, procedures and
controls are in place, including encryption, network security, systems access
and data protection. This is supported by ongoing monitoring, reporting and
rectification of vulnerabilities and through:
• Focused working groups led by the Infosec Team at Next 15 which review the
management of data across the business including employee data, customer
data, commercial data, financial data and the sharing of any data with third
parties; and
•
Independent assurance through a cyber maturity assessment against the
National Institute of Standards and Technology (‘NIST’) framework with targets
to drive continuous improvement.
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Principal risks and uncertainties continued
Principal risk
Potential impact
Our mitigating actions
Operational risk continued
Rate of professionalisation
of Next 15
There is a risk that our financial
growth outpaces our ability
to manage the risks we face
and our requirement to deliver
good governance.
Our pace of growth over the last few years has created a potential new risk
of a mismatch between our financial scale and our ability to manage the
risk we face.
In making sure that our processes, systems and resource keep pace with our
rapidly growing scale, we have a number of approaches in place to ensure we
identify and manage risk:
When seen at a brand level, individual risks can look manageable. But when
aggregated to Group level they often require a joined-up response. For
example, data privacy risks grow as we add more brands to the Group and we
add new products and services. Data breaches will be assessed at the Group
level rather by reference to the brand causing the problem.
A further example is that existing management approaches can become
ineffective as the Group scales and need to replaced by new structures that
are consistent with our values whilst retaining control.
• Our overall risk management process highlights areas where gaps are likely to
emerge between target risk and current net risk;
• We regularly review Next 15 Head Office team’s role and how it should be
structured to deliver the Group’s goals. A transformation roadmap sets out
a series of strategic projects that aim to improve efficiency and reduce risks;
• A design process for each project focuses on addressing where risks will be at
our current scale of growth as well as addressing current issues;
• Steering groups monitor project delivery and success in achieving their
goals; and
• We consult widely with our brands on new initiatives through a series of
Group-wide forums.
Business continuity
There is a risk of disruption to the
efficient functioning of our business.
These threats include any incidents
or disasters that negatively impact
our organisation.
We recognise the importance of the risk of disruption to business as usual to
our operations at Group level and to our brands, as well as the impact of a
cyber attack or critical incident that impacts a crucial contractor or supplier.
At Next 15 we have an understandable reliance on our IT systems and people.
In the event of an incident affecting business as usual, business continuity
plans are in place.
Any period of sustained business interruption may directly or indirectly
result in:
• Loss of confidence in our business by our clients;
• Reduced productivity of our employees in instances where critical operational
infrastructure is impacted;
• Damage to our Group and or brand reputation;
• Regulatory fines; and
• Financial impact, potentially leading to revenue losses.
Additionally, we make use of a third-party testing of our IT systems and
business continuity plans to gain extra assurance regarding the resilience
of our operations in the face of an unanticipated event.
To aid operational management as far as possible we use Software as a
Service (‘SaaS’) tools to carry out our daily work. These are hosted services,
rather than on-premise deployments, that we can access easily via a browser
from any location. We have confidence in the SaaS providers we rely on and
that their business continuity plans are robust.
Periodic stress testing to determine the robustness of our physically located
software is undertaken.
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Financial statements
Principal risk
Potential impact
Our mitigating actions
Financial, regulatory and compliance risk
Global tax
There is a risk that our tax
strategy fails leading to material
tax compliance failures or
uncertain tax positions. These
could result in financial, legal, and
reputational damage for Next 15
and management.
Legal and compliance
There is a risk that we fail to comply
with key laws and regulations
which negatively affect our
business model.
Tax liabilities in the territories in which the Group operates could increase as
a result of either challenges of existing positions by tax authorities or future
changes in tax law. Specifically, given the substantial operations in the US any
changes in US tax policy could have a significant impact on the Group.
The Group has an in-house tax team to ensure compliance with tax legislation
globally. Our in-house team are subject matter specialists on tax matters across
different jurisdictions, and consistently horizon-scan for changes to existing
legislation or emerging new regulations that may affect our tax strategy.
The Group, and our brands, operates in multiple geographies and in an
environment governed by numerous regulations including General Data
Protection Regulation, competition, employment, bribery and corruption, and
regulations over the Group’s products.
The vast regulatory landscape across multiple jurisdictions presents a
significant risk of potential non-compliance with laws and regulations,
which can lead to regulatory investigation, reputational damage, fines and
financial loss.
We take external professional advice on our Group structure, including in
relation to acquisitions and incentives. We take a position of not taking part
in overly aggressive tax planning strategies.
This is a serious risk to our business and to our brands, so we manage
it through multiple mitigation channels:
Awareness: we rely on our regularly updated Code of Conduct, employee
policies and training to raise awareness among management and staff in
relation to their roles and responsibilities when it comes to meeting our legal
and regulatory obligations.
In-house and external expertise: the Group maintains an in-house legal
function and also uses external legal counsel to advise on local legal and
regulatory requirements.
Assurance: consideration of regulatory compliance is included in the
assurance programme led by the Risk & Assurance function.
Accreditation: we maintain a number of accreditations and registrations
to meet a number of contractual and statutory obligations.
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Principal risks and uncertainties continued
Principal risk
Potential impact
Our mitigating actions
Financial, regulatory and compliance risk continued
Fraud and misreporting
There is a risk that fraud and
misreporting may occur due to the
decentralised nature of the Group,
leading to loss of cash, profit and
damaging our reputation.
There is a risk that without appropriate oversight and review, our business
may be subject to fraudulent activity and misreporting of financial information.
This risk increases when we acquire new business units for the Group where
segregation of duties may not have been as strictly applied as we require.
We have in place the following mitigations:
• Oversight of all financial reporting and control activities by the
Audit Committee;
The risk of misappropriation and fraud is also increased due to the
entrepreneurial and federated nature of the Next 15 operating model
and the level of influence founders can have within their specific
company environments.
• A minimum controls framework that mandates the adoption of the Group’s
finance, tax and banking systems, which provides the central team with
oversight of the day-to-day transactions within the Group’s operations. This is
immediately applied to new business units that join the Group;
• The consolidation of the Group’s banking facility under one centralised
banking facility gives the Group greater control and visibility over
cash balances;
• Regular working capital monitoring; and
• Centralised Group payment function.
Further, an established Internal Audit function provides assurance on the
Group’s control environment, with particular focus given to the appropriate
segregation of duties at a brand level.
Most of the Group’s revenue is matched by costs arising in the same
functional currency.
Foreign exchange exposure is continually monitored, and net investment
hedges are used where appropriate for significant foreign currency investments.
Global and local short-term cash flow forecasts are used to monitor foreign
currency payments, and natural currency hedging is used where possible
across the Group.
Surplus cash balances are swept to the UK to minimise any exposure to
particular currencies or locations.
Currency risk
There is a risk that the Group’s
results are materially impacted
by adverse currency movements
resulting in a failure to meet
shareholder expectations.
As a global business, currency fluctuations continue to have a potential impact
on the Group’s translated results. The Group is listed in the UK with sterling as
its functional currency but makes a significant proportion of its profits outside
the UK. As a result, the Group’s reported profits and asset values are impacted
by any fluctuation of sterling relative to other currencies, particularly the
US dollar.
We also face the risk of potentially suffering restrictions on the ability to
repatriate cash, particularly for our operations in India and China.
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Principal risk
Potential impact
Our mitigating actions
People and culture risks
Attraction and retention
There is a risk that we fail to attract,
retain and develop talent and
capabilities required to deliver our
growth ambitions.
Succession planning
There is a risk that being
unprepared for unplanned
departures and overreliance on key
individual creates risk to the stability
and growth of our business.
Equity, diversity and inclusion
There is a risk that Next 15 does
not continue to scale because we
fail to attract and retain a diverse
workforce limiting our ability to
progress and innovate.
Our people are key to our success. We operate in very competitive markets
and acknowledge that the skills that our people possess are attractive to other
employers. There is the risk that not having the right people and skills could
impact negatively on our ability to serve our customers and grow our business.
It is important that we maintain high levels of employee engagement to ensure
that we are able to retain and attract the best talent.
We are mindful that we operate in a highly competitive talent market. As
a result, our focus is on continuing to provide high levels of support and
consideration to our team members’ wellbeing and ongoing development
needs. As part of our approach to risk management:
• We have a programme of learning and development for our people, which
includes management and leadership training and the Next 15 Academy.
Weak employee engagement, organisational alignment and inadequate
incentivisation may lead to poor performance and instability. It could also have
an adverse impact on the realisation of strategic plans.
Given the level of ongoing business transformation and change, high
employee turnover or the failure to recruit in line with our needs, may result in
programmes and projects not being successful or business as usual activities
being negatively impacted.
A number of individuals are key to the management and performance across
Next 15 and the execution of the Group’s overall strategy. When key individuals
leave or retire there is a risk that knowledge, client relationships or competitive
advantage are lost.
The impact of succession risk not being managed may result in higher turnover
of senior management and could significantly impede the Group’s financial
plans, product development, project completion, marketing and other plans
resulting in loss of market share and reputational damage.
Relationships with investors can also be damaged, as can our share price. The
cumulative effect of poor or inadequate succession planning means it is vital
that planning is comprehensive and holistic.
Embedding equity, diversity and Inclusion forms an integral part of our Group
values. The impacts of this risk not being managed effectively include:
• Failing to attract or retain talent;
• Our culture does not successfully evolve as the business grows;
• Deterring customers: If you don’t have a good reputation for ED&I, there is a
risk that clients may switch to a competitor that does;
• Reputational damage if Next 15 does not uphold or live out the values we have
committed to; and
• Being less attractive to shareholders.
• We offer competitive compensation and benefits packages.
• We carry out regular performance reviews and appraisals of our people.
• There are regular staff events and wellbeing initiatives.
• We undertake an annual employee engagement survey from which we
produce an action plan to address the issues identified.
• Senior leadership monitor and have oversight of all significant
change programmes.
Succession plans and retention strategies are in place for key people at a
brand and Group level.
We have a talent identification process through active networking forums.
There is ongoing monitoring of the effectiveness and skill set of the Board of
Directors. This enables effective succession to supplement the Board’s skill
set as well as helping to maintain a strong and diverse set of independent
Directors.
We are committed to further progress in this area with oversight of the
ED&I programme by the Group HR Director with KPIs within the monthly
management account and regular reporting to the Board.
We are committed to raising awareness, providing training and encouraging
diversity amongst the workforce through a diversity network initiative.
Every effort is made to consider the needs of the diverse workforce at the
design and planning stage, rather than wait for a worker to be employed and
then having to make changes.
Linking occupational safety and health into any workplace equality actions,
including equality plans and non discrimination policies (US).
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Corporate
governance
Financial
statements
Consolidated statement of changes in equity
Independent auditors’ report
106
118 Consolidated income statement
120 Consolidated balance sheet
122
124 Consolidated statement of cash flow
126 Notes to the accounts
184 Company balance sheet
186 Company statement of changes in equity
187
196
206 Five-year financial information
Notes forming part of the Company financial statements
Glossary – Alternative Performance Measures
Other information
208 Shareholder information
209 Advisers
210 References
65 Board of Directors
Introduction
68
70 Corporate governance statement
76 Nomination Committee report
Audit Committee report
77
83 Directors’ remuneration report
101 Report of the Directors
105 Directors’ responsibilities statement
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Board of Directors
The Board is
responsible for the
strategic direction,
investment
decisions and
effective control
of the Group.
Committee membership
A Audit Committee
N Nomination Committee
R Remuneration Committee
Chair of Committee
A N R
Penny Ladkin-Brand
Chair
Tim Dyson
Chief Executive Officer
Peter Harris
Chief Financial Officer
Appointed July 2017 (5 years)
Penny is Non-Executive Chair and a member of the
Nomination, Audit and Remuneration Committees.
Penny joined Next 15 as a Non-Executive Director and
chair of the Audit Committee. In April 2020 she was
appointed as Senior Independent Director and from
February 2021 became Chair of the Board.
Skills and experience
Penny is also Chief Financial Officer at Future
plc, a global platform for specialist media, having
been reappointed into the role in November 2021
following a year as Chief Strategy Officer. She was
previously Chief Financial Officer at Future from
August to June 2020 during which time the group’s
market capitalisation increased from £25m to £1.2bn
and entered the FTSE 250 as it became a digital
led business. Prior to that, Penny was Commercial
Director at Auto Trader Group plc responsible for
digital monetisation. Penny brings considerable
experience of digital transformation and M&A to the
Board. Penny qualified as a Chartered Accountant
with PwC before moving into corporate finance.
Appointed August 1988 (34 years)
Tim joined the Group in 1984 straight from
Loughborough University and became CEO in 1992.
Skills and experience
As one of the early pioneers of tech PR, he has
worked on major corporate and product campaigns
with such companies as Cisco, Microsoft, IBM and
Intel. Tim moved from London to set up the Group’s
first US business in 1995 in Seattle and is now
based in California. Tim oversaw the flotation of
the Company on the London Stock Exchange and
has managed a string of successful acquisitions by
the Group including The Outcast Agency, M Booth,
Activate and The Blueshirt Group in the US as well
as Morar (now Savanta), ELVIS, Velocity, Planning-
inc and Publitek in the UK. Tim has also driven the
evolution of the Group from a marcom business
into a Growth Consultancy grounded in data and
technology. Outside Next 15, Tim has served on
the advisory boards of a number of emerging
technology companies. Tim was named an Emerging
Power Player by PR Week US and subsequently in
PR Week’s Power Book. Tim was also recognised
on the Holmes Report’s In2’s Innovator 25, which
recognises individuals who have contributed ideas
that set the bar for the industry.
Appointed March 2014 (8 years)
Peter joined Next 15 as Chief Financial Officer in
November 2013 and was appointed as an Executive
Director in March 2014.
Skills and experience
Peter’s financial experience spans 30 years and he has
extensive media experience, having spent the last 25
years in finance roles in the media sector.
From July 2013 until December 2018, he was a Non-
Executive Director of Communisis plc and Chairman
of its Audit Committee. He was previously the Interim
Finance Director at Centaur Media plc, Interim CFO of
Bell Pottinger LLP, CFO of the Engine Group, and CFO
of 19 Entertainment. Prior to that, he was Group Finance
Director of Capital Radio plc. Peter has considerable
experience in UK and US-listed companies with
international exposure.
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Corporate governance
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Board of Directors continued
A N R
A N R
Helen Hunter
Non-Executive Director
Robyn Perriss
Non-Executive Director
Appointed June 2019 (3 years)
As a Non-Executive Director of Next 15, Helen chairs
the Remuneration Committee and is a member of the
Nomination and Audit Committees.
Appointed November 2020 (2 years)
As a Non-Executive Director of Next 15, Robyn
chairs the Audit Committee and is a member of the
Nomination and Remuneration Committees.
Skills and experience
Helen is Chief Technology Officer for Customer
and Data at Sainsbury’s plc, where her remit is to (i)
build and run the Tech underpinning Sainsbury’s
ecommerce propositions (Grocery online, Argos, Tu,
and Habitat) and instore digital customer propositions
e.g. Smartshop; (ii) build and run the Tech used to
communicate with customers, in Contact Centres
and in Marketing; and (iii) to maximise the value of the
Group’s data asset: democratising access and finding
creative ways to unlock its insight potential in support
of Sainsbury’s strategy to be connected to customers.
Previously Helen led the creation of the new Nectar
digital loyalty scheme (Food), Sainsbury’s Customer
Permissions Management Tool (multi-brand), Omni-
channel coupons (Food), Sainsbury’s Brand Match
(Food), and SCV (Food). Before joining Sainsbury’s,
Helen held a variety of commercial and marketing
roles at Home Retail Group, Woolworths Group, and
Kingfisher Group. Helen is also currently a Governor
of Lancing College.
Skills and experience
Robyn has extensive experience in both the
technology and media industries, together with core
skills in finance, having served as Finance Director
at Rightmove plc, the UK’s largest property portal,
until June 2020. Robyn previously held senior roles
at Rightmove, including as Financial Controller and
Company Secretary. Before joining Rightmove,
Robyn was Group Financial Controller at Auto Trader,
another media sector disruptor. Robyn is currently
a Non-Executive Director and Chair of the Audit
Committee at Softcat plc, a leading provider of IT
infrastructure services and solutions. She is also a Non-
Executive Director and Chair of the Audit Committee
at Dr Martens plc, an iconic British consumer brand.
Robyn qualified as a Chartered Accountant in South
Africa with KPMG and worked in both audit and
transaction services.
Mark Sanford
General Counsel and
Company Secretary
Appointed February 2021 (1 year)
Skills and experience
Having qualified as a solicitor at Eversheds, Mark
worked in their Corporate team before moving to
his first in-house role at Premier Farnell plc. Mark
first joined Next 15 in 2003 as General Counsel
and Company Secretary. In 2009 he set up his own
boutique law firm Baker Sanford LLP while continuing
to provide an outsourced legal and company
secretarial function to Next 15. In 2017 Mark became
General Counsel and Company Secretary of Ebiquity
plc, an AIM-listed media consultancy business. He
re-joined Next 15 in February 2021.
Committee membership
A Audit Committee
N Nomination Committee
R Remuneration Committee
Chair of Committee
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Since the year‑end,
two further Directors
have joined the Board.
Dianna Jones
Non-Executive Director
Jonathan Peachey
Chief Operating Officer
Appointed April 2022
Dianna joined Next 15 as a Non-Executive Director.
Skills and experience
With nearly 20 years of experience spanning the
energy and technology industries, Dianna brings
expertise in global ethics and legal compliance,
business risk mitigation in both mature and scaling
environments, and ESG. Dianna is Director, Legal
Compliance at Uber Technologies, Inc. She was
previously Regional Compliance Counsel – Western
Hemisphere at John Wood Group plc, a global leader
in engineering and technical consulting services for the
energy and infrastructure industries. Prior to that, she
was with the international law firm, Greenberg Traurig,
LLP, where she advised national and multinational
companies on complex M&A transactions,
reorganisations and restructurings. Dianna is licensed
by the State Bar of Texas and registered with the State
Bar of California.
Appointed April 2022
Jonathan joined Next 15 in July 2018 and became Chief
Operating Officer in 2019. He was appointed as an
Executive Director in April 2022.
Skills and experience
Jonathan has 35 years’ experience in digital
transformation. At the BBC, he led the myBBC
programme that introduced customer data at scale
to drive better ways to commission, discover and
consume content. Before the BBC, he founded and led
an award-winning consultancy that specialised in using
digital technology to improve government delivery. As
part of that role, Jonathan launched a dedicated TV
channel to support ongoing teacher development, and
wrote the UK government’s digital strategy which led
to the creation of gov.uk. Jonathan sold that business
to The Engine Group where he subsequently became
Chief Operating Officer. Jonathan qualified as a
Chartered Accountant with PwC before moving into
management consultancy and subsequently working
in commercial television delivering some of the first
interactive services.
Jonathan is heavily involved in the UK tech startup
scene, having founded a number of companies and
invested in or mentored numerous others.
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An introduction from our Chair
On behalf of the Board I am pleased to present the
corporate governance report for the year ended
31 January 2022.
The Directors recognise that shareholders look to
the Board to promote the long-term success of the
Company and I recognise that effective governance
is crucial to achieving this. In this section of our
report we have set out our approach to governance
and provided further detail on how the Board and its
Committees operate.
The Board has continued to apply the Quoted
Companies Alliance Corporate Governance Code (the
‘QCA Code’). The corporate governance framework
which the Group operates, including Board leadership
and effectiveness, Board remuneration, and internal
controls is based upon practices which the Board
believes are proportional to the size, risks, complexity
and operations of the businesses within the Group.
During the year there were no changes to the
composition of the Board. However, as announced on
28 March 2022, we added two new Directors to the
Board. Dianna Jones joined as a Non-Executive Director
and Jonathan Peachey, Next 15’s Chief Operating
Officer also joined the Board. The new appointments
to Next 15’s Board reflect the continued growth of the
Group in recent years and add a greater breadth of
experience, particularly in the US market. Biographies
of the new Directors are set out on page 67.
As Chair I am responsible for leading the Board and
for its governance of the Group. I will work with the
enlarged Board to ensure continual improvements to
the Group’s governance, taking into account the size
and complexity of the Group in order to promote the
long-term success of the Group.
We welcome feedback from our shareholders at all
times and I encourage all to participate in our AGM.
Penny Ladkin-Brand
Chair
4 April 2022
Introduction
Strong governance is
crucial to achieving
long‑term success
Penny Ladkin-Brand
Chair
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Financial statements
Our governance structure
Shareholders
The Board
Nomination
Committee
Audit
Committee
Remuneration
Committee
Executive Management
Board and Committee attendance for the year
ended 31 January 2022
Attendance records for the Board and Committee
meetings held during the year are shown below.
These include both scheduled and ad-hoc meetings
that were convened as required throughout the year for
the Board, Nomination Committee, Audit Committee,
and Remuneration Committee. Additional Committees
of the Board were also constituted from time to time to
review and approve certain operational activities such
as acquisitions and regulatory news announcements.
Other members of the senior management and brand
management teams, as well as advisers, attended
Board and Committee meetings by invitation as
appropriate throughout the year.
Penny
Ladkin-Brand
Board
Audit Remuneration Nomination
9 of 9 5 of 5
6 of 6
2 of 2
Brand CEOs
Ethics Group
Robyn Perriss
9 of 9 5 of 5
Helen Hunter
9 of 9 5 of 5
Tim Dyson
Peter Harris
9 of 9
9 of 9
n/a
n/a
6 of 6
6 of 6
n/a
n/a
2 of 2
2 of 2
n/a
n/a
The organisation
Board overview
as at 31 January 2022
40%
60%
Board members by gender
■ Male
■ Female
40+
60+
■ Non-executive
■ Executive
Balance of the Board
60%
40%
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Corporate governance statement
Statement of compliance
Next 15 has adopted the QCA Code and is compliant
with all of its principles. Disclosures required by
the QCA Code have been made both in this annual
report and on our website. Further information on the
Company’s compliance with the QCA Code can be
found on the Group’s website at www.next15.com.
The composition of the Board
The Board is responsible for the strategic direction,
investment decisions and effective control of the Group.
During the year ended 31 January 2022 the Board
comprised two Executive Directors, a Non-Executive
Chair and two Non-Executive Directors. Penny Ladkin-
Brand has now completed her first full year as Chair
of the Board since her appointment as Chair on 1
February 2021.
At the end of the financial year, Penny Ladkin-Brand
advised the Board that her return to the role of CFO
at Future plc meant her responsibilities had increased,
and that she would work with the Nomination
Committee to ensure that she could devote sufficient
time to all of her commitments. With this in mind,
the Nomination Committee launched a search for
additional Non-Executive Directors, using an external
executive search company. Additional Directors will
ensure an appropriate composition of the Committees
of the Board and allow for Penny to step away from
the Committees, focusing purely on her Chairship. The
Board is satisfied that the remaining Non-Executive
Directors devote sufficient time to the Company and
that there have been no significant changes to their
other commitments.
In April 2022, the Board appointed two new
Directors. Dianna Jones joined as a Non-Executive
Director, and Jonathan Peachey was appointed as an
Executive Director.
Biographies of each of the Board Directors, including
the Committees on which they serve and chair, are
shown on pages 65 to 67.
The Board is satisfied that, between the Directors,
it has an effective and appropriate balance of skills and
knowledge, including a range of financial, commercial
and entrepreneurial experience. The Board is also
satisfied that it has a suitable balance between
independence (of character and judgement) and
knowledge of the Company to enable it to discharge
its duties and responsibilities effectively. The Non-
Executive Directors are considered to be independent.
No single Director is dominant in the decision-making
process. The new Directors add complementary
skills and experience in terms of sectors, geography
and diversity.
Prior to their appointment, the Company informed
each Director of the nature of their role, their
responsibilities and duties to the Company, and the
time commitment involved.
On appointment each Director confirmed that, taking
into account all of their other commitments, they were
able to allocate sufficient time to the Company to
discharge their role effectively.
70
How the Board spends its time
In early 2022 the Board agreed a new meeting
timetable comprising six meetings. Three to be held
virtually and three in person, including a full day
strategy meeting, with additional meetings being held
if required.
Details of Board and Committee meetings held during
the financial year and the attendance records of
individual Directors can be found on page 69.
The Board meets once a year to discuss the Group’s
strategy. This year, the Board participated in workshops
with representatives from the Group’s businesses
focusing on the future of the Group and how it could
serve its stakeholders better.
The introduction of timed agendas, as part of the
improvements to our meeting governance, means
we can now monitor how we spend our time and
assess the need for any adjustments that will help
the business meet its strategic objectives. The chart
opposite illustrates our increased focus on strategy
and governance during the year. The Board is satisfied
that the time available during meetings was utilised
appropriately to serve the needs of the business.
Next Fifteen Communications Group plc | Annual Report 2022 Strategic report
Corporate governance
Financial statements
How the Board spends its time
28+
Category
Financial matters
Strategic
Operations
Governance
Other
28%
32%
8%
25%
7%
Percentage
The Board’s responsibilities and processes
The principal matters considered by the Board during the period included:
Key area
Activity during the year
Financial
matters
• Reviewed the Annual Report and Accounts as a whole including the clarity of the disclosures and that the narrative in the front
section reflected the performance as detailed in the Group financial statements, as recommended by the Audit Committee.
• Review the half-year accounts, including the material judgements and estimates as recommended by the Audit Committee.
• Reviewed the half-year and full-year results announcements and trading statements.
• Reviewed the Group FY22 budget and budget forecasts.
• Reviewed the Group’s application of the Treasury policy and banking relationships.
• Considered the Group’s performance and outlook, including that of individual brands.
Strategic
matters
• Reviewed opportunities to expand by acquisition.
• Reviewed and approved acquisition proposals.
• Worked with management to formulate and approve new strategic priorities for the Group.
Operations
• Post-integration monitoring of acquisitions.
• Reviewed the Group’s risk management and internal controls.
• Reviewed and monitored ESG proposals and initiatives.
Governance
• Monitoring QCA code compliance and updates.
• Monitoring the regulatory environment and any changes relevant to the Group.
• Board and committee evaluations and outcomes.
• Succession planning.
• Review and approve the schedule of matters reserved for the Board.
• Review and approve updated Group policies.
Other
matters
• Approved the implementation of a board portal to improve the governance of meetings.
• Monitor and review the people dashboard in support of diversity and equity targets.
• Monitoring the cyber security dashboard.
• Assessing and responding to the uncertainty, challenges and opportunities from the Covid-19 pandemic and Brexit.
There is a schedule of matters specifically reserved for decision by the Board which is regularly reviewed and
available from the Group’s website at www.next15.com.
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Corporate governance statement continued
The Board’s responsibilities
and processes continued
At each Board meeting, the Chief Executive Officer
provides a business review, and the Chief Financial
Officer provides a financial review. Board members
receive monthly trading results, together with detailed
commentary. Each Director receives a Board pack
in advance of each meeting which includes a formal
agenda together with supporting papers for items to
be discussed at the meeting. All Directors have access
to the advice and services of the Company Secretary,
who is responsible for ensuring that Board procedures
are followed and that the Company complies with
all applicable rules, regulations and obligations.
Directors may take independent professional advice
at the Company’s expense, as and when necessary to
support the performance of their duties as Directors of
the Company. Appropriate induction and training for
new and existing Directors is provided where required.
Appointment, election and re-election of Directors
Appointments to the Board are the responsibility of the
Board as a whole. From February 2021, the Board re-
established a Nomination Committee comprising all the
Non-Executive Directors.
The Directors’ service agreements, the terms and
conditions of appointment of Non-Executive Directors
and Directors’ deeds of indemnity are available for
inspection at the Company’s registered office during
normal business hours.
The Company’s Articles of Association provide that a
Director appointed by the Board shall retire and offer
themselves for re-election at the first AGM following
their appointment and that, at each AGM of the
Company one-third of the Directors in addition to any
new appointment must retire by rotation. Tim Dyson
and Helen Hunter will offer themselves for re-election
by the shareholders at the forthcoming AGM.
The roles of the Chair and Chief Executive
Penny Ladkin-Brand held the position of the Chair
of the Board. During the year, she led the Board in
the determination of its strategy and in achieving its
objectives. The Chair is responsible for organising the
business of the Board, ensuring its effectiveness and
setting its agenda, and is also responsible for effective
communication with the Group’s shareholders.
The Board is satisfied that the contributions of both
Tim Dyson and Helen Hunter continue to be effective
and demonstrate sufficient time commitment to their
respective roles.
At the time of her appointment as Chair, Penny Ladkin-
Brand was considered independent as defined by the
UK Code and in accordance with the principles of the
QCA Code.
Jonathan Peachey, and Dianna Jones, having been
appointed since the last AGM, will stand for election for
the first time at the AGM in June 2022.
The Board believes that each Director standing for
election and re-election is independent in character
and judgement. The Board therefore recommends
that the Company and its shareholders support the re-
election of each of these Directors.
Penny Ladkin-Brand became Chair of the Board
with effect from 1 February 2021. Following Penny’s
appointment as Chair of the Board, Robyn Perriss was
appointed Chair of the Audit Committee.
Biographical details of each Director standing for
election and re-election can be found on pages 65 to 67.
The Chief Executive Officer, Tim Dyson, oversees the
Group on a day-to-day basis and is accountable to the
Board for the financial and operational performance
of the Group. The Chief Executive Officer has
responsibility for implementing the agreed strategy and
policies of the Board.
Board performance evaluation, succession
planning and diversity
The performance of the Board is key to the
Company’s success. The performance of the Board
and its Committees is evaluated regularly, and the
evaluations are conducted with the aim of improving
their effectiveness.
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A Board evaluation process was undertaken during the
year. Having completed an evaluation process with an
external provider last year, the process this year was
carried out by a questionnaire sent to all Directors,
the result of which were collated by the Company
Secretary. There were various actions that came from
Board evaluation:
• There had been a concern about the geographical
spread of the Directors, but this has been dealt
with by the appointment of the new Non-Executive
Director set out above. The expansion of the Board
has widened the skills and experience of the Board.
• For the year ahead, the number of Board meetings
that are being held has been slightly reduced but
with a clearer agenda and more in-person meetings
where possible. Ad-hoc meetings will be held as
required. This will be combined with an all-day
strategy meeting during the year.
• Board papers now have a clear executive summary
with clarity as to what is required from the Board at
the meeting. The Board also reviewed the actions
that had been recommended from the previous
year’s Board evaluation and noted that the key
actions had all been completed.
• It was noted that more work is required on succession
planning and an action plan is in place to ensure that
succession planning is in place for the Board and the
senior management of the Group.
The new Board composition has added ethnic and
geographical diversity to the Board as well as gender
diversity. Dianna and Jonathan are excellent additions
to the Board and bring with them a wide range of
experience from the technology, consultancy and
transformation fields which will prove immensely
valuable as Next 15 continues to utilise technology and
data to drive growth. Dianna will add critical knowledge
and understanding of the US, which continues to be a
key market for us. I’m confident that these appointments
will support management’s ambitious growth plans
for Next 15.
The Nomination Committee leads the Board
recruitment and appointment processes. It also has
responsibility for reviewing the balance of the Board to
ensure that, collectively, the Board: has a good range
of skills, knowledge and experience; comprises diverse
individuals who can bring different perspectives
to the Board’s discussions; has oversight of senior
management and Board succession plans; and makes
recommendations on matters such as Directors’
independence and commitment.
More information can be found in the Nomination
Committee report on page 76.
Directors’ conflicts of interest
Directors have a statutory duty to avoid conflicts of
interest with the Company. The Company’s Articles of
Association allow the Directors to authorise conflicts
of interest and the Board has adopted a policy for
managing and, where appropriate, approving potential
conflicts of interest. The Board is aware of the other
commitments and interests of its Directors, and changes
to these commitments and interests are reported by the
Directors. A review of Directors’ conflicts of interest is
conducted annually.
Committees of the Board
The Board is supported by the Nomination, Audit and
Remuneration Committees. The Board appoints the
Committee members. The reports of these Committees
can be found on pages 76 to 100. Each Committee
has access to such external advice as it may consider
appropriate. The Company Secretary or his nominee
acts as Secretary to the Committees. The terms of
reference of each Committee are reviewed regularly,
updated as necessary to ensure ongoing compliance
with best practice guidelines and referred to the
Board for approval. Copies of the Committees’ terms
of reference are available from the Group’s website at
www.next15.com.
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Corporate governance statement continued
Committees of the Board continued
The Audit Committee currently comprises three Non-
Executive Directors: Robyn Perriss (Chair), Penny
Ladkin-Brand, and Helen Hunter. Peter Harris also
attends most meetings at the invitation of the Chair of
the Audit Committee. Broadly, the Audit Committee is
responsible for reviewing financial reporting, oversight
of the Internal Audit function, the relationship with the
External Auditor, internal controls, and oversight of the
effectiveness of risk and risk management systems.
The Remuneration Committee comprises three
Non-Executive Directors: Helen Hunter (Chair),
Robyn Perriss, and Penny Ladkin-Brand. The Executive
Directors also attend these Committee meetings
at the invitation of the Chair of the Remuneration
Committee, except when discussing matters of their
own remuneration. The Remuneration Committee is
responsible for reviewing and approving executive
remuneration policies and practices, taking
account of pay practices and policies across the
Group’s workforce.
The Nomination Committee currently comprises three
Non-Executive Directors: Penny Ladkin-Brand (Chair),
Helen Hunter, and Robyn Perriss. The Nomination
Committee is responsible for matters such as Board
composition including the recruitment and the
appointment process as described in the Nomination
Committee report on page 76.
The composition of the Committees will be reviewed
early in FY23 to include our newly appointed Directors.
Risk
Our approach to risk management is set out on pages
54 and 55, and the principal risks to our business, and
the actions we have taken to mitigate them, are set out
on pages 57 to 63.
Corporate culture
We have a strong corporate culture based on
entrepreneurial spirit, taking personal responsibility and
treating all stakeholders fairly and equitably. Businesses
within the Group are given a high degree of autonomy
in line with the Group’s emphasis on personal
responsibility, with the centre acting as enablers and
teachers. However, the Board and its Committees set
a high standard for ethical behaviour and ensure the
Group complies with applicable laws and regulations,
and the executive team work to embed a corporate
conscience that runs throughout Group initiatives
and practices.
Our people
Our employees and workers are considered one of the
Company’s principal stakeholders. The ESG report on
pages 33 to 53 details the importance the Company
places on its people and the steps taken to support,
evolve and motivate employees.
The Group’s approach to equity, diversity and inclusion
is set out on pages 47 to 50, and on our website at
www.next15.com. Our approach to Board diversity is set
out on page 47.
Our shareholders
Engagement with our shareholders is detailed
on page 28.
The Chief Executive Officer, the Chief Financial
Officer, the Chairman, the Chair of the Remuneration
Committee and the Chair of the Audit Committee
will be available at the AGM to answer shareholders’
questions. Proxy votes are disclosed at the meeting
following a show of hands on each shareholder
resolution and are subsequently published on the
Group’s website at www.next15.com by completing
an online proxy appointment form in advance of
the meeting, appointing the chair of the meeting as
your proxy.
In the event of a significant proportion of votes ever
being received against a particular resolution, the
Board would take steps to understand shareholder
concerns and consider what action they might want to
take in response. Shareholders are also encouraged to
submit questions to the Board throughout the year via
the Company Secretary to cosec@next15.com. More
information concerning the arrangements for the AGM
can be found on page 103.
The Board is happy to enter into dialogue with
institutional shareholders based on a mutual
understanding of objectives, subject to its duties
regarding equal treatment of shareholders and the
dissemination of inside information. The Chief Executive
Officer and the Chief Financial Officer meet institutional
shareholders on a regular basis.
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The Board as a whole is kept informed of the views and
concerns of the major shareholders. When requested
to do so, the Non-Executive Directors will attend
meetings with major shareholders and are prepared
to contact individual shareholders should any specific
area of concern or enquiry be raised.
Our customers and suppliers
Client focus is critical to the success of each of our
businesses. By their nature our businesses work in
collaboration with their clients: we embed teams within
client organisations, use agile processes, and build
businesses to better serve client needs based on what
they tell us.
Because of the nature of our business, our long-term
success as a Group is not dependent on any one
supplier; nevertheless, we believe in treating our
suppliers fairly, for example by ensuring that we pay our
suppliers promptly in accordance with the prevailing
terms of business.
More information on how we engage with our
stakeholders can be found on pages 28 and 29.
Financial reporting and going concern statement
The Directors have, at the time of approving the
financial statements, a reasonable expectation that the
Company and the Group have adequate resources to
continue in operational existence for the foreseeable
future. Accordingly, they continue to adopt the going
concern basis in preparing the financial statements.
The Directors have made this assessment in light of
reviewing the Group’s budget and cash requirements
for a period in excess of one year from the date of
signing of the annual report and considered outline
plans for the Group thereafter.
The Group’s business activities, together with the factors
likely to affect its future development, performance and
position, are set out in the Strategic Report on pages 1
to 63. The financial position of the Group, its cash flows,
liquidity position and borrowing facilities are described
in the Financial Review on pages 22 to 27.
In addition, note 19 to the financial statements includes:
the Group’s objectives, policies and processes for
managing its capital; its financial risk management
objectives; details of its financial instruments and
hedging activities; and its exposures to credit risk and
liquidity risk.
The Directors’ Responsibilities Statement in respect of
the financial statements is set out on page 105.
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Nomination Committee report
“ The Board re‑established a
Nomination Committee in
February 2021. Prior to this,
appointments to the Board
were the responsibility of the
Board as a whole.”
Role of the Committee
The principal role of the Committee is to ensure that
there is a formal, rigorous and transparent procedure
of appointments to the Board and to lead the process
for Board appointments. The Committee also regularly
reviews the structure, size and composition of the
Board (including skills, knowledge, experience,
independence and diversity) and its committees.
It also gives full consideration to succession planning
for Directors and senior executives.
Candidates met with the existing Non-Executive
Directors and certain members of the management
team. The Committee and the Board were impressed
by the candidates it met and has announced Dianna
Jones will join the Board as a Non-Executive Director.
The Committee also recommended to the Board that
Jonathan Peachey join the Board as an additional
Executive Director. Jonathan has been Chief Operating
Officer of the Company since June 2019 and will add
great skills and experience to the Board.
Committee membership
The Committee comprises all of the Non-
Executive Directors.
Following the above appointments, the Board will
comprise four Non-Executive Directors and three
Executive Directors.
Focus of the Committee during the year
The Committee held two meetings during the year.
The main focus was to review the current composition
of the Board in terms of the number of Executive and
Non-Executive Directors and the skills, experience and
diversity of the Directors.
In August 2021, the Committee commenced a search
for an additional Non-Executive Director. A thorough
process was carried out to identify what skills and
experience were required to complement those of the
existing Directors.
There was also a desire to look for a US-based Non-
Executive Director to reflect the geographic base
of the Group’s businesses and clients. A search was
carried out by an external search agency who were
also instructed to include diverse candidates from
under-represented Groups and a balance of male and
female candidates.
The Committee and the Board have been reviewing
the Board composition to ensure that there is
effective succession planning at Board level, as well
as considering succession planning for key senior
executives of the Group. This work is ongoing, and
the Committee recognises the need to continually
review succession planning and have a thorough
process in place.
Penny Ladkin-Brand
Nomination Committee Chair
4 April 2022
Penny Ladkin-Brand
Chair
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Audit Committee report
“ The Committee
continues to fulfil a
vital role in the Group’s
governance framework.”
Robyn Perriss
Chair of the Audit Committee
As Chair of the Audit Committee (the ‘Committee’), I am
pleased to present the Committee’s report for the year
ended 31 January 2022.
The Committee continues to fulfil a vital role in
the Group’s governance framework, providing
independent challenge and oversight of the
accounting, financial reporting and internal control
processes, risk management, the Internal Audit function
and the relationship with Deloitte, the External Auditor.
This report outlines how the Committee has discharged
its responsibilities during the year, the key issues it has
considered during FY22 and also areas of focus over
the next financial year.
As well as the ‘business as usual’ items, the Committee
reviewed the Group’s definition and disclosure of
Alternative Performance Measures (‘APMs’), resulting
in a decision to simplify and de-clutter the FY22
Annual Report by including all APM definitions and
reconciliations in a glossary to the financial statements.
Given the significant new five-year contract entered
into in February 2022 by Mach49, with a global
technology and digital business, with revenues over
the initial life of the contract anticipated to be in excess
of US$400m, a key focus of the Committee’s year-end
discussions has been on the impact of the contract win
on the Mach49 earn-out liability and the judgement
and assumptions made by management, together with
related sensitivities. Further details of how we have
considered this are set out in note 17 on page 159.
The Committee also reviewed our whistleblowing
and anti-bribery policies, including recommendations
for more formalised recording of gifts and hospitality
across the Group and the implementation of a third
party whistleblowing line.
A significant proportion of Committee time has also
been devoted to areas of operational risk including
GDPR and Information Security/Cyber with these items
becoming standing items on the Committee agenda.
Given the ever evolving compliance landscape and
to provide further support to the existing in-house
Internal Audit team in specialist areas, a decision was
made during the year to appoint an outsourced Head
of Internal Audit, and following a competitive tender
process BDO was appointed in August 2021. In addition
Shoosmiths LLP was appointed as an outsourced Data
Protection Officer (‘DPO’). More information about the
appointment and the function of the DPO can be found
on page 102.
The Committee’s priorities for the next financial year
will include:
• ongoing monitoring of the integration status
and financial control environment of recently
acquired brands;
• continued focus on cyber security and
GDPR compliance;
• a review of the entity level control framework at a
brand level with a key focus on revenue recognition;
• evolution of the Internal Audit function; and
• monitoring of the proposed BEIS
governance reforms.
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Audit Committee report continued
Through the activities of the Committee, described in
this report, the Board confirms that it has reviewed the
effectiveness of the Group’s internal systems of control
and risk management, covering all material controls
including financial, operational and compliance controls,
and that there were no material failings identified which
require disclosure in this Annual Report.
I will be happy to answer any questions about the work
of the Committee at the forthcoming AGM.
Robyn Perriss
Audit Committee Chair
4 April 2022
Membership and attendance
The current members of the Committee are the Chair
of the Committee and two Non-Executive Directors,
all of whom are independent. The membership of
the Committee has been selected with the aim of
providing a range of financial and commercial expertise
necessary to meet its responsibilities under the QCA
Code. The Committee Chair and Penny Ladkin-Brand
have previous experience as Chief Financial Officers of
premium listed FTSE businesses and both are qualified
accountants and thus the Board considers their financial
experience to be recent and relevant to discharge
their duty to the Committee and its stakeholders. This
is kept under continuous review and any changes to
the composition of the Committee are a matter for the
Nomination Committee to finalise.
The Company Secretary, or their nominee, attends
all meetings as Secretary to the Committee and, by
invitation, they are attended by the Chief Executive
Officer, Chief Financial Officer, the External Audit
Partner and the Head of Internal Audit. From time-to-
time other senior managers and advisers are invited to
present to the Committee.
Following the decision to add an additional meeting to
the permanent calendar, the Committee met four times
during the year. A summary of members’ attendance
can be found on page 69.
Role and responsibilities
The Committee’s role is to assist the Board in fulfilling its
oversight responsibilities. The Committee monitors and
reviews the integrity of the Group’s financial reporting
and other announcements relating to its financial
reporting and manages the relationships between the
Company and its Internal and External Audit functions.
The Committee makes recommendations to the Board
based on its activities, all of which were accepted
during the year. The Committee’s responsibilities are
set out in its Terms of Reference on the Company’s
website at www.next15.com.
You can see from the chart on the right how the
Committee spent its time in FY22. The Committee is
satisfied that this was the correct focus to serve the
broad needs and risk profile of the business during
the year. Looking forward the Committee is mindful of
the increased scale and complexity of the Group and
will continue to focus on both core financial reporting
controls and broader operational risks and related
controls as highlighted by the range of internal audit
reviews proposed in FY23 on page 80.
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How the Committee
spends its time
25+
Percentage
Category
Finance Matters 25%
Operational
15%
Internal Audit
24%
External Audit
24%
Governance
12%
Key activities during the year
Key area
Activity during the year
Financial reporting
• Considered the Group’s accounting policies and practices, application of accounting standards and significant judgements
and estimates, adjusting items, tax matters, goodwill impairment, earn-out liabilities, and accounting for new acquisitions.
• Reviewed the Annual Report and Accounts as a whole including the clarity of the disclosures and that the narrative in the
front section reflected the performance as detailed in the Group financial statements.
• Reviewed the Going Concern Statement included in the Annual Report; in assessing going concern the Committee has
considered the Group’s latest budget and three-year plan, cash flow forecast and corresponding sensitivities together
with potential downside scenarios.
• Reviewed the half-year accounts, including the material judgements and estimates.
• Reviewed the External Auditor’s report on the full-year audit.
• Reviewed the half-year and full-year results announcements and trading statements.
Operations
• Oversight of the GDPR and privacy project, including any remedial activities.
The significant financial judgements considered in relation to the Annual Report and Accounts are detailed in note 1T on page 137.
• Monitored cyber and information security, including the identification and subsequent resolution of gaps.
• A review of the entity level control framework at a brand level with a key focus on revenue recognition.
• Monitored post-acquisition integration status.
Internal audit
• Approved the annual internal audit plan, including its alignment to the principal risks, emerging areas of risk, coverage
across the Group and continuing review of the Group’s processes and controls.
• Monitoring the remit and resourcing of the Group’s Internal Audit function.
• Assisting the Board in its assessment of the Group’s risk environment, internal controls and risk management processes.
• Keeping under review the effectiveness of the Group’s internal control and risk management systems.
• Reviewed key findings from Internal Audit activities during the year.
External audit
• Reviewed the External Auditor’s independence, objectivity, and the effectiveness of the external audit process.
• Considered the reappointment of the External Auditor.
• Considered External Auditor fees and terms of engagement.
• Reviewed and approved changes to the Non-Audit Services Policy.
• Reviewed the External Auditor non-audit services and fees.
Other matters
• Discussed the impact of upcoming changes to accounting standards and legal, tax and regulatory requirements.
• Carried out a review of the Committee’s terms of reference.
• Monitored the proposed BEIS governance reforms.
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+
23
+
25
+
12
+
T
Strategic report
Corporate governance
Financial statements
Audit Committee report continued
Risk and internal control
The Group’s system of internal control, along with its
design and operating effectiveness, is subject to review
by the Committee. The Board has overall responsibility
for setting the Group’s risk appetite and ensuring that
there is an effective risk management framework.
The Committee supports the Board and the Internal
Auditor in reviewing systems of risk management and
the effectiveness of internal controls. The Executive
Directors have overall accountability for the control
and management of the risks the Company faces. More
information on how we manage our risk can be found
on page 54.
Internal audit
The Group has an independent and objective Internal
Audit function which supports the Board in assessing
and ensuring that risks are appropriately managed
and that the internal controls are operating effectively.
Internal audit achieves this by assessing whether
all significant risks are identified and appropriately
reported to the Board, assessing whether they are
adequately controlled and assisting management
to improve the effectiveness of governance, risk
management and internal controls. Internal audit
focuses on controls and related activities (including
policies, procedures and systems) which are in place
to ensure:
Internal Audit may perform advisory services relating
to governance, risk management and control as
appropriate for Next 15. It may also evaluate within the
independence requirements, specific operations at the
request of the Board, Audit Committee, or management
as appropriate. To provide for the independence of
the function, the function is run by the Head of Internal
Audit, who reports to the Audit Committee. The Audit
Committee provides final approval of the department’s
Charter and annual internal audit plan. The Head of
Internal Audit is responsible for providing the Audit
Committee with a self-assessment on internal audit
activity, its consistency with the Audit Charter and
performance relative to its plan at least every two years.
The internal audit plan for FY23 is developed using
a combination of the annually refreshed corporate
risk register, the sector experience of the co-sourced
team, and in discussion with other key stakeholders
such as External Audit and Management. The plan is
approved by the Audit Committee. For 2023 key areas
are summarised below. Some areas remain on the
plan from prior year, as they are inherent risks within
our business, other areas have come onto the plan to
reflect our changing risk landscape.
• Revenue recognition.
• Earn-out processes.
• Proper identification and management of risk;
• Acquisition reviews.
• reliability, integrity and security of information; and
• Data privacy and security.
• compliance with policies, plans, procedures, laws
• Third Party Management.
and regulations.
• Culture.
• Other assurance and support as aligned to the Group
principal risks and approved by the Committee.
Next 15 continues to expand its global operations
through a blended approach of organic growth and
through acquisitional growth. Risk and Assurance
plays an important role helping to ensure that risks are
identified and appropriately managed in line with the
Group’s risk appetite. Additionally, Risk and Assurance
will perform regular horizon scanning to anticipate
future risks that may have an impact on Next 15’s
operations and strategic priorities (i.e. UK corporate
governance reforms and ESG reporting requirements).
Auditor independence, objectivity and fees
The External Auditor, Deloitte LLP, was first appointed
in 2014, for the financial year ended 31 January 2015.
The Board is satisfied that the Company/Group
has adequate policies and safeguards in place to
ensure that Deloitte maintain their objectivity and
independence. The External Auditor reports annually
on its independence from the Company/Group and in
accordance with Deloitte’s partner rotation rules, a new
senior audit partner, Peter McDermott, was appointed
with effect from 1 February 2020. The Group has a
formal policy on the engagement of the External Auditor
for non-audit services. The objective of the policy is to
ensure that the provision of non-audit services by the
External Auditor does not impair, or is not perceived
to impair, the External Auditor’s independence or
objectivity. The policy sets out monetary limits and
imposes guidance on the areas of work that the
External Auditor may be asked to undertake and those
assignments where the External Auditor should not
be involved. The policy is reviewed regularly, and its
application is monitored by the Committee. The fees
paid to Deloitte in respect of non-audit services are
shown in note 4 to the financial statements. This work
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is not considered to affect the independence or
objectivity of the External Auditor. The Audit Committee
has confirmed no services were provided outside of
the updated policy.
External audit effectiveness
The Committee places great importance on ensuring
that the External Audit is of a high quality and that
the auditor is effective. The Committee received a
comprehensive audit plan from Deloitte, setting out the
proposed scope and areas of focus for the year-end
audit and the auditor’s assessment of the key areas of
risk that had been identified. The audit plan and areas of
risk identified were reviewed, and where appropriate,
challenged by the Committee. The Committee met with
Deloitte throughout the year, including at times without
management present, to discuss their remit and any
issues arising from their work as auditor.
Subsequent to the FY22 year end the Committee
commenced a review of the effectiveness of Deloitte
and its work during the FY22 year end audit in the
format of a questionnaire completed by the Committee
members and management. The questionnaire
responses, corroborated by the Committees
discussions with management, indicated that overall
the external auditor was viewed as being effective. A
more detailed debrief discussion is planned as part of
the June 2022 Committee meeting which will be used
as an input into the FY23 audit plan.
Areas of focus for the coming year
The Committee has continued to focus on
strengthening the systems of internal control across the
Group through a number of initiatives which are aligned
to the Group’s strategy and principal risks:
• Entity level control improvement programme;
• Group-wide risk management framework;
• Strengthening the Internal Audit function; and
• Championing corporate governance
enhancements in advance of potential reforms.
In light of the continued disruption by Covid-19 the
Committee has continued to be alert to the risk of fraud
and ensure that people are working safely remotely
and that our data is protected, this has also included
risks relating to cyber and GDPR.
During 2021, in response to the changing risk
landscape faced by a fast growing global business,
the Committee appointed an internal audit co-source
partner to work alongside Next 15’s internal audit team.
This has also included outsourcing the Head of Internal
Audit role. This combined team leverages experience
of both the business and the sector, enabling Next 15 to
gain timely assurance over the changing financial and
operational landscape we face as an expanding global
business.
The Committee will continue to discharge its duties as
documented in the Audit Committee terms of reference.
The Committee has oversight over a recently launched
governance improvement project which will include a
review of the quality of reporting from the Group into
the Committee. This is supported by the introduction
of the board portal hosted on the Company’s behalf
by iBABs. The improvements are planned to extend
to the content and practical application of the Group
policy set. In FY23 the business will be reviewing the
effectiveness of the Group anti-bribery and corruption
policy and how it is embedded into our culture.
During the year the Committee reviewed the refreshed
Group whistleblowing policy which will result in the
implementation of an externally hosted independent
whistleblowing hotline, which will allow our people
to remain anonymous throughout the whistleblowing
process should they wish to. The Committee’s terms of
reference were refreshed during the year and can be
found on our website at www.next15.com.
The Committee will continue to discharge its duties as
documented in the Audit Committee terms of reference.
In relation to the FY22 financial year, the Committee
was satisfied that there had been appropriate focus
and challenge on the primary areas of audit risk and
concluded that Deloitte remained independent and
objective in relation to audit. The Committee has
made a recommendation to the Board to reappoint
Deloitte LLP as the Company’s auditor for the 2022/23
financial year. Accordingly, a resolution proposing
their reappointment will be proposed at the AGM in
June 2022.
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Audit Committee report continued
Significant judgements
Issue
Explanation
How it was addressed
Changes in estimates
relating to
acquisition-related
liabilities
Presentation of
alternative
performance
measures
The Group has material earn-out liabilities, with some payments dependent on
performance up to five years from 31 January 2022. The estimates are sensitive to changes
in revenue growth rates and profitability assumptions, as well as the discount rate used.
During FY22 earnout liabilities increased by a net £124.5m in the year, primarily driven by a
changes in estimate of £104.7m relating to the Mach49 business. This change in estimate
was driven both by revised assumptions for the underlying growth rate of the core Mach
49 business, but principally due to a significant new contract win with a global technology
and digital business, with revenues over the initial life of the contract anticipated to be in
excess of $400m. This contract has significantly increased the estimated earnout liability,
which management has subsequently agreed to cap at $300m. There is little judgement in
relation to the future revenue in relation to this contract given this is a contractual amount;
however there is significant judgement in relation to the future costs associated with the
delivery of the contract and the resultant profitability and margin. If incorrect assumptions
are used this could result in a material adjustment to the value of the Mach 49 earn out
liability within future financial years.
The identification of adjusting items and the presentation of Alternative Performance
Measures (“APMs”) is a judgement in terms of which costs or credits are not associated with
the underlying trading of the Group or otherwise impact the comparability of the Group’s
results year on year. The Group’s adjusting items include the amortisation of acquired
intangibles, the change in estimate and unwinding of discount on acquisition-related
liabilities, deal costs, charge for one-off employee incentive schemes, employment-related
acquisition costs, property related impairment, and Covid-19 related restructuring costs.
Whilst APMS are still referred to in the Financial Review within the front of the Annual
Report to explain the Group’s results in line with how the Board reviewed underlying
trading performance, this year a decision was made to move the APMs out of the back
half financial statements, and these are now all disclosed within the glossary of the Annual
Report. Within there each is explained and reconciled to statutory numbers.
The Committee considered the earn-out liabilities recognised at the half-year and year-end split
by brand, how they had changed over the last 6 or 12 months, and the key assumptions made.
In addition, a separate paper was prepared by management in relation to the Mach 49 liability
setting out the approach and rationale for the key inputs to the earn out calculation, together with
detailed sensitivity analysis on the impact of a potential change in margin on the earn out liability.
The paper also set out the proposed disclosure with the Annual Report as a key area of judgement
and estimation uncertainty.
At the year-end the External Auditor’s testing and validation of key assumptions was also discussed
and following due consideration the Committee concluded it was satisfied with management’s
assumptions and judgements.
For both the full year results the Committee considered the adjusting items, including explanations
of why they were either not related to the underlying performance of the business or impacted
the comparability of the Group’s results year-on-year. The Committee also reviewed the FRC’s
guidance, considered adjusting items used by the Group’s peers and the External Auditor’s
assessment of the adjusting items. The Committee reviewed the narrative for the adjusting items
within the glossary to the Annual Report to ensure it gave adequate detail on why the items were
adjusted. The Committee concluded it was satisfied with the adjusting items included in the Group’s
results and that appropriate disclosure of those items has been included in the Annual Report.
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Directors’ remuneration report
“ The Committee keeps the
remuneration framework
under consistent review
and is committed to
ensuring it is aligned with
best practice.”
Helen Hunter
Chair of the Remuneration Committee
On behalf of the Board, I am pleased to present the
Directors’ Remuneration Report for the year ended
31 January 2022. The report explains the work of the
Remuneration Committee (the ‘Committee’) during the
year, the basis for the remuneration paid to Directors
for FY22, and how we intend to apply the remuneration
framework for FY23.
2021 AGM approvals and remuneration
framework review
The Committee keeps the remuneration framework
under consistent review and is committed to ensuring
it is aligned with best practice and appropriately reflects
Next 15’s position and performance against the current
macroeconomic backdrop. The Committee focused on
the structure of our remuneration framework in FY21
and the overall remuneration levels and structure more
broadly throughout the senior executive population in
FY22, with the necessary AGM approvals sought. We
thank shareholders for their engagement over both
years and the strong support received on remuneration
-related resolutions at our 2021 AGM. As we enter
FY23, we are comfortable that the changes we have
made to date are supporting the business strategy
well and that the remuneration framework provides a
strong long-term alignment of interest between senior
executives and shareholders.
As part of the Committee’s annual agenda, the
Remuneration Framework continues to be kept
under review, in the context of the Group’s strategy
and growth plans, market best practice and market
competitiveness. As the Group continues to grow,
it is vital that the executive team can be rewarded
appropriately for the performance they deliver under
the Remuneration Framework. Accordingly, we are
proposing to increase the annual bonus opportunity
for FY23 from 60% of salary to 100% of salary. The
Committee believes this increase is necessary to
provide a more market competitive annual bonus
opportunity for Next 15’s current size and complexity,
albeit it is still at the lower end of market levels for the
Directors, and to provide a more appropriate weighting
between the fixed and variable pay elements of the
package. This increase to bonus opportunity and the
accompanying increased stretch in bonus targets
supports our strategy, and ambitious short-term goals
for this next stage of rapid growth, whilst the LTIP
and the associated performance metrics and targets
continue to focus Executive Directors on the long-term
growth plans.
In line with past practice, we are voluntarily providing
shareholders with an advisory vote on the adoption of
this report to ensure there is full accountability for the
remuneration framework, its operation and payments
to Directors. We are committed to having an open
and constructive dialogue with shareholders on our
executive remuneration approach and whilst we
hope investors will be supportive of this change to the
framework for FY23, we welcome any feedback on our
remuneration framework and approach.
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Directors’ remuneration report continued
Performance and pay for FY22
It has been another year of strong performance for
the Group with adjusted diluted EPS and adjusted
profit before income tax both increasing by over 45%.
Furthermore, we were pleased to resume payment of
dividends following the 2021 AGM and there was no
need to furlough any employees during the year, with
furlough monies in relation to FY21 repaid in full in FY22.
Last year the executives volunteered to forgo their
annual bonus (which would have paid out at a 100%
level) in light of the need to retain cash and spread
the available bonus pool more broadly throughout the
business. For FY22 the annual bonus was based on the
achievement of operating profit, cash conversion ratio,
organic revenue growth and operating profit margin
performance conditions. The strong performance
over the year exceeded the maximums set for the
performance targets and so the full bonus, equivalent
to 60% of salary, will be payable to both Executive
Directors. Whilst the bonus scheme focused on the
financial performance of the Group we were also
pleased to see strong progress made in relation to
our overall business strategy throughout the course
of the year.
We have several cycles of legacy LTIP awards that
were due to vest based on performance over FY22
and tranche four of the FY19 LTIP award and tranche
three of the FY20 LTIP award are all eligible to vest.
The awards are based 70% on an adjusted EPS
performance metric and 30% on strategic KPIs and,
following an assessment of performance over the year,
the tranches will vest in full.
Further details on the performance against targets
for both the bonus and LTIP can be found later in
this report.
From FY21, under the current remuneration framework,
we moved to a single three-year performance
measurement basis with a two-year holding period for
the Executive Directors.
Board appointments
To support the Group’s continued growth in size,
scale and complexity, the Board were pleased to
announce the appointment of Jonathan Peachey as
an Executive Director and Dianna Jones as a Non-
Executive Director. Both will join the Board on 6 April
2022. Jonathan has been the Group Chief Operating
officer since 2019. Jonathan will receive a salary of
£300,000, benefits in line with policy and a maximum
pension contribution of 10% of salary in line with the
other executive directors. His annual bonus opportunity
will be 100% of salary and his LTIP opportunity will be
150% of salary. Dianna is based in San Francisco and
her annual fee is US$75,500 which is equivalent to the
base fee currently paid to the Non-Executive Directors
based in the UK.
Looking forward – how we intend to operate our
remuneration framework in FY23 and beyond
We have reviewed the remuneration framework against
our current strategy and the most recent guidance from
investor representative bodies and are satisfied that the
current structure of remuneration remains appropriate
for FY23. However, as mentioned earlier in this letter,
the Committee has reviewed the quantum of incentives
and believes it is appropriate to increase the annual
bonus opportunity from 60% of salary to 100% of salary.
Salary increases for the CEO and CFO will be 3% which
is slightly below the average workforce increase.
During the year, we undertook a review of remuneration
strategy with a particular focus on Environmental, Social
and Governance (‘ESG’) matters. The Group has now
defined and set out its ESG policy and key targets which
can be found in this annual report on pages 33 to 53.
We are a Company strongly driven by purpose and
values and we would look to incorporate appropriate
ESG measures into our business strategy and then,
if appropriate into our executive incentive plans. The
Committee is cognisant of investor views regarding
ESG and intends to review the appropriateness of
incorporating ESG metrics into incentives during the
year for possible implementation in FY24.
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The annual bonus opportunity will be 100% of
salary, payable in cash. Our annual bonus plan will
remain based on the same mix of operating profit,
cash conversion ratio, organic revenue growth and
operating profit margin performance measures as in
FY22 and stretching targets have been set which will
be disclosed retrospectively in next year’s report. Our
FY23 Long-Term Incentive Plan (‘LTIP’) awards will be
based on the same mix of EPS, organic revenue growth
and operating profit margin. This suite of measures
mirror our financial KPIs and provide a rounded
assessment of our performance over FY23 for the
bonus and longer term to the period to FY25 for the
LTIP. LTIP award levels for the Executive Directors will
be 150% of their base salary, and the Committee has set
stretching targets for each performance metric which
are detailed on page 100
Broader employee pay arrangements
During FY23 we will be looking at our broader
employee share arrangements and in particular the
possibility of operating an all-employee share plan.
Our policy throughout the Group has been to operate
devolved bonus and equity incentive arrangements
linked to growth of the business units and we believe
that this approach continues to serve us well. However,
an all-employee share plan using PLC equity will
provide a counter-balance toward a Group focus and
ensure all our employees share in the Group’s growth
and success.
Closing remarks
The Committee is satisfied that, following changes
made over the past two years and with the proposed
change to bonus quantum for FY23, the current
remuneration framework is appropriate and supports
the Group’s strategy in both the short and long term. We
will continue to apply the framework robustly to ensure
that there is a strong link between our remuneration
framework and our business strategy, with reward tied
to the achievement of stretching performance goals.
I hope this report is clear and demonstrates the robust
application of our remuneration framework. Although
we are an AIM listed company with no requirement for
a shareholder vote on Directors’ pay, in the spirit of full
accountability, this Remuneration Report will be subject
to an advisory shareholder vote at the 2022 AGM.
We look forward to continued dialogue with you, and
your support at the forthcoming AGM.
Helen Hunter
Remuneration Committee Chair
4 April 2022
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Directors’ remuneration report continued
At a glance
How we performed in FY22
FY22 performance-related bonus
Maximum vs actual pay for FY22
Adjusted performance measure
Target range
Performance
Weighting
Outcome
Operating profit after
lease liability interest*
£54m–£62m
£79.2m
Organic revenue growth
5%–10%
Cash conversion ratio
80%–100%
Operating profit margin*
18%–20%
26.1%
100%
21.9%
30%
30%
20%
20%
30%
30%
20%
20%
Total
100%
100%
* Excluding share acquisitions made after Q1 reforecast in May 2021.
Maximum LTIP value is based on share price at grant date. Actual LTIP value is based on average Q4 FY22 share price.
£2,000k
£1,800k
£1,600k
£1,400k
£1,200k
£1,000k
£800k
£600k
£400k
£200k
£0k
£1,442k
19%
27%
54%
£1,798k
35%
22%
43%
Fixed pay
Performance-related bonus
LTIP
£691k
18%
29%
53%
£863k
35%
23%
39%
42%
Maximum
Actual FY22
Maximum
Actual FY22
Chief Executive Officer
Chief Financial Officer
LTIP tranches vesting in relation to FY22 performance
Tranche four of the FY19 LTIP award and tranche three of the FY20 LTIP award are eligible to vest in FY23, based on performance over FY22.
The awards are based 70% on an adjusted EPS performance metric and 30% on strategic KPIs. The performance against targets and the vesting outcomes are shown below:
FY19 and FY20 LTIP Awards
Adjusted performance measure
Earnings per share
KPIs
Organic revenue growth
Operating profit margin
Total
86
Weighting
Target range
Performance
70%
5% – 15%
46.7%
15%
5% – 10%
15% 18.5% – 20%
26.1%
21.9%
FY19
tranche 4
vesting
70%
15%
15%
FY20
tranche 3
vesting
70%
15%
15%
100%
100%
100%
Next Fifteen Communications Group plc | Annual Report 2022
Strategic report
Corporate governance
Financial statements
How we will apply our remuneration framework for FY23
Element
Salary
Pension and
benefits
Annual bonus
Long-term
incentives
Shareholding
requirement
Time horizon
FY23
FY24
FY25 Application of remuneration framework for FY22
Tim Dyson, Chief Executive: US$933,392
Peter Harris, Chief Financial Officer: £339,900
Jonathan Peachey, Chief Operating Officer: £300,000
Salary levels reflect a 3% increase for the CEO and the CFO in line with the average workforce increase.
Directors are entitled to receive employer contributions of up to 10% of base salary to a Group pension plan.
Maximum opportunity is 100% of salary, payable in cash.
Performance metrics unchanged from FY22 of operating profit, organic revenue growth, cash conversion ratio and operating profit margin.
Long-term incentive grant of 150% of salary.
Performance will be measured over a single three-year period and will be based two-thirds on EPS, 16.7% on organic net revenue growth
and 16.7% on adjusted operating profit margin.
A two-year holding period will apply to the vested award.
Executive Directors must build and maintain a holding of shares in the Company of 200% of salary. 50% of the net of tax number shares
vesting under the incentive arrangements must be retained until guideline is met.
Remuneration framework
To ensure that the Group continues to grow, organically and inorganically, we must have the right remuneration framework in place.
In setting our remuneration framework the Committee considers:
• ensuring that there is a strong long-term alignment of interest between Executive Directors and our shareholders;
• the need to align the overall reward arrangements with the Group’s strategy, both in the short and long term;
• the need to attract, retain and motivate Executive Directors and senior management of the right calibre, ensuring an appropriate mix between fixed and
variable pay; and
• ensuring that there is a coherent cascade of pay and benefits arrangements elsewhere in the Group to support internal alignment of interest and succession.
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Corporate governance
Financial statements
Directors’ remuneration report continued
Executive Director remuneration framework
Element of
remuneration
Base salary
Key features
Purpose and link to strategy
Maximum opportunity
Performance measures
Malus and clawback
Reflects external market
and geography and an
individual’s performance
and contribution.
Reviewed annually normally
in February.
Attracts and retains the
best talent with the
necessary expertise
to deliver the Group’s
strategy and to create
shareholder value.
No prescribed maximum.
Account will be taken
of increases applied to
employees as a whole
when determining
salary increases.
The Committee considers the
individual’s performance and
contribution in the period since
the last review.
N/A
Committee discretion to
award increases when it
considers it appropriate,
including where base salary
at outset may have been
set at a relatively low level,
or where there has been a
substantial change in
responsibilities of the role.
The value of benefits is not
capped as it is determined
by the cost to the Company,
which may vary.
N/A
N/A
Provides market
competitive and
cost-effective benefits.
Provides reassurance
and risk mitigation and
supports personal health
and wellbeing.
Allowances
and benefits
The Chief Executive Officer is
entitled to a contribution to a
deferred benefit plan; private
health, dental and vision
insurance; life assurance;
professional adviser fees paid
on his behalf; and car allowance
(lease and associated fees) or
cash in lieu thereof.
The Chief Financial Officer
is entitled to private
medical insurance.
The Committee may determine
that other benefits may be
added where appropriate.
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Corporate governance
Financial statements
Element of
remuneration
Pension
Directors are entitled
to receive employer
contributions to a Group
pension plan.
Provides market
equivalent
retirement benefits.
Performance-
related
bonus
Annual cash bonus plan.
Targets closely aligned with
the Group’s strategic aims.
Targets are reviewed
annually by the Committee.
Not pensionable.
Reinforces and
rewards delivery of
annual performance
and strategic
business priorities.
Delivers value to
shareholders and
consistent with the
delivery of the
strategic plan.
Key features
Purpose and link to strategy
Maximum opportunity
Performance measures
Malus and clawback
Maximum contribution,
currently 10% of base salary.
N/A
N/A
In addition, Tim Dyson
is entitled to receive a
pension benefit under
a US 401k plan.
The maximum bonus
opportunity is 100%
of salary.
The Committee chooses measures
that help drive and reward the
achievement of the Group’s
strategy. Metrics and their relative
weightings are reviewed each year.
The Remuneration Committee has
the discretion to adjust and to
override formulaic outcomes for
annual bonus payment due if
the Remuneration Committee
considers it is not reflective of the
underlying performance of the
Company, as well investor
experience and the employee
reward outcome.
The bonus is subject to recovery and
withholding provisions which may be
applied in the event of a material
miscalculation of a participant’s entitlement,
a material misstatement or restatement of
the Company’s financial results for the year
to which the performance period relates,
or material personal misconduct that would
justify summary dismissal, or result in
significant reputational damage to the
Company, or have a material adverse
effect on the Company’s financial position,
or reflect a significant failure of the
Company’s risk management or control.
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Corporate governance
Financial statements
Directors’ remuneration report continued
Executive Director remuneration framework continued
Element of
remuneration
Key features
Long-Term
Incentive
Plan (‘LTIP’)
Awards may be structured
as performance share awards
or nil-cost options.
For awards granted during
FY21 onwards, awards will
be subject to a three-year
performance period.
For awards granted during
FY22 onwards, there will be
a two-year holding period
on shares acquired from
vested awards.
The value of dividends
payable over the vesting
period pay be added to the
vested share awards in cash
or shares.
Purpose and link to strategy
Maximum opportunity
Performance measures
Malus and clawback
150% of salary.
Rewards long-term
sustainable performance,
in line with the
Company’s strategy.
Focuses Executive
Directors on delivering
outstanding value
creation for shareholders.
Same clawback and malus provisions as
for the performance-related bonus.
The Committee chooses
performance measures that support
delivery of the Company’s strategy
and provide alignment between
Executive Directors
and shareholders.
Performance metrics and their
respective weightings may vary
from year to year depending on
financial and strategic priorities.
Up to 25% vests for
threshold performance.
The Remuneration Committee
has the discretion to adjust and
to override formulaic outcomes
for the LTIP vesting level if the
Remuneration Committee considers
it is not reflective of the underlying
performance of the Company, as
well as investor experience and the
employee reward outcome.
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Corporate governance
Financial statements
Element of
remuneration
Key features
Shareholding
guidelines
Executive Directors are
expected to build and
maintain a holding of shares
in the Company of 200% of
base salary.
Purpose and link to strategy
Maximum opportunity
Performance measures
Malus and clawback
Increases alignment
between Executive
Directors and shareholders
and shows a clear
commitment by all
Executive Directors
to creating value for
shareholders in the
longer term.
N/A
Minimum shareholding
guidelines to be satisfied
within five years of
appointment of 200%
of salary for all
Executive Directors.
If any Executive Director
does not meet the
guideline, they will be
expected to retain up
to 50% of the net of tax
number of shares vesting
under any of the
Company’s discretionary
share incentive
arrangements until the
guideline is met.
Executive Directors shall not dispose of
shares needed to meet their minimum
shareholding requirement except as
approved by the Committee.
The Committee may give such approval
in limited circumstances such as to
comply with legal obligations or to
avoid financial distress.
Non-Executive Director remuneration framework
Element of
remuneration
Fees
Key features
Purpose and link to strategy
Maximum opportunity
Performance measures
Cash fees, determined by the
Executive Directors, reflecting
the time commitment required,
the responsibility of each role,
and the level of fees in
comparable companies.
Supports recruitment and retention
of Non-Executive Directors with
the necessary breadth of skills and
experience to advise and assist with
establishing and monitoring the
Group’s strategic objectives.
The aggregate Directors’ service
fees (excluding salary or other
remuneration) is limited to £500,000
under the Company’s Articles.
No entitlement to compensation
for early termination.
Internal evaluation of the Board’s and
its Committees’ effectiveness takes
place periodically.
Policy on recruitment
In the case of hiring or appointing a new Executive Director, the Committee may make use of any or all of the existing components of remuneration, as described above.
The Committee will take into consideration all relevant factors (including quantum, nature of remuneration and the jurisdiction from which the candidate operates) to ensure
that the pay arrangements are in the best interests of the Company and its shareholders. Awards forfeited from the previous employer may be bought out like-for-like with
equivalent bonus or LTIP awards over Next 15 shares.
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Corporate governance
Financial statements
Directors’ remuneration report continued
Directors’ service contracts, policy on outside appointments and payments for loss of office
Executive Directors have rolling contracts that are terminable on six months’ notice. There are no contractual entitlements to compensation on termination of the employment
of any of the Directors other than payment in lieu of notice at the discretion of the Company and a payment for compliance with post-termination restrictions.
Executive Directors
Tim Dyson
Peter Harris
Jonathan Peachey
Date of current
service contract
Notice period
1 June 1997
25 March 2014
16 April 2019
6 months
6 months
6 months
The Executive Directors are allowed to accept appointments and retain payments from sources outside the Group, provided such appointments are approved by the Board.
Bonus and LTIP awards normally lapse if the Executive resigns. However, for a ‘good leaver’, part-year bonus may be payable, pro rata, and the Executive’s unvested awards
may also vest subject to the achievement of the performance conditions, usually pro rata, for the proportion of the LTIP holding period employed.
Non-Executive Directors’ letters of appointment
All Non-Executive Directors are engaged under letters of appointment terminable on three months’ notice at any time. Non-Executive Directors are not entitled to any
pension benefit or any payment in compensation for early termination of their appointment.
Non-Executive Directors
Penny Ladkin-Brand
Helen Hunter
Robyn Perriss
Dianna Jones
92
Date of current letter of appointment
Notice period
1 February 2021
26 June 2019
10 November 2020
25 March 2022
3 months
3 months
3 months
3 months
Next Fifteen Communications Group plc | Annual Report 2022 Strategic report
Corporate governance
Financial statements
Illustrative performance scenarios
The charts to the right illustrate, under three different
performance scenarios, the total value of the
remuneration package receivable by the Executive
Directors for FY23. The assumptions used have been
set out below.
Minimum: Comprises fixed pay only using the salary
for FY23, the value of benefits in FY22 and a 10%
company pension contribution. Tim Dyson also
receives a pension benefit under a US 401k plan.
On-Target: A bonus of 50% of salary is payable (50%
of maximum) for target performance and half the
LTIP awards vest (based on a grant value of 150%
of salary).
£3,500k
£3,000k
£2,500k
£2,000k
£1,500k
£1,000k
£500k
£0k
£3,009k
£2,500k
£1,652k
31%
20%
47%
27%
£803k
100%
49%
32%
Fixed pay
Annual bonus
LTIP
LTIP with 50% Share price growth
£1,225k
£1,480k
£1,080k
£1,305k
£800k
32%
21%
47%
42%
28%
30%
£375k
100%
£705k
32%
21%
47%
42%
28%
30%
£300k
100%
Below target
Target
Maximum
Below target
Target
Maximum
Below target
Target
Maximum
Chief Executive Officer
Chief Financial Officer
Chief Operating Officer
Maximum: Comprises fixed pay and assumes that the maximum annual bonus is paid (100% of salary) and the FY23 LTIP grant (150% of salary) vests in full. The maximum
scenario includes an additional element to represent 50% share price growth on the LTIP award from the date of grant to vesting.
Composition of the Committee and advice received
The Committee usually comprises three Non-Executive Directors: Helen Hunter the Committee Chair, Penny Ladkin-Brand and Robyn Perriss. The Company’s Executive
Directors attend the Committee meetings by invitation and assist the Committee in its deliberations, except when issues relating to their own remuneration are discussed.
No Director is involved in deciding his or her own remuneration. The Company Secretary or his nominee acts as secretary to the Committee. The Committee is authorised,
where it judges it necessary to discharge its responsibilities, to obtain independent professional advice at the Company’s expense.
Korn Ferry is appointed as adviser to the Committee. Korn Ferry is a signatory to the Remuneration Consultants’ Code of Conduct and has confirmed to the Committee
that it adheres in all respects to the terms of the Code. Fees paid to Korn Ferry during the period were £26,985 (FY21: £49,776). The Committee is satisfied that the advice
it received from Korn Ferry is objective and independent.
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Corporate governance
Financial statements
Directors’ remuneration report continued
Terms of reference and activities in the year
The activities of the Committee are governed by its terms of reference, which are available from the Group’s website at www.next15.com. The Committee had six meetings
during the year and details of attendance can be found in the corporate governance statement on page 70.
The principal matters considered by the Committee during the year included:
• reviewing the remuneration framework against the Group strategy and best practice corporate governance requirements;
• undertaking the annual review of remuneration for both Executive Directors;
• setting financial targets for the annual bonus plan FY22;
• reviewing and setting appropriate stretching performance targets for the FY22 LTIP awards;
• considering the remuneration arrangements of brand senior management;
• reviewing the extent to which performance conditions have been met for both the annual and long-term incentive plans, and agreeing the cash and equity payments
arising including the processes and communication to Executive Directors and senior executives;
• reviewing the design, policies and targets of the Group’s equity incentive plans including their impact on dilution and headroom;
• closely reviewing changes to laws, regulations and guidelines or recommendations regarding remuneration, including in relation to tax; and
• continuing to review the Group’s approach to gender pay, diversity and inclusion policies.
Key activities of the Committee for the year ahead
The principal matters for consideration by the Committee for the year ahead will include:
• keeping the remuneration framework under review;
• setting appropriate performance targets for the incentive schemes;
• consideration to the principles governing the Group’s brand equity schemes and any adjustments required;
• continuing to review the Group’s approach to gender pay, diversity and inclusion policies;
• monitoring and reviewing best practice corporate governance requirements, changes to laws, regulations and tax;
• reviewing the current use of long-term incentive schemes and the impact on dilution and headroom and the possibility of introducing an all-employee share plan; and
• review of remuneration structures for staff below Executive Director level.
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Corporate governance
Financial statements
Directors’ remuneration for the 12-month period to 31 January 2022
Executive Directors
Tim Dyson
Peter Harris
Non-Executive Directors
Penny Ladkin-Brand
Helen Hunter
Robyn Perriss
Salary
and fees
2022
£’000
Performance-
related
bonus
2022
£’000
LTIP awards
£’000 1
Pension
contributions
2022
£’000
Other
benefits
2022
£’000
659
330
150
58
58
395
198
—
—
—
624
301
—
—
—
74
33
—
—
—
46
1
—
—
—
Total
2022
£’000
1,798
863
150
58
58
Total Fixed
Pay 2022
£’000
Total Variable
Pay 2022
£’000
779
364
150
58
58
1,019
499
N/A
N/A
N/A
Total
2021
£’000 2
1,385
620
45
41
8
1 These figures comprise tranches of three LTIP awards which vest in relation to performance periods ending FY22, being those LTIP awards granted in April 2018 and April 2019, valued using a share price of 1189p, being the average share price over
the last quarter of the period.
2 These figures have been restated to reflect the actual value of the LTIPs on vesting for 2021 using a share price of 782p.
Performance-related bonus
The annual bonus opportunity for FY22 was 60% of salary for both Executive Directors. Performance was based on four weighted performance metrics. The formulaic
outcome based on performance against targets resulted in a bonus pay-out of 100% of maximum as set out in the table below.
Performance metric
Adjusted operating profit after lease liability interest*
Cash conversion ratio
Organic revenue growth
Operating profit margin*
Total bonus (% of max)
* Excluding share acquisitions made after 1 May 2021.
Weighting
(% of max)
Target
range
Actual
performance
Pay-out
for element
(% of element)
30% £54m–£62m
20%
30%
20%
80%–100%
5%–10%
18%–20%
79.2m
100%
26.1%
21.9%
30%
20%
30%
20%
100%
The bonuses for the year ended 31 January 2022 were £395,378 (US$543,724) for Tim Dyson and £198,000 for Peter Harris, payable entirely in cash.
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Corporate governance
Financial statements
Directors’ remuneration report continued
Long-Term Incentive Plan
Awards vesting by reference to performance periods ending 31 January 2022
The historic awards granted to the Executive Directors which vested by reference to
performance periods ending on 31 January 2022 are summarised below:
FY19 LTIP grant (granted 10 April 2018)
Executive Director
Tim Dyson
Peter Harris
Number of
performance
shares in
tranche 4
26,821
13,577
Percentage
of award
vesting
Number of
shares vesting
from tranche 4
Gain on vesting
£’000
100%
100%
26,821
13,577
319
161
Awards granted during FY22
The FY22 awards were granted to Executive Directors on 5 May 2021 and 28 June
2021. During the year shareholder approval was sought to increase the individual
limits on LTIP awards to Directors from 100% to 150% of salary. This approval was
obtained at the AGM in June 2021 and so the additional award made on 28 June
2021 was for the additional amount that were approved by shareholders. The
awards cover a three-year period with performance measured over the period from
1 February 2021 to 31 January 2024. The performance criteria for the award is based
70% on adjusted EPS performance and 30% on a range of financial KPIs. Subject
to performance against these conditions, the award will be released following the
end of FY24.
Performance shares which vest in tranche 4 of the FY19 award will be released
following the 31 January 2023 results (expected to be April 2023).
Executive Director
Tim Dyson
Peter Harris
Number of performance shares
119,245
60,162
FY20 LTIP grant (granted 28 April 2019)
Executive Director
Tim Dyson
Peter Harris
Number of
performance
shares in
tranche 3
25,644
11,769
Percentage of
award vesting
Number of
shares vesting
from tranche 3
100%
100%
25,644
11,769
Gain on
vesting
£’000
305
140
Vesting criteria (for both
Executive Directors)
Up to 66.67% of maximum award Target
Absolute increase in adjusted
diluted earnings per share over
the three-year performance
period at a constant tax rate
Less than 20%
20%
Between 20% and 50% 16.67%–66.67%
Proportion of award vesting
0%
16.67%
Performance shares which vest in tranche 3 of the FY20 award will be released
in April 2022.
Value of gain on vesting has been calculated using a share price of 1,189p, being the
average share price over the last quarter of the period.
Up to 33.33% of maximum award
Average annual organic net
revenue growth over the
three-year performance period
Average annual adjusted
operating profit (after lease
liability interest) margin
96
50% or more
Less than 4%
4%
Between 4% and 7.5%
7.5% or more
Less than 18%
18%
(straight-line basis)
66.67% total award
0%
4.2%
4.2%– 16.67%
(straight-line basis)
16.67%
0%
4.2%
Between 18% and 20% 4.2%–16.67% (straight-line
20% or more
basis)
16.67%
Next Fifteen Communications Group plc | Annual Report 2022 Strategic report
Corporate governance
Financial statements
Directors’ interests in share plans for the year to 31 January 2022
As at 31 January 2022 the following Directors held performance share awards over Ordinary Shares of 2.5p each under the 2015 LTIP and 2016 Share Award Agreements,
as detailed below:
Executive Director
Tim Dyson
Peter Harris
Number of
performance
shares at
1 February 2021
Shares
lapsing during
the period
Shares
released during
the period
Shares
granted
during
the period
Number of
performance
shares at
31 January 2022
Grant date
32,519
111,146
107,807
186,423
—
—
15,073
56,265
49,479
85,174
—
—
—
—
4,488
—
—
—
—
—
2,060
—
—
—
—
57,531
—
—
—
—
—
29,124
—
—
—
—
—
—
—
—
81,557
37,688
—
—
—
—
41,065
19,097
32,519
02.05.2017
53,615
103,319
10.04.2018
26.04.2019
186,423
30.07.2020
81,557
06.05.2021
End of
performance
period
31.01.2022 1
31.01.2023 2
31.01.2024 3
31.01.2023 4
31.01.2024
37,688
28.06.2021
31.01.2024
15,073
27,141
47,419
85,174
41,065
19,097
02.05.2017
10.04.2018
26.04.2019
30.07.2020
06.05.2021
31.01.2022 1
31.01.2023 2
31.01.2024 3
31.01.2023 4
31.01.2024
28.06.2021
31.01.2024
Total gain
on release 5
£’000
—
450
—
—
—
—
—
228
—
—
—
—
1 As reported previously, the LTIP awards under the 2015 LTIP (granted from 2017) vest on a tranche basis over a total five-year period. Tranches representing a maximum of 20% of this award vested by reference to performance periods ending 31 January
2021 but are not released until after 31 January 2022.
2 The first 60% of the total awarded performance shares were released to the Executive Directors in April 2021. The Executive Directors will become unconditionally legal and beneficially entitled to the remaining 40% on the date on which vesting is
determined in relation to the performance period ending 31 January 2023 (expected April 2023).
3 Executive Directors will become unconditionally legally and beneficially entitled to up to 60% of the total awarded performance shares on the date on which vesting is determined in relation to the performance period ending 31 January 2022 (expected
April 2022). The Executive Directors will become unconditionally legal and beneficially entitled to the remaining 40% of the award on the date on which vesting is determined in relation to the performance period ending 31 January 2024 (expected April 2024).
4 Executive Directors will become unconditionally legally and beneficially entitled to the total awarded performance shares on the date on which vesting is determined in relation to the three-year performance period ending 31 January 2023 (expected
April 2023).
5 These figures have been calculated using the share price on the date of release of 782p.
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Corporate governance
Financial statements
Directors’ remuneration report continued
Directors’ interests in the shares of Next Fifteen Communications Group plc
The interests of the Directors in the share capital of the Company at 31 January 2021 and 31 January 2022 are as follows:
Executive Directors
Tim Dyson
Peter Harris
Non-Executive Directors
Penny Ladkin-Brand
Helen Hunter
Robyn Perriss
*
Includes Ordinary Shares legally and beneficially owned and performance shares which have vested in relation to prior periods but not yet been released.
Ordinary Shares
LTIP performance shares
31 January
2021
31 January
2022
1 February
2021
31 January
2022
5,077,997*
5,000,000*
371,566 *
386,128 *
437,895
205,991
495,121
234,969
85,118
85,118
—
—
—
—
—
—
—
—
—
—
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Next Fifteen Communications Group plc | Annual Report 2022 Strategic report
Corporate governance
Financial statements
Total shareholder return
The Directors consider that a comparison of the Company’s total shareholder return to that of similar businesses on the Main Market is more relevant than a comparison
with the FTSE AIM All-Share Index.
This graph shows the value on 31 January 2022 of £100 invested in the Company on 31 January 2013 compared with £100 invested in the FTSE Media Index and
demonstrates the sustained and significant total shareholder return that we have delivered to shareholders over this period.
£1,800
£1,600
£1,400
£1,200
£1,000
£800
£600
£400
£200
£0
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Next 15
FTSE Media Index
How the remuneration framework will be applied for FY23
Salary
The CEO and the CFO will each receive a salary increase of 3% for FY23 which is slightly below the average increase awarded to the workforce.
Executive Director
Tim Dyson
Peter Harris
Jonathan Peachey
Salary with
effect from
1 April 2021
Salary with
effect from
1 April 2022
US$906,206 US$933,392
£339,900
£330,000
n/a
£300,000
Increase
3%
3%
n/a
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Corporate governance
Financial statements
Directors’ remuneration report continued
How the remuneration framework will be applied for FY22 continued
Non-Executive Director fees
Following the review of NED remuneration there were no changes to the fees paid to the NEDs.
Fee
Non-Executive Chair fee
Non-Executive Director base fee
Audit Committee Chair fee
Remuneration Committee Chair fee
Fee with
effect from
1 April 2021
£150,000
£53,000
£7,000
£7,000
Fee with
effect from
1 April 2022
£150,000
£53,000
£7,000
£7,000
Increase
0%
0%
0%
0%
Pension and benefits
Pension will remain capped at 10% of base salary for Executive Directors. Tim Dyson is also entitled to a small pension under a US 401k pension plan.
Benefits will operate in line with FY22, and policy.
Annual bonus
The annual bonus opportunity will be 100% of salary for FY23, payable in cash. Performance will be measured against adjusted operating profit (30% of total), cash conversion
ratio (20% of total), organic revenue growth (30% of total) and adjusted operating profit margin (20% of total). The Committee considers the bonus targets to be commercially
sensitive but commits to full retrospective disclosure in next year’s Remuneration Report.
Long-term incentive
The Executive Directors will be granted LTIP awards of 150% of salary. Performance will be measured over a single three-year performance period to 31 January 2025.
The awards will vest based on the achievement of the following performance conditions and targets over the three-year performance period:
Performance condition
EPS growth over the performance period
Average annual organic net revenue growth
Average annual operating profit margin
A two-year post-vesting holding period applies to vested awards.
Weighting
(% of salary)
Threshold
(25% vests)
Maximum
(100% vests)
100%
25%
25%
30%
8%
18%
60%
15%
20%
The Committee will have discretion to override the formulaic outcome of the incentives in certain circumstances. Clawback and malus provisions will apply.
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Report of the Directors
The Directors present their Annual Report together
with the audited financial statements of Next Fifteen
Communications Group plc (the ‘Company’) and
its subsidiaries (the ‘Group’) for the year ended
31 January 2022.
The Group has chosen, in accordance with section
414C(11) of the Companies Act 2006, to include
such matters of strategic importance to the Group
in the Strategic Report which otherwise would be
required to be disclosed in this Directors’ Report,
and are incorporated by reference to the links below:
Key Performance Indicators
Stakeholder engagement
Section 172 statement
Employees and workers
Equity, diversity and inclusion
Employee engagement
Principal risks and uncertainties
Directors’ interests in shares
p20
p28
p30
p47
p47
p50
p54
p98
Group results and dividends
The Group’s results for the period are set out in the
Consolidated Income Statement on page 118. The
Directors recommend a final dividend of 8.4p per
Ordinary Share to be paid on Friday 12 August 2022,
which gives a total dividend of the period of 12p per
Ordinary Share (2021: 7p).
Directors
Details of Directors who served during the year and
biographies for Directors currently in office can be
found on pages 65, 66 and 67. Details of the Directors’
remuneration, share options, service agreements and
interests in the Company’s shares are provided in the
Directors’ Remuneration Report on pages 83 to 100.
Except for Directors’ service contracts, no Director
has a material interest in any contract to which the
Company or any of its subsidiaries is a party.
Directors’ indemnity and insurance
In accordance with its Articles of Association the
Company has entered into contractual indemnities with
each of the Directors in respect of its liabilities incurred
as a result of their office. In respect of those liabilities for
which Directors may not be indemnified, the Company
maintained a Directors’ and Officers’ Liability Insurance
policy throughout the period. Although the Directors’
defence costs may be met, neither the Company’s
indemnity nor the insurance policy provides cover in
the event that the Director is proved to have acted
dishonestly or fraudulently. No claims have been made
under the indemnity or against the policy.
Acquisitions
The following is a summary of Group acquisitions
made in the year to 31 January 2022, more detailed
disclosure of which can be found in note 26 to the
financial statements.
On 9 April 2021, Next 15 purchased the entire share
capital of Shopper Media Group Limited (‘SMG’) and
its subsidiaries Capture Marketing Limited, Lobster
Agency Limited, and Threefold Agency Limited.
Shopper Media Group specialises in commerce
marketing activation, connecting retailers and brands
with shoppers at the point of purchase both online and
in-store. The initial consideration for the acquisition is
approximately £15.7m, of which approximately £11.8m
was satisfied in cash with the balance satisfied by the
issue of 569,181 new Ordinary Shares in Next 15. Further
contingent consideration is anticipated to be payable
around April 2023 and April 2025 based on the EBITDA
performance of SMG in the two-year periods ending
31 January 2023 and 31 January 2025, respectively.
On 1 May 2021, Next 15 acquired a controlling interest in
Blueshirt Capital Advisors LLC (‘BCA’), the tech focused
capital markets advisory business. Next 15 initially
owned 20% of BCA and as part of the shareholders’
agreement Next 15 has exercised the option to increase
its shareholding from 20% to 51%. Next 15 has the
option to increase its shareholding in BCA to 80% in
two years’ time.
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Report of the Directors continued
Significant post-balance sheet events
Subsequent to the year end, on 8 March 2022
Next 15 acquired Engine Acquisition Limited
(‘Engine UK’). Engine UK is a broad-based digital
transformation, communications and creative business
with approximately 600 staff and 300 UK and
international clients.
The acquisition of Engine UK was for an enterprise
value of £77.5m, with £61.7m paid on completion in
cash. The Acquisition was funded from the Company’s
debt facilities and the proceeds of a placing of new
Ordinary Shares in the Company. A total of 4,505,000
new Ordinary Shares in the capital of the Company of
2.5p each were placed by Numis Securities Limited and
Joh. Berenberg, Gossler & Co. KG at a price of 1,110p per
Placing Share, raising gross proceeds of approximately
£50m (before expenses).
Cyber security and data privacy
During the course of the year, we have made significant
improvements to our information & cyber security
posture, including growing the internal team to improve
our position and ability to support the brands. One of the
key priorities was to achieve ISO27001 accreditation for
the Next 15 head Office function which we achieved in
May 2021. We have used this to create a stronger set of
Group-wide policies to strengthen the overall position
of the Group. We have adopted the NIST cybersecurity
framework and have invested in online training material
which is deployed via the Next 15 Academy to support
end user awareness of cyber and data threats.
We focused resource and technology to ensure that
the overall business continues to be GDPR compliant,
and we engaged a third party to conduct in-depth
reviews on a number of our Group businesses using
the output to strengthen the overall Group position.
Significant investment in OneTrust as a tool to help the
group digitise, automate and maintain its compliances
have rolled this out across the Group to digitise our
Article 30 requirements.
We have appointed Shoosmiths to be our Global
Data Protection Officer, and this has strengthened our
position both around day-to-day operations and future
client and supplier contracts.
We have put a robust incident response plan in place
that is linked to our cyber insurance policy that enables
individual Group businesses to engage with the central
team and Shoosmiths in the event of any incidents.
This plan has been tested successfully and during the
course of FY23 we will be looking to use additional
models in OneTrust to progress this further.
PriceWaterhouseCoopers has been commissioned to
conduct a cyber maturity review across the Group early
in 2022 against the NIST cyber security framework. This
will measure our posture by business and as a Group
and the output will form the basis of our information &
cyber security strategy for the coming 24 months.
Likely future developments in the business
of the Company
The Group’s priorities for 2022/23 are disclosed in the
Strategic Report on pages 1 to 63.
Research & Development
Our brands continue to invest in R&D to convert their
intellectual property into products and to automate their
work for clients. Innovations in development include:
ongoing work to build an end to end market research
platform, automated due diligence tools and smart
campaign management and optimisation products.
Health and safety
Health and safety policy is a matter for the Board,
and they are aware of their responsibilities and are
committed to keeping health and safety policy under
review, a full evaluation is planned for the coming year.
The implementation of the Group policy on health and
safety sits with the Chief Financial Officer. The Group
is dedicated to observing health and safety laws and
government guidance in every country we operate in,
and we prioritise the welfare of employees, visitors,
customers and any other individual or group affected
by our activities. Whilst we benefit from being a low-risk
industry, in line with our values, the health and safety of
our people is our primary concern.
Covid-19
The changing landscape created by the Covid-19
pandemic has required us to adapt and respond
promptly. The Head Office team has continuously
monitored advice and adapted internal standards
swiftly and to an exceedingly high standard. During the
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Financial statements
year our offices were able to re-open, and our new way
of working began. In order to ensure our people were
safeguarded and our offices remained Covid secure,
we implemented a flexible working policy, social
distancing, a strict desk booking and check-in system,
free lateral flow tests for all employees, enhanced
cleaning regimes, and restricted access for external
parties to our Head Office.
We are acutely aware of the mental health and
wellbeing of our people so in addition to providing a
safe workspace to serve as respite from the varying
challenges of working from home, we have extended
our support to home offices by conducting assessments
and providing appropriate equipment where required.
Furthermore, we have made a considered effort to
care for the mental wellbeing of our employees by
encouraging open dialogue with line managers and
colleagues, open communication and support via our
intranet/Slack, organising a virtual wellbeing event, and
flexible working to promote life/work balance, making
time for exercise, and the importance of rest.
In the coming year we will continue our enhanced
cleaning routines and continue to closely monitor
guidance to ensure the continuing high standards of
safety for our employees.
External Auditor
The Board appointed Deloitte LLP to act as External
Auditor for the year ended 31 January 2022. A
resolution to reappoint Deloitte LLP as External Auditor
of the Company and to authorise the Board to fix their
remuneration will be proposed at the forthcoming AGM.
Disclosure of information to the External Auditor
Each of the persons who is a Director at the date of
approval of this report confirms that:
1.
2.
so far as the Director is aware, there is no relevant
audit information of which the Company’s External
Auditor is unaware; and
the Director has taken all steps that they ought
to have taken as a Director in order to make
themselves aware of any relevant audit information
and to ensure that the Company’s External Auditor
is aware of that information.
This confirmation is given and should be interpreted
in accordance with the provisions of section 418 of the
Companies Act 2006.
Annual General Meeting
The Annual General Meeting (the ‘AGM’) of Next
Fifteen Communications Group plc (the ‘Company’)
will be held at 60 Great Portland Street, London W1W
6RT on Thursday 23 June 2022 at 11.00am. Should
the Government re-introduce restrictions related
to the Covid-19 pandemic, shareholders will find
information relating to any changes to the meeting
arrangements via our website. We recommend that
shareholders vote on all resolutions by completing
an online proxy appointment form in advance of the
meeting, appointing the chair of the meeting as your
proxy. Shareholders can ask the Company Secretary
questions using cosec@next15.com
The Notice of AGM and explanatory notes regarding the
ordinary and special business to be put to the meeting
will be set out in a separate circular to shareholders,
which will be made available on the Group’s website
at www.next15.com and will be mailed to shareholders
who have requested a paper copy.
Political donations
It is the Group’s policy not to make donations for political
purposes and, accordingly, there were no payments to
political organisations during the year (2021: £Nil).
Charitable donations
During the year ended 31 January 2022, the Group
donated £113,056 to various charities (2021: £69,925).
Acquisition of shares
Acquisitions of shares by the Next Fifteen Employee
Trust purchased during the period are as described in
note 22 to the financial statements.
Financial instruments
Information on the Group’s financial risk management
objectives, policies and activities and on the Group’s
exposure to relevant risks in respect of financial
instruments is set out in note 19 and in the Strategic
Report on pages 1 to 63.
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Report of the Directors continued
Significant shareholdings
As at 31 March 2022 the Company had received the
notifications below of the following significant beneficial
holdings in the issued Ordinary Share capital carrying
rights to vote in all circumstances of the Company. The
percentage holding is based on the Company’s issued
share capital at the date of the notification.
Financial reporting and going concern statement
The Directors have, at the time of approving the
financial statements, a reasonable expectation that the
Company and the Group have adequate resources to
continue in operational existence for the foreseeable
future. Accordingly, they continue to adopt the going
concern basis in preparing the financial statements.
The Directors’ Responsibilities Statement in respect of
the financial statements is set out on page 105.
Approved by the Board on 4 April 2022 and signed on
its behalf by:
Octopus Investments
13,087,453
2022
Total
Liontrust Asset
Management
Aviva Investors
Aberdeen Standard
Investments
Slater Investments
BlackRock
Tim Dyson
JP Morgan Asset
Management
BMO Global Asset
Management
Herald Investment
Management
11,470,037
8,269,268
6,524,344
6,193,881
5,871,284
5,000,000
3,728,964
3,038,864
2,937,000
%
13.44
11.78
8.49
6.70
6.36
6.03
5.14
3.83
3.12
3.02
The Directors have made this assessment in light of
reviewing the Group’s budget and cash requirements
for a period in excess of one year from the date of
signing of the annual report and considered outline
plans for the Group thereafter.
Penny Ladkin-Brand
Chair of the Board
4 April 2022
The Group’s business activities, together with the factors
likely to affect its future development, performance and
position, are set out in the Strategic Report on pages 1
to 63. The financial position of the Group, its cash flows,
liquidity position and borrowing facilities are described
in the Financial Review on pages 22 to 27. In addition,
note 19 to the financial statements includes: the Group’s
objectives, policies and processes for managing its
capital; its financial risk management objectives; details
of its financial instruments and hedging activities; and
its exposures to credit risk and liquidity risk.
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Directors’ responsibilities statement
The Directors are responsible for preparing the annual
report and the financial statements in accordance with
applicable law and regulations.
Company law requires the Directors to prepare
financial statements for each financial year. Under that
law the Directors are required to prepare the Group
financial statements in accordance with International
Financial Reporting Standards (‘IFRSs’) and Article 4
of the IAS Regulation and have elected to prepare the
parent company financial statements in accordance
with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards and
applicable law), including FRS 101 ‘Reduced Disclosure
framework’. Under company law the Directors must
not approve the accounts unless they are satisfied that
they give a true and fair view of the state of affairs of
the company and of the profit or loss of the Company
for that period.
In preparing the parent company financial statements,
the Directors are required to:
• select suitable accounting policies and then apply
them consistently;
• make judgements and accounting estimates that
are reasonable and prudent;
• state whether FRS 101 ‘Reduced Disclosure
Framework’ has been followed, subject to any
material departures disclosed and explained in the
financial statements; and
• prepare the financial statements on the going
concern basis unless it is inappropriate to presume
that the Company will continue in business.
In preparing the Group financial statements, International
Accounting Standard 1 requires that Directors:
Responsibility statement
We confirm that to the best of our knowledge:
• properly select and apply accounting policies;
• the financial statements, prepared in accordance
• present information, including accounting policies,
in a manner that provides relevant, reliable,
comparable and understandable information;
• provide additional disclosures when compliance
with the specific requirements in IFRSs are
insufficient to enable users to understand the
impact of particular transactions, other events and
conditions on the entity’s financial position and
financial performance; and
• make an assessment of the Company’s ability to
continue as a going concern.
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and
explain the Company’s transactions and disclose with
reasonable accuracy at any time the financial position
of the Company and enable them to ensure that the
financial statements comply with the Companies Act
2006. They are also responsible for safeguarding
the assets of the Company and hence for taking
reasonable steps for the prevention and detection of
fraud and other irregularities.
The Directors are responsible for the maintenance
and integrity of the corporate and financial information
included on the Company’s website. Legislation in
the United Kingdom governing the preparation and
dissemination of financial statements may differ from
legislation in other jurisdictions.
with the relevant financial reporting framework, give
a true and fair view of the assets, liabilities, financial
position and profit or loss of the Company and the
undertakings included in the consolidation taken
as a whole;
• the Strategic Report includes a fair review of the
development and performance of the business and
the position of the Company and the undertakings
included in the consolidation taken as a whole,
together with a description of the principal risks and
uncertainties that they face; and
• the annual report and financial statements, taken as
a whole, are fair, balanced and understandable and
provide the information necessary for shareholders
to assess the Company’s position and performance,
business model and strategy.
This responsibility statement was approved by the
Board of Directors on 4 April 2022 and is signed on
its behalf by:
Peter Harris
Chief Financial Officer
4 April 2022
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Independent auditors’ report
to the members of Next Fifteen Communications Group plc
Report on the audit of the financial statements
1. Opinion
In our opinion:
• the financial statements of Next Fifteen Communications Group plc (the ‘parent
company’) and its subsidiaries (the ‘group’) give a true and fair view of the state
of the group’s and of the parent company’s affairs as at 31 January 2022 and of
the group’s loss for the year then ended;
• the group financial statements have been properly prepared in accordance
with United Kingdom adopted international accounting standards;
• the parent company financial statements have been properly prepared
in accordance with United Kingdom Generally Accepted Accounting
Practice, including Financial Reporting Standard 101 “Reduced Disclosure
Framework”; and
• the financial statements have been prepared in accordance with the
requirements of the Companies Act 2006.
We have audited the financial statements which comprise:
• the consolidated income statement;
• the consolidated and parent company balance sheets;
• the consolidated and parent company statements of changes in equity;
• the consolidated statement of cash flow; and
• the related notes 1 to 30 and the parent company related notes 1 to 12.
106
The financial reporting framework that has been applied in the preparation of
the group financial statements is applicable law and United Kingdom adopted
International Accounting Standards. The financial reporting framework that has
been applied in the preparation of the parent company financial statements is
applicable law and United Kingdom Accounting Standards, including FRS 101
“Reduced Disclosure Framework”
(United Kingdom Generally Accepted
Accounting Practice).
2. Basis for opinion
We conducted our audit in accordance with International Standards on Auditing
(UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards
are further described in the auditor’s responsibilities for the audit of the financial
statements section of our report.
We are independent of the group and the parent company in accordance with
the ethical requirements that are relevant to our audit of the financial statements
in the UK, including the Financial Reporting Council’s (the ‘FRC’s’) Ethical Standard
as applied to listed entities, and we have fulfilled our other ethical responsibilities
in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate
to provide a basis for our opinion.
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Financial statements
3. Summary of our audit approach
Key audit matters The key audit matters that we identified in the current year were:
Within this report, key audit matters are identified as follows:
• revenue recognition: cut-off of project revenue; and
Newly identified
• valuation of acquisition-related liabilities.
Increased level of risk
Similar level of risk
Decreased level of risk
Materiality
The materiality that we used for the group financial statements was £2.75m which was determined on the basis of considering a number of
different measures including adjusted profit before tax and revenue.
Scoping
Our audit procedures provided coverage of 70% of the Group’s revenue and 83% of Adjusted Profit before Tax.
Significant
changes in our
approach
We have refined our key audit matters for the current year as follows:
We no longer identify the classification and presentation of adjusting items as a key audit matter as these items are no longer included in the
financial statements.
We have identified revenue recognition: cut-off of project revenue as a key audit matter in the current period. This reflects an area of our audit
where we have performed additional audit work in the current period as a result of our iterative risk assessment process.
We have pinpointed the existing valuation of acquisition-related liabilities key audit matter to be focused on the most significant assumption
underpinning the Mach49 earnout liability, to reflect where the majority of our audit effort has been spent in respect of this risk.
We identified in the prior period the valuation of contingent consideration on the acquisition of Mach49 as a key audit matter, as this was the
period in which Mach49 was acquired. Estimation uncertainty remains in respect of this consideration, albeit the risk now captured by the
valuation of acquisition-related liabilities key audit matter.
There are no other significant changes in our approach apart from these changes in key audit matters.
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Independent auditors’ report continued
to the members of Next Fifteen Communications Group plc
4. Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the financial statements
is appropriate.
Our evaluation of the directors’ assessment of the group’s and parent company’s ability to continue to adopt the going concern basis of accounting included:
• assessing the assumptions used in the forecasts, including the appropriateness of the modelling of downside scenarios;
• testing the clerical accuracy of those forecasts;
• assessing the linkage to business model and medium-term risks;
• assessing the availability of financing facilities including nature of facilities, repayment terms and covenants;
• calculating the amount of headroom in the forecasts and undertaking sensitivity analysis to determine what changes would be required to breach cash requirements
or covenant compliance; and
• assessing the appropriateness of the disclosures made in the financial statements.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast
significant doubt on the group’s and parent company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements
are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
5. Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and
include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which had the
greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
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5. Key audit matters continued
5.1. Revenue recognition: Cut-off of project revenue
Key audit matter
description
The Group has recognised £470.1m of revenue for the year ended 31 January 2022 (2021: £323.7m) and £362.1m of net revenue (2021: £266.9m)
after direct costs.
We have identified the cut-off of revenue recognised from project fees as a key audit matter in the current period. Judgement is required to
determine the stage of completion for projects that span the year end. The key judgements made in respect of projects spanning across year
end are either the allocation of revenue to individual deliverables of the project, or the estimation of the percentage of completion of a fixed
price project.
Management is incentivised, both at the component level and at the group level, according to revenue and profit growth targets. Due to the level
of judgement involved, we have determined that there is potential for manipulation of this balance by management and this therefore represents
a risk of fraudulent financial reporting.
For further details, see note 1(e) to the financial statements which sets out Management’s accounting policy for revenue earned from project fees.
How the scope
of our audit
responded to the
key audit matter
In order to address the key audit matter relating revenue recognition, our audit work included:
• obtaining an understanding of relevant controls over revenue recognition and forecasting of revenue both at the component and group level;
• for each component, selecting a statistical testing sample of projects that span across the year end and substantively testing the cut-off of
revenue recognised from each sampled project;
• comparing the audit evidence obtained in respect of each sample against the project statement of work;
• making enquiries of management to corroborate specific judgements; and
• assessing whether disclosures within the financial statements are appropriate.
Key observations Based on our audit procedures performed, we concluded that the project revenue recognised in the period and the disclosures made in the
financial statements are appropriate.
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Independent auditors’ report continued
to the members of Next Fifteen Communications Group plc
5. Key audit matters continued
5.2. Valuation of acquisition-related liabilities
Key audit matter
description
As at 31 January 2022, the Group had £178.1m of acquisition-related liabilities (2021: £53.7m) which consist mainly of contingent consideration
payable based on a share of the post acquisition profits of the businesses previously acquired. These liabilities are estimated upon acquisition
and subsequently revised at the Group’s financial year end.
The values of these liabilities remain highly judgemental until settled as they are based on forecast future performance of specific brands. As
these liabilities are held at fair value, a change in the estimate of revenue growth or profitability of a brand could result in a material charge to the
income statement. These changes are recorded in the income statement each period and in the current year the charge arising from changes
in estimates is £110.7m (2021: £8.1m) as set out in Note 17.
As a result of the new contract signed by Mach49 in February 2022, we have identified this key audit matter as an area of increased risk from the
prior period due to the additional level of estimation uncertainty that has been introduced in determining the Mach49 acquisition-related liability.
We have therefore pinpointed our identified risk to the most sensitive assumption underlying the valuation of acquisition-related liabilities, being
the EBIT margin forecast from the new contract signed by Mach49.
There is a risk that these liabilities are inappropriately valued if they are based on inappropriate forecast and discount rate assumptions. Given
the sensitivity, management has set out that this is a key source of estimation uncertainty in Note 1 and included a sensitivity analysis in Note 17
to the financial statements.
For further details, see notes 1, 2 and 17 to the financial statements.
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5. Key audit matters continued
5.2. Valuation of acquisition-related liabilities continued
How the scope
of our audit
responded to the
key audit matter
In order to address the key audit matter relating to the valuation of acquisition-related liabilities, specifically the EBIT margin forecast under the
new Mach49 contract, our audit work included:
• obtaining an understanding of relevant controls over the valuation of acquisition-related liabilities process;
• assessing the forecast costs of servicing the new contract, challenging management’s model by comparison to historical margins from similar
contracts and external contradictory evidence;
• making inquiries of senior management of both the Group and Mach49 to corroborate the inputs in management’s model and to identify any
contradictory evidence;
• challenging EBIT margin assumptions by considering the historical accuracy of budgeting and benchmark data;
• involving our valuation specialists to determine whether the discount rate applied falls within an acceptable range;
• where relevant, agreeing settlements in the year and post year end to bank statements or other documentation; and
• assessing whether the disclosures within the financial statements adequately explain the estimates made in calculating these acquisition-related
liabilities and the sensitivity of these estimates to changes in inputs.
Key observations Based on our audit procedures performed, we concluded that the Directors’ judgements regarding forecast EBIT margin under the new Mach49
contract are appropriate.
The discount rate applied is within our acceptable range.
We are satisfied with the disclosures made in the financial statements.
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Financial statements
Independent auditors’ report continued
to the members of Next Fifteen Communications Group plc
6. Our application of materiality
6.1 Materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a reasonably knowledgeable
person would be changed or influenced. We use materiality both in planning the scope of our audit work and in evaluating the results of our work.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Group financial statements
Parent company financial statements
Materiality
£2.75m (2021: £1.75m)
£2.48m (2021: £1.58m)
Basis for determining
materiality
Materiality has been determined as a blend of a number of different
measures including adjusted profit before tax and revenue.
Parent company materiality is capped at 0.9% of group materiality.
Parent company materiality represents 1.5% (2021: 0.97%) of net assets
of £163.1m (2021: £166.2m).
Rationale for the
benchmark applied
This is consistent with the prior year.
We considered a number of relevant benchmarks
in our
determination of materiality. Adjusted profit before income tax is
a significant key performance indicator for the users of the annual
report and financial statements. In addition, we incorporated
revenue and net revenue as additional benchmarks as they reflect
the growth of the Group.
Materiality, representing approximately 3.4%
adjusted profit before tax and 0.6% (2021: 0.6%) of revenue.
(2021: 3.6%) of
The Parent company is a holding company, and net assets is indicative
of the company’s ability to support its subsidiaries.
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6. Our application of materiality continued
6.2 Performance materiality
We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and undetected misstatements exceed the
materiality for the financial statements as a whole.
Performance materiality
68.5% (2021: 68.5%) of group materiality
65% (2021: 65%) of parent company materiality
Group financial statements
Parent company financial statements
Basis and rationale for
determining performance
materiality
We have set out the significant circumstances behind the professional judgements made in determining performance materiality for this audit. The specific
factors were:
a.
we considered the quality of the control environment and that
it was not appropriate to rely on controls over a number of
business processes;
a.
we considered the quality of the control environment and that
it was not appropriate to rely on controls over a number of
business processes;
b.
there is an effective corporate governance structure;
b. there is an effective corporate governance structure;
c.
low level of uncorrected misstatements;
c.
low level of uncorrected misstatements;
d.
no prior period adjustments; and
d. no prior period adjustments; and
e.
there is maturity within the executive management team, with
little turnover.
e.
there is maturity within the executive management team, with
little turnover.
6.3 Error reporting threshold
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £0.14m (2021: £0.09m), as well as differences below
that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit Committee on disclosure matters that we identified when
assessing the overall presentation of the financial statements.
113
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Corporate governance
Financial statements
Independent auditors’ report continued
to the members of Next Fifteen Communications Group plc
7. An overview of the scope of our audit
7.1. Identification and scoping of components
In selecting the components that are in scope each year, we obtained an
understanding of the Group and its environment, including an understanding
of the Group’s system of internal controls, and assessing the risks of material
misstatement at the Group level. The components were also selected to provide
an appropriate basis on which to undertake audit work to address the identified
risks of material misstatement. Audit work to respond to the risks of material
misstatement was performed directly by the group audit engagement team.
Such audit work represents a combination of procedures, all of which are
designed to target the Group’s identified risks of material misstatement in the
most effective manner possible. Based on our assessment, we focused our
audit work on 17 components, 2 of which subject to full audit scope and 15 were
subject to specified audit procedures. Our audit procedures provided coverage
of 70% (2021: 73%) of the Group’s consolidated revenue and 83% (2021: 84%) of
the Group’s Adjusted Profit Before Tax.
Our audit work at the components, excluding the parent company, is executed at
levels of materiality appropriate for such components, which in all instances are
capped at 50% (2021: 55%) of Group materiality.
For all remaining components, we have performed centralised analytical
procedures at component materiality.
The range of component materialities we have used are from £720,000 to
£1,270,000 (2021: (£600,000 to £660,000)).
114
8. Other information
The other information comprises the information included in the annual report,
other than the financial statements and our auditor’s report thereon. The directors
are responsible for the other information contained within the annual report.
Our opinion on the financial statements does not cover the other information and,
except to the extent otherwise explicitly stated in our report, we do not express
any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the course of the audit, or otherwise
appears to be materially misstated.
If we identify such material inconsistencies or apparent material misstatements,
we are required to determine whether this gives rise to a material misstatement
in the financial statements themselves. If, based on the work we have performed,
we conclude that there is a material misstatement of this other information, we
are required to report that fact.
We have nothing to report in this regard.
Next Fifteen Communications Group plc | Annual Report 2022 Strategic report
Corporate governance
Financial statements
9. Responsibilities of directors
As explained more fully in the directors’ responsibilities statement, the directors
are responsible for the preparation of the financial statements and for being
satisfied that they give a true and fair view, and for such internal control as the
directors determine is necessary to enable the preparation of financial statements
that are free from material misstatement, whether due to fraud or error.
11. Extent to which the audit was considered capable of detecting
irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and
regulations. We design procedures in line with our responsibilities, outlined
above, to detect material misstatements in respect of irregularities, including
fraud. The extent to which our procedures are capable of detecting irregularities,
including fraud is detailed below.
In preparing the financial statements, the directors are responsible for assessing
the group’s and the parent company’s ability to continue as a going concern,
disclosing as applicable, matters related to going concern and using the going
concern basis of accounting unless the directors either intend to liquidate
the group or the parent company or to cease operations, or have no realistic
alternative but to do so.
10. Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due
to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably
be expected to influence the economic decisions of users taken on the basis of
these financial statements.
A further description of our responsibilities for the audit of the financial statements
is located on the FRC’s website at: www.frc.org.uk/auditorsresponsibilities. This
description forms part of our auditor’s report.
11.1 Identifying and assessing potential risks related to irregularities
In identifying and assessing risks of material misstatement in respect of
irregularities, including fraud and non-compliance with laws and regulations, we
considered the following:
• the nature of the industry and sector, control environment and business
performance including the design of the group’s remuneration policies, key
drivers for directors’ remuneration, bonus levels and performance targets;
• results of our enquiries of management, internal audit and the audit committee
about their own identification and assessment of the risks of irregularities;
• any matters we identified having obtained and reviewed the group’s
documentation of their policies and procedures relating to:
• identifying, evaluating and complying with laws and regulations and whether
they were aware of any instances of non-compliance;
• detecting and responding to the risks of fraud and whether they have
knowledge of any actual, suspected or alleged fraud;
• the internal controls established to mitigate risks of fraud or non-
compliance with laws and regulations;
• the matters discussed among the audit engagement team and relevant internal
specialists, including tax and valuations, regarding how and where fraud might
occur in the financial statements and any potential indicators of fraud.
115
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Corporate governance
Financial statements
Independent auditors’ report continued
to the members of Next Fifteen Communications Group plc
11. Extent to which the audit was considered capable of detecting
irregularities, including fraud continued
11.1 Identifying and assessing potential risks related to irregularities continued
As a result of these procedures, we considered the opportunities and incentives
that may exist within the organisation for fraud and identified the greatest potential
for fraud in the following areas: revenue recognition; cut-off of project revenue,
being the risk that management recognise the wrong amount of revenue to
benefit them either in the current or future years; and alternative performance
measures, specifically the risk that management will manipulate adjusted results.
In common with all audits under ISAs (UK), we are also required to perform
specific procedures to respond to the risk of management override.
We also obtained an understanding of the legal and regulatory framework that
the group operates in, focusing on provisions of those laws and regulations that
had a direct effect on the determination of material amounts and disclosures
in the financial statements. The key laws and regulations we considered in this
context included UK Companies Act, AIM Listing Rules and tax legislation.
In addition, we considered provisions of other laws and regulations that do not
have a direct effect on the financial statements but compliance with which may
be fundamental to the group’s ability to operate or to avoid a material penalty.
This includes the group’s compliance with GDPR.
11.2 Audit response to risks identified
As a result of performing the above, we identified revenue recognition: cut-off of
project revenue as a key audit matter related to the potential risk of fraud. The
key audit matters section of our report explains the matter in more detail and
also describes the specific procedures we performed in response to that key
audit matter.
In addition to the above, our procedures to respond to risks identified included
the following:
• reviewing the financial statement disclosures and testing to supporting
documentation to assess compliance with provisions of relevant laws and
regulations described as having a direct effect on the financial statements;
• enquiring of management, the audit committee and in-house legal counsel
concerning actual and potential litigation and claims;
• performing analytical procedures to identify any unusual or unexpected
relationships that may indicate risks of material misstatement due to fraud;
• reading minutes of meetings of those charged with governance and reviewing
internal audit reports;
• in addressing the risk of fraud in alternative performance measures, we have
evaluated the appropriateness of adjusting items identified by management by
comparison against the group accounting policy for such items; and
• in addressing the risk of fraud through management override of controls,
testing the appropriateness of journal entries and other adjustments; assessing
whether the judgements made in making accounting estimates are indicative
of a potential bias; and evaluating the business rationale of any significant
transactions that are unusual or outside the normal course of business.
We also communicated relevant identified laws and regulations and potential
fraud risks to all engagement team members including internal specialists, and
remained alert to any indications of fraud or non-compliance with laws and
regulations throughout the audit.
116
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Corporate governance
Financial statements
Report on other legal and regulatory requirements
12. Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the strategic report and the directors’ report for the
financial year for which the financial statements are prepared is consistent with
the financial statements; and
• the strategic report and the directors’ report have been prepared in accordance
with applicable legal requirements.
In the light of the knowledge and understanding of the group and the parent
company and their environment obtained in the course of the audit, we have not
identified any material misstatements in the strategic report or the directors’ report.
13 Matters on which we are required to report by exception
13.1 Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not received all the information and explanations we require for
our audit; or
• adequate accounting records have not been kept by the parent company,
or returns adequate for our audit have not been received from branches not
visited by us; or
• the parent company financial statements are not in agreement with the
accounting records and returns
We have nothing to report in respect of these matters.
13 Matters on which we are required to report by exception continued
13.2 Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in our opinion
certain disclosures of directors’ remuneration have not been made.
We have nothing to report in respect of these matters.
14. Use of our report
This report is made solely to the company’s members, as a body, in accordance
with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been
undertaken so that we might state to the company’s members those matters we
are required to state to them in an auditor’s report and for no other purpose. To
the fullest extent permitted by law, we do not accept or assume responsibility to
anyone other than the company and the company’s members as a body, for our
audit work, for this report, or for the opinions we have formed.
Peter McDermott (Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
London, United Kingdom
4 April 2022
117
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Corporate governance
Financial statements
Consolidated income statement
for the year ended 31 January 2022 and the year ended 31 January 2021
Revenue
Direct costs
Net revenue
Staff costs
Depreciation
Amortisation
Other operating charges
Total operating charges
Operating profit
Finance expense
Finance income
Net finance expense
Share of profit from associate
Loss before income tax
Income tax credit/(expense)
Loss for the year
Attributable to:
Owners of the Parent
Non-controlling interests
Loss per share
Basic (pence)
Diluted (pence)
Note
2
3
4,12,16
4,11
6
7
8
10
10
Year ended
31 January
2022
£’000
258,945
9,442
19,317
34,414
Year ended
31 January
2021
£’000
189,530
11,609
16,394
35,665
Year ended
31 January
2022
£’000
470,055
(107,952)
362,103
(322,118)
39,985
(121,384)
1,049
(120,335)
211
(80,139)
14,475
(65,664)
(69,219)
3,555
(65,664)
(74.9)
(74.9)
Year ended
31 January
2021
£’000
323,668
(56,782)
266,886
(253,198)
13,688
(16,884)
1,459
(15,425)
431
(1,306)
(2,643)
(3,949)
(4,938)
989
(3,949)
(5.5)
(5.5)
The accompanying notes are an integral part of this Consolidated Income Statement.
All results relate to continuing operations.
118
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Strategic report
Corporate governance
Financial statements
Consolidated income statement continued
for the year ended 31 January 2022 and the year ended 31 January 2021
Loss for the year
Other comprehensive income/(expense):
Items that will not be reclassified subsequently to profit or loss:
Fair value gain/(loss) on investments in equity instruments designated as fair value through other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translating foreign operations
Total other comprehensive income/(expense) for the year
Total comprehensive expense for the year
Total comprehensive expense attributable to:
Owners of the Parent
Non-controlling interests
The accompanying notes are an integral part of this Consolidated Statement of Comprehensive Income.
All results relate to continuing operations.
Year ended
31 January
2022
£’000
(65,664)
7,466
(963)
6,503
(59,161)
(62,716)
3,555
(59,161)
Year ended
31 January
2021
£’000
(3,949)
(117)
(1,395)
(1,512)
(5,461)
(6,450)
989
(5,461)
119
Next Fifteen Communications Group plc | Annual Report 2022
Strategic report
Corporate governance
Financial statements
Consolidated balance sheet
as at 31 January 2022 and 31 January 2021
Assets
Property, plant and equipment
Right-of-use assets
Intangible assets
Investment in equity-accounted associate
Investments in financial assets
Deferred tax assets
Other receivables
Total non-current assets
Trade and other receivables
Cash and cash equivalents
Corporation tax asset
Total current assets
Total assets
Liabilities
Loans and borrowings
Deferred tax liabilities
Lease liabilities
Other payables
Provisions
Contingent consideration
Other contingent liability
Share purchase obligation
Total non-current liabilities
Loans and borrowings
Trade and other payables
Lease liabilities
Provisions
Corporation tax liability
Deferred consideration
Contingent consideration
Share purchase obligation
Total current liabilities
Total liabilities
Total net assets
120
Note
12
16
11
18
13, 19
13
19
19
18
16
14, 19
15, 19
17, 19
17, 19
17, 19
19
14, 19
16
15, 19
17, 19
17, 19
17, 19
31 January
2022
£’000
7,506
19,948
183,050
—
8,483
46,350
821
119,676
58,216
708
22,478
3,187
22,285
401
14,733
125,045
5,202
9,717
—
120,333
10,698
7,778
3,278
133
36,496
1,535
31 January
2021
£’000
8,904
26,008
163,777
254
955
15,314
860
77,530
26,831
1,215
7,810
3,229
31,812
1,576
7,140
36,194
—
5,302
5,000
77,319
10,957
5,656
604
1,262
9,700
1,206
31 January
2022
£’000
266,158
178,600
444,758
(203,048)
(180,251)
(383,299)
61,459
31 January
2021
£’000
216,072
105,576
321,648
(93,063)
(111,704)
(204,767)
116,881
Next Fifteen Communications Group plc | Annual Report 2022
Strategic report
Corporate governance
Financial statements
Consolidated balance sheet continued
as at 31 January 2022 and 31 January 2021
Equity
Share capital
Share premium reserve
Share purchase reserve
Foreign currency translation reserve
Other reserves
Retained (loss)/earnings
Total equity attributable to owners of the Parent
Non-controlling interests
Total equity
Note
20
24
31 January
2022
£’000
2,320
104,800
(2,673)
5,203
608
(50,429)
31 January
2022
£’000
59,829
1,630
61,459
31 January
2021
£’000
2,274
92,408
(2,673)
6,166
608
18,174
31 January
2021
£’000
116,957
(76)
116,881
The accompanying notes are an integral part of this Consolidated Balance Sheet.
These financial statements were approved and authorised by the Board on 4 April 2022.
Peter Harris
Chief Financial Officer
Company number 01579589
121
Next Fifteen Communications Group plc | Annual Report 2022
Strategic report
Corporate governance
Financial statements
Consolidated statement of changes in equity
for the year ended 31 January 2022 and the year ended 31 January 2021
Note
20
20
8
9
At 1 February 2021
(Loss)/profit for the year
Other comprehensive (expense)/income
for the year
Total comprehensive (expense)/income
for the year
Shares issued on satisfaction
of vested performance shares
Shares issued on acquisitions
Movement in relation to
share-based payments
Tax on share-based payments
Dividends to owners of the Parent
Movement due to ESOP share purchases
Movement due to ESOP
share option exercises
Movement on reserves for non-controlling
interests
Non-controlling interest purchased in the
period
Non-controlling interest reversed in the
period
Non-controlling dividend
9
Share
capital
£’000
2,274
Share
premium
reserve
£’000
92,408
Share
purchase
reserve
£’000
(2,673)
—
—
—
22
24
—
—
—
—
—
—
—
—
—
—
—
—
5,385
7,007
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Foreign
currency
translation
reserve
£’000
6,166
—
(963)
(963)
—
—
—
—
—
—
—
—
—
—
—
Other
reserves ¹
£’000
Retained
earnings
£’000
Equity
attributable
to owners of
the Parent
£’000
Non-
controlling
interests
£’000
Total
equity
£’000
608
18,174
116,957
(76)
116,881
—
—
—
—
—
—
—
—
(3)
3
—
—
—
—
(69,219)
(69,219)
3,555
(65,664)
7,466
6,503
—
6,503
(61,753)
(62,716)
3,555
(59,161)
(5,407)
—
5,565
2,757
(9,832)
—
—
67
—
—
—
—
7,031
5,565
2,757
(9,832)
(3)
3
67
—
—
—
—
—
—
—
—
—
—
(67)
585
171
—
7,031
5,565
2,757
(9,832)
(3)
3
—
585
171
(2,538)
(2,538)
At 31 January 2022
2,320
104,800
(2,673)
5,203
608
(50,429)
59,829
1,630
61,459
1 Other reserves include the ESOP reserve, the treasury reserve, the merger reserve and the hedging reserve; see note 24.
122
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Strategic report
Corporate governance
Financial statements
Consolidated statement of changes in equity continued
for the year ended 31 January 2022 and the year ended 31 January 2021
At 1 February 2020
(Loss)/profit for the year
Other comprehensive expense
for the year
Total comprehensive (expense)/income
for the year
Shares issued on satisfaction
of vested performance shares
Shares issued on acquisitions
Movement in relation to
share-based payments
Tax on share-based payments
Movement due to ESOP share purchases
Movement due to ESOP share
option exercises
Movement on reserves for
non-controlling interests
Non-controlling dividend
At 31 January 2021
Note
20
20
8
9
Share
capital
£’000
2,163
Share
premium
reserve
£’000
76,019
Share
purchase
reserve
£’000
(2,673)
—
—
—
69
42
—
—
—
—
—
—
—
—
—
10,162
6,227
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Foreign
currency
translation
reserve
£’000
7,561
—
(1,395)
(1,395)
—
—
—
—
—
—
—
—
Other
reserves ¹
£’000
608
Retained
earnings
£’000
29,618
Equity
attributable
to owners of
the Parent
£’000
113,296
(4,938)
(4,938)
Non-
controlling
interests
£’000
(585)
989
Total
equity
£’000
112,711
(3,949)
(117)
(1,512)
—
(1,512)
(5,055)
(6,450)
989
(5,461)
—
—
—
—
—
—
—
(5)
5
—
—
(10,231)
—
—
6,269
3,557
3,557
491
—
—
(206)
—
491
(5)
5
(206)
—
2,274
92,408
(2,673)
6,166
608
18,174
116,957
1 Other reserves include the ESOP reserve, the treasury reserve, the merger reserve and the hedging reserve; see note 24.
The accompanying notes are an integral part of this Consolidated Statement of Changes in Equity.
—
—
—
—
—
—
206
(686)
(76)
—
6,269
3,557
491
(5)
5
—
(686)
116,881
123
Next Fifteen Communications Group plc | Annual Report 2022
Note
4,12
4,16
4,11
6
7
4
8
Strategic report
Corporate governance
Financial statements
Consolidated statement of cash flow
for the year ended 31 January 2022 and the year ended 31 January 2021
Cash flows from operating activities
Loss for the year
Adjustments for:
Depreciation
Right-of-use depreciation
Amortisation
Finance expense
Finance income
Share of profit from equity-accounted associate
Impairment of right-of-use assets
Loss on sale of property, plant and equipment
Gain on exit of finance lease
Gains on investment activities
Income tax (credit)/expense
Employment linked acquisition provision charge
Share-based payment charge
Net cash inflow from operating activities before
changes in working capital
Change in trade and other receivables
Change in trade and other payables
Movement in other liabilities
Change in working capital
Net cash generated from operations
Income taxes paid
Net cash inflow from operating activities
Cash flows from investing activities
Acquisition of subsidiaries trade and assets,
net of cash acquired
Payment of contingent consideration
124
Year ended
31 January
2022
£’000
Year ended
31 January
2022
£’000
Year ended
31 January
2021
£’000
Year ended
31 January
2021
£’000
(65,664)
3,296
6,146
19,317
121,384
(1,049)
(211)
1,378
(189)
(1,423)
(455)
(14,475)
15,167
9,463
(26,842)
27,014
4
92,685
176
92,861
(14,109)
78,752
(3,949)
3,880
7,729
16,394
16,884
(1,459)
(431)
8,503
6,885
(2,327)
—
2,643
8,041
3,587
(5,692)
12,942
(697)
(8,097)
(15,539)
66,380
6,553
72,933
(8,423)
64,510
26
(14,454)
(13,628)
Next Fifteen Communications Group plc | Annual Report 2022
Strategic report
Corporate governance
Financial statements
Consolidated statement of cash flow continued
for the year ended 31 January 2022 and the year ended 31 January 2021
Purchases of equity instruments designated at FVTOCI
Acquisition of property, plant and equipment
Proceeds on disposal of property, plant and equipment
Acquisition of intangible assets
Net movement in long-term cash deposits
Income from finance lease receivables
Interest received
Net cash outflow from investing activities
Net cash inflow from operating and investing activities
Cash flows from financing activities
Repayment of lease liabilities
Increase in bank borrowings and overdrafts
Repayment of bank borrowings and overdrafts
Interest paid
Dividend and profit share paid to non-controlling
interest partners
Dividend paid to shareholders of the Parent
Net cash outflow from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Exchange loss on cash held
Cash and cash equivalents at end of the year
Note
7
6
9
9
Year ended
31 January
2022
£’000
(60)
(3,107)
20
(2,694)
(73)
1,767
69
(11,993)
32,091
(22,518)
(424)
(2,538)
(9,832)
Year ended
31 January
2021
£’000
—
(1,998)
4
(2,109)
(82)
780
47
(12,647)
—
(24,912)
(881)
(686)
—
Year ended
31 January
2022
£’000
(32,160)
46,592
(15,214)
31,378
26,831
7
58,216
The accompanying notes are an integral part of this Consolidated Statement of Cash Flow.
Year ended
31 January
2021
£’000
(26,994)
37,516
(39,126)
(1,610)
28,661
(220)
26,831
125
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Strategic report
Corporate governance
Financial statements
Notes to the accounts
for the year ended 31 January 2022
1 Accounting policies
Next Fifteen Communications Group plc (the ‘Company’) is a public limited company incorporated and registered in England and Wales. The consolidated financial
statements include the Company and its subsidiaries (together, the ‘Group’) and its interests in associates.
The principal accounting policies applied in the preparation of the consolidated financial statements are set out below. These policies have been consistently applied
to all the periods presented, unless otherwise stated.
A. Basis of preparation
The Group’s financial statements have been prepared in accordance with International Financial Reporting Standards, International Accounting Standards and
Interpretations (‘Adopted IFRSs’) and the parts of the Companies Act 2006 applicable to companies reporting under Adopted IFRSs. These financial statements are
presented in pounds sterling because that is the currency of the primary economic environment in which the Group operates.
The consolidated financial statements have been prepared on a going concern basis (as set out in the corporate governance report) and on a historical cost basis,
except for the remeasurement to fair value of certain financial assets and liabilities as described in the accounting policies below.
B. New and amended standards adopted by the Group
The Group has adopted the new accounting pronouncements which became effective this year, none of which had a material impact on the Group’s results or
financial position.
C. Basis of consolidation
The Group’s financial statements consolidate the results of Next Fifteen Communications Group plc and all of its subsidiary undertakings, and its interests in associates.
Subsidiaries are all entities over which the Group has control. Control is achieved where the Company has existing rights that give it the ability to direct the activities
that affect the Company’s returns and exposure or rights to variable returns from the entity. The existence and effect of potential voting rights that are currently
exercisable or convertible are considered when assessing whether the Group controls another entity.
In the Consolidated Balance Sheet, the acquiree’s identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition
date. The results of acquired operations are included in the Consolidated Income Statement from the date on which control is obtained.
Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the Parent’s ownership interests in them. On an acquisition-
by-acquisition basis, the Group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of
the acquiree’s net assets. Each of these approaches has been used by the Group. Non-controlling interests are subsequently measured as the amount of those
non-controlling interests at the date of the original combination and the non-controlling interest’s share of changes in equity since the date of the combination.
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C. Basis of consolidation continued
An associate is an entity in which the Group has significant influence and which is neither a subsidiary nor a joint venture. Associates are accounted for under the
equity method of accounting. The Consolidated Income Statement reflects the share of the results of the operations of the associate after tax.
When a business combination is achieved in stages, the Group’s previously held interests in the acquired entity are remeasured to its acquisition date fair value
and the resulting gain or loss, if any, is recognised in the Consolidated Income Statement. Amounts arising from interests in the acquiree prior to the acquisition
date that have previously been recognised in other comprehensive income are reclassified to the Consolidated Income Statement, where such treatment would be
appropriate if that interest were disposed of.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional
amounts for the items for which the accounting is incomplete.
Intercompany transactions, balances and unrealised gains on transactions between Group companies (Next Fifteen Communications Group plc and its subsidiaries)
are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies for
subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
D. Merger reserve (included in other reserves)
Where the conditions set out in section 612 of the Companies Act 2006 or equivalent sections of previous Companies Acts are met, shares issued as part of the
consideration in a business combination are measured at their fair value in the Consolidated Balance Sheet, and the difference between the nominal value and fair
value of the shares issued is recognised in the merger reserve.
E. Revenue and other income
Billings represent amounts receivable from clients, exclusive of VAT, sales taxes and trade discounts in respect of charges for fees, commission and rechargeable
expenses incurred on behalf of clients.
Revenue comprises commission and fees earned and is recognised when a performance obligation is satisfied, in accordance with the terms of the contractual
agreement. Typically, performance obligations are satisfied over time as services are rendered. Payment terms across the Group vary, but the Group is generally paid
in arrears for its services and payment is typically due between 60 and 90 days.
Revenue recognised over time is based on the proportion of the level of service performed. Either an input method or an output method, depending on the
particular arrangement, is used to measure progress for each performance obligation. In the majority of cases, relevant output measures such as the completion
of distinct performance obligations set out in the contract are used to assess proportional performance. Where this is not the case then an input method based on
costs incurred to date is used to measure performance. The primary input of substantially all work performed is represented by labour. As a result of the relationship
between labour and cost there is normally a direct correlation between costs incurred and the proportion of the contract performed to date.
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E. Revenue and other income continued
The amount of revenue recognised depends on whether we act as an agent or as a principal. The Group acts as principal when we control the specified good or
service prior to transfer. When the Group acts as a principal the revenue recorded is the gross amount billed. Out-of-pocket costs such as travel are also recognised
at the gross amount billed with a corresponding amount recorded as a direct cost. Certain other arrangements with our clients are such that our responsibility is to
arrange for a third party to provide a specified good or service to the client. In these cases, we are acting as an agent and we do not control the relevant good or
service before it is transferred to the client. When the Group is acting as an agent, the revenue is recorded at the net amount retained. There is deemed to be no
significant judgements in applying IFRS 15 and in evaluating when customers obtain control of the promised goods or services.
Direct costs comprise fees paid to external suppliers when they are engaged to perform part or all of a specific project and are charged directly to clients but where
the Group retains quality control oversight, such as production or research costs.
Further details on revenue recognition in terms of the nature of contractual agreements are as follows:
• retainer fees relate to arrangements whereby we have an obligation to perform services to the customer on an ongoing basis over the life of the contract. In these
instances, revenue is recognised using a time-based method resulting in straight-line revenue recognition;
• where project fees relate to assignments carried out under contractual terms which entitle the Group to payment for its performance to date in the event of contract
termination, then fees are recognised over the period of the relevant assignments. Revenue is typically recognised in line with the value delivered to the customer
which is the amount assigned to the project milestones completed set out in the contract. Where this is not the case then an input method based on costs incurred
is used; and
• revenue can be derived from media placements, for which the revenue for commissions on purchased media is typically recognised at the point in time the
media is run.
The Group has variable incentive-based revenue, typically in the form of volume based rebates provided to certain clients. The variable consideration is estimated using
the most likely amount and is included in revenue to the amount that is highly probably not to result in a significant reversal of the cumulative revenue recognised.
Accrued and deferred income
Accrued income is a contract asset and is recognised when a performance obligation has been satisfied but has not yet been billed. Contract assets are transferred
to receivables when the right to consideration is unconditional and billed per the terms of the contractual agreement.
In certain cases, payments are received from customers prior to satisfaction of performance obligations and recognised as deferred income on the Group’s balance
sheet. These balances are considered contract liabilities and are typically related to prepayments for third-party expenses that are incurred shortly after billing.
Finance income
Finance income primarily relates to changes in estimate in the Group’s contingent consideration and share purchase obligation liabilities; refer to section T.
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F. Intangible assets
Goodwill
Goodwill represents the excess of the fair value of consideration payable, the amount of any non-controlling interest in the acquiree and the acquisition date fair value
of any previous equity interest in the acquiree, over the fair value of the Group’s share of the identifiable net assets acquired. The fair value of consideration payable
includes assets transferred, liabilities assumed and equity instruments issued. The amount relating to the non-controlling interest is measured on a transaction-by-
transaction basis, at either fair value or the non-controlling interest’s proportionate share of net assets acquired. Both approaches have been used by the Group.
Goodwill is capitalised as an intangible asset, not amortised but reviewed annually for impairment or in any period in which events or changes in circumstances
indicate the carrying value may not be recoverable. Any impairment in carrying value is charged to the Consolidated Income Statement.
Software
Costs that are directly associated with the production of identifiable and unique software products controlled by the Group, and that are expected to generate
economic benefits exceeding costs beyond one year, are recognised as intangible assets. Direct costs include software development and employee costs.
Amortisation is provided on software at rates calculated to write off the cost of each asset evenly over its expected useful life of between two and four years. Costs
associated with maintaining computer software programs and licenses for cloud based software not controlled by the Group are recognised as an expense as they
are incurred. No amortisation is charged on assets in the course of construction until they are available for operational use in the business.
Software acquired as part of a business combination is recognised at fair value at the acquisition date. Software has a finite useful life and is amortised using the
straight-line method over its estimated useful life of two to four years.
Trade names
Trade names acquired in a business combination are recognised at fair value at the acquisition date. Trade names have a finite useful life and are carried at cost
less accumulated amortisation. Amortisation is calculated using the straight-line method to allocate the cost of trade names over their estimated useful lives of up
to 20 years.
Customer relationships
Contractual customer relationships acquired in a business combination are recognised at fair value at the acquisition date. The contractual customer relationships
have a finite useful life and are carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method over the expected life of the
customer relationship of five to six years.
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F. Intangible assets continued
Non-compete
Certain acquisition agreements contain non-compete arrangements restricting the vendor’s ability to compete with the acquiring business during an earn-out period.
The non-compete arrangements have a finite useful life equivalent to the length of the earn-out period and are carried at cost less accumulated amortisation.
Amortisation is calculated using the straight-line method over the length of the arrangement.
G. Property, plant and equipment
Property, plant and equipment is stated at cost, net of depreciation. Depreciation is provided on all property, plant and equipment at annual rates calculated to write
off the cost, less estimated residual value, of each asset evenly over its expected useful life as follows:
Short leasehold improvements
Office equipment
Office furniture
Motor vehicles
–
–
–
–
Over the term of the lease
20% to 50% per annum straight-line basis
20% per annum straight-line basis
25% per annum straight-line basis
H. Impairment
Impairment tests on goodwill are undertaken annually at the financial year end and in the event of any changes in circumstances that indicate impairment. Other
non-financial assets (excluding deferred tax) are subject to impairment tests whenever events or changes in circumstances indicate that their carrying amount may
not be recoverable.
Where the carrying value of an asset exceeds its recoverable amount, which is measured as the higher of value in use and fair value less costs to sell, the asset is
impaired accordingly.
Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried out on the asset’s cash-generating unit, defined as
the lowest group of assets in which the asset belongs for which there are separately identifiable cash flows. Goodwill is allocated on initial recognition to each of the
Group’s cash-generating units that are expected to benefit from the synergies of the combination giving rise to the goodwill. The cash-generating units represent
the lowest level within the entity at which the goodwill is monitored for internal management purposes.
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H. Impairment continued
Impairment charges are included within the amortisation and impairment line of the Consolidated Income Statement unless they reverse gains previously recognised
in other comprehensive income. An impairment loss recognised for goodwill is not reversed.
I. Foreign currency
Transactions entered into by Group entities in a currency other than the currency of the primary economic environment in which they operate (their ‘functional
currency’) are recorded at the exchange rates ruling when the transactions occur. Foreign currency monetary assets and liabilities are translated at the exchange
rates ruling at the balance sheet date. Exchange differences arising on the retranslation of unsettled monetary assets and liabilities are recognised immediately in
the Consolidated Income Statement. In the consolidated financial statements, foreign exchange movements on intercompany loans with indefinite terms, for which
there is no expectation of a demand for repayment, are recognised directly in equity within a separate foreign currency translation reserve.
On consolidation, the results of overseas operations are translated into sterling at the average exchange rates for the accounting period.
All assets and liabilities of overseas operations, including goodwill arising on the acquisition of those operations, are translated at the exchange rates ruling at the
balance sheet date. Exchange differences arising on translating the opening net assets at opening rates and the results of overseas operations at average rates are
recognised directly in the foreign currency translation reserve within equity. The effective portion arising on the retranslation of foreign currency borrowings which
are designated as a qualifying hedge is recognised within equity. See note 19 for more detail on hedging activities.
On disposal of a foreign operation, the cumulative translation differences recognised in the foreign currency translation reserve relating to that operation up to the
date of disposal are transferred to the Consolidated Income Statement as part of the profit or loss on disposal.
On a reduction of ownership interest in a subsidiary that does not affect control, the cumulative retranslation difference is only allocated to the non-controlling
interests (‘NCI’) and not recycled through the Consolidated Income Statement.
J. Operating segments
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker,
who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Board of Directors.
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K. Financial instruments
Financial assets and liabilities are recognised on the Group’s Consolidated Balance Sheet when the Group becomes party to the contractual provisions of the asset
or liability. The Group’s accounting policies for different types of financial asset and liability are described below.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets
and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial
assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at
fair value through profit or loss are recognised immediately in profit or loss.
Trade receivables
All trade receivables held by the Group are financial assets held within a business model whose objective is to hold financial assets in order to collect the contractual
cash flows. Trade receivables are initially recognised at fair value and will subsequently be measured at amortised cost less allowances for impairment.
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand and short-term (less than 3 months) call deposits held with banks, with deemed low credit risk. Bank overdrafts
are shown within loans and borrowings in current liabilities on the Consolidated Balance Sheet, except where there is a pooling arrangement with a bank that allows
them to be offset against cash balances. In such cases the net cash balance are shown within cash and cash equivalents in the Consolidated Balance Sheet.
Impairment of financial assets
The Group recognises a loss allowance for expected credit losses on trade receivables and contract assets. The amount of expected credit losses is updated at
each reporting date to reflect changes in credit risk since initial recognition of the respective financial instrument. The Group always recognises lifetime ECL for trade
receivables and contract assets. The expected credit losses on these financial assets are estimated using a provision matrix based on the Group’s historical credit
loss experience, adjusted for factors that are specific to the debtors.
Such provisions are recorded in a separate allowance account, with the loss being recognised as an expense in the other operating charges line in the Consolidated
Income Statement.
Contingent consideration
On initial recognition, the liability for contingent consideration relating to acquisitions is measured at fair value. The liability is calculated based on the present value
of the ultimate expected payment with the corresponding debit included within goodwill. Subsequent movements in the present value of the ultimate expected
payment are recognised in the Consolidated Income Statement within finance income/expense.
The Group has a portion of consideration which is payable subject to continuing employment of the previous owner within the Group. The expected liability is
recognised within operating costs evenly over the required employment term of the seller and is separately recognised as an employment-related acquisition
payment provision.
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K. Financial instruments continued
The Group adjusts for the remeasurement of the acquisition-related liabilities within the adjusted performance measures in order to aid comparability of the Group’s
results year on year as the charge/credit can vary significantly depending on the brand’s performance.
Share purchase obligation
Put-option agreements that allow the non-controlling interest shareholders in the Group’s subsidiary undertakings to require the Group to purchase the non-
controlling interest are recorded in the Consolidated Balance Sheet as liabilities. On initial recognition, the liability is measured at fair value and is calculated based
on the present value of the ultimate expected payment with the corresponding debit included in the share purchase reserve. Subsequent movements in the present
value of the ultimate expected payment are recognised in the Consolidated Income Statement within finance income/expense.
Trade payables
Trade payables are initially recognised at fair value and thereafter at amortised cost.
Bank borrowing
Interest-bearing bank loans and overdrafts are recognised at their fair value, net of direct issue costs and, thereafter, at amortised cost. Finance costs are charged to
the Consolidated Income Statement over the term of the debt so that the amount charged is at a constant rate on the carrying amount. Finance costs include issue
costs that are initially recognised as a reduction in the proceeds of the associated capital instrument.
Hedging activities
The Group designates certain derivatives as hedging instruments in respect of hedges of net investments in foreign operations. The Group has chosen to continue
to account for these under IAS 39 as allowed by the transition provisions for IFRS 9.
The Group documents, at the inception of the transaction, the relationship between hedging instruments and hedged items, as well as its risk management objectives
and strategy for undertaking various hedging transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether
the hedging instruments used in hedging transactions are highly effective in offsetting changes in fair values of hedged items.
Where a foreign currency loan is designated as a qualifying hedge of the foreign exchange exposure arising on retranslation of the net assets of a foreign operation,
any gain or loss on the hedging instrument relating to the effective portion of the hedge is recognised in other comprehensive income in a separate hedging reserve
included within other reserves. This offsets the foreign exchange differences arising on the retranslation of the foreign operation’s net assets, which are recognised in
the separate foreign currency translation reserve. The gain or loss relating to the ineffective portion is recognised immediately in the Consolidated Income Statement
within finance income/expense.
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K. Financial instruments continued
Hedging activities continued
Gains and losses accumulated in equity on retranslation of the foreign currency loans are recycled through the Consolidated Income Statement when the foreign
operation is sold or is partially disposed of so that there is a loss of control. At this point the cumulative foreign exchange differences arising on the retranslation of the
net assets of the foreign operation are similarly recycled through the Consolidated Income Statement. Where the hedging relationship ceases to qualify for hedge
accounting, the cumulative gains and losses remain within the foreign currency translation reserve until control of the foreign operation is lost; subsequent gains and
losses on the hedging instrument are recognised in the Consolidated Income Statement.
Where there is a change in the ownership interest without effecting control, the exchange differences are adjusted within reserves.
L. Provisions
Provisions are recognised when the Group has a present obligation as a result of a past event and it is probable that the Group will be required to settle that obligation,
and are discounted to present value where the effect is material. Provisions are created for acquisition-related payments linked to the continuing employment of the
sellers and is recognised over the required period of employment. Provisions comprise liabilities where there is uncertainty about the timing of the settlement and
are measured at the present value of the Group’s best estimate of the expenditure required to settle the present obligation at the balance sheet date.
M. Retirement benefits
Pension costs which relate to payments made by the Group to employees’ own defined contribution pension plans are charged to the Consolidated Income
Statement as incurred.
N. Share-based payments
The Group issues equity-settled share-based payments to certain employees via the Group’s Long-Term Incentive Plan. The share-based payments are measured at
fair value at the date of the grant and expensed on a straight-line basis over the vesting period. The cumulative expense is adjusted for failure to achieve non-market
performance vesting conditions.
Fair value is measured by using a Black-Scholes model on the grounds that there are no market-related vesting conditions. The expected life used in the model has
been adjusted, based on the Board’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.
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N. Share-based payments continued
The Group grants brand equity appreciation rights to key individuals in the form of LLC units or restricted Ordinary Shares in the relevant subsidiary. The LLC units or
restricted Ordinary Shares give the individuals a right to a percentage of the future appreciation in their particular brand’s equity. Appreciation is measured based on
a multiple of the brand’s operating earnings in subsequent year(s), over the base line value determined at the date of grant. Since any brand appreciation payments
are to be settled in Group equity, they are accounted for as equity-settled share-based payments. The value is recognised as a one-off share-based payment in
the income statement in the year of grant as the agreements do not include service requirements, thus the cost accounting is not aligned with the timing of the
anticipated benefit of the incentive, namely the growth of the relevant brands. Therefore, adjusting for these within the Group’s adjusted performance measures
gives a better reflection of the Group’s performance and enhances comparability year on year.
O. Leased assets
The Group leases various assets, comprising mostly of properties and office equipment. The Group assesses whether a contract is or contains a lease, at inception
of a contract, based on whether the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Group
recognises a right-of-use asset and a corresponding lease liability at the commencement date with respect to all lease agreements in which it is the lessee, except
for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low-value assets (approximately less than £5,000), where the Group
has elected to use the exemption. The total rentals payable under these leases are charged to the Consolidated Income Statement on a straight-line basis over the
lease term.
The lease liability is initially measured at the present value of the lease payments not paid at the commencement date, discounted using the interest rate implicit in
the lease. When this rate cannot be determined, the Group uses the incremental borrowing rate for the same term as the underlying lease. Lease payments comprise
fixed payments less any lease incentives receivable and variable lease payments as at the commencement date. The lease liability is subsequently remeasured
when there is a change in future lease payments due to a renegotiation or market rent review, or a reassessment of the lease term. Lease modifications result in
remeasurement of the lease liability with a corresponding adjustment to the related right-of-use asset. Interest expense is included within finance expense in the
Consolidated Income Statement. The right-of-use asset is initially measured based on the lease liability adjusted for any lease payments made at or before the
commencement date, plus any initial direct costs incurred, less any lease incentives received, plus the estimated cost for any restoration costs the Group is obligated
to at lease inception. Right-of-use assets are subsequently measured at cost less accumulated depreciation and impairment losses. They are depreciated on a
straight-line basis over the shorter of the lease term or the useful life of the asset.
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O. Leased assets continued
At times, entities of the Group will sublet certain of their properties when underlying business requirements change. The Group assesses the classification of
these subleases with reference to the right-of-use asset, not the underlying asset. As a result, certain subleases are classified as finance leases and a sublease
receivable is recognised and recorded as a financial asset within trade and other receivables on the Consolidated Balance Sheet and any relating right-of-use asset
is derecognised.
When the Group acts as an intermediate lessor it accounts for the head lease and the sublease separately. Whenever the terms of the lease transfer substantially
all the risks and rewards of ownership in relation to the underlying asset to the lessee, the contract is classified as a finance lease. All other leases are classified as
operating leases. Amounts due from lessees under finance leases are recognised as finance lease receivables at the amount of the Group’s net investment in the
leases using the effective interest rate method. The Group recognises lessor payments under operating leases as income on a straight-line basis over the lease term.
P. Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the Consolidated Income Statement because it
excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group’s
liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.
Q. Deferred tax
Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the Consolidated Balance Sheet differs from its tax base, except
for differences arising on:
• the initial recognition of goodwill;
• the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting nor
taxable profit; and
• investments in subsidiaries and jointly controlled entities where the Group is able to control the timing of the reversal of the difference and it is probable that the
difference will not reverse in the foreseeable future.
Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be available against which the asset can be utilised.
The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the balance sheet date and are expected to
apply when the deferred tax liabilities/(assets) are settled/(recovered).
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Q. Deferred tax continued
Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and
liabilities relate to taxes levied by the same tax authority on either:
• the same taxable Group company; or
• different Group entities which intend either to settle current tax assets and liabilities on a net basis, or to realise the assets and settle the liabilities simultaneously,
in each future period in which significant amounts of deferred tax assets or liabilities are expected to be settled or recovered.
Where a temporary difference arises between the tax base of employee share options and their carrying value, a deferred tax asset should arise. To the extent
that the future tax deduction exceeds the related cumulative IFRS 2 ‘Share-Based Payment’ (‘IFRS 2’) expense, the excess of the associated deferred tax balance is
recognised directly in equity. To the extent that the future tax deduction matches the cumulative IFRS 2 expense, the associated deferred tax balance is recognised
in the Consolidated Income Statement.
R. Dividends
Equity dividends are recognised when they become legally payable. Interim equity dividends are recognised when paid. Final equity dividends are recognised when
approved by the shareholders at an Annual General Meeting.
S. Employee Share Ownership Plan (‘ESOP’)
As the Group is deemed to have control of its ESOP trust, the trust is treated as a subsidiary and is consolidated for the purposes of the Group accounts. The ESOP’s
assets (other than investments in the Company’s shares), liabilities, income and expenses are included on a line-by-line basis in the Group financial statements.
The ESOP’s investment in the Group’s shares is deducted from equity in the Consolidated Balance Sheet as if they were treasury shares and presented in the
ESOP reserve.
T. Critical accounting judgements and key sources of estimation uncertainty
Critical judgements in applying the Group’s accounting policies
The following are the critical judgements, apart from those involving estimations (which are dealt with separately below), that the Directors have made in the process
of applying the Group’s accounting policies and that have the most significant effect on the amounts recognised in financial statements.
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T. Critical accounting judgements and key sources of estimation uncertainty continued
I. Identification of acquired intangible assets
As part of the acquisition accounting under IFRS 3, the Group must identify and value the intangibles it has acquired. The identification of the intangibles acquired,
such as customer relationships, intellectual property, non-compete agreements and brand names, requires judgement following an assessment of the acquired
business. This involves reviewing the past performance of the acquiree and future forecasts to ascertain the intangible assets which the purchase price should be
allocated to.
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation uncertainty at the reporting period that may have a significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below.
I. Impairment of goodwill
In line with lAS 36 ‘Impairment of Assets’, the Group is required to test the carrying value of goodwill, at least annually, for impairment. As part of this review process the
recoverable amount of the goodwill is determined using value-in-use calculations, which requires estimates of future cash flows and as such is subject to estimates
and assumptions around revenue and cost growth rates from the Board-approved budget and discount rates applied. Further details are contained in note 11.
The Group has performed sensitivity analysis on the assumptions used in the value-in-use calculations for the purposes of the goodwill impairment review. Further
details on the scenarios considered have been described in note 11.
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T. Critical accounting judgements and key sources of estimation uncertainty continued
Key sources of estimation uncertainty continued
II. Contingent consideration, share purchase obligation and valuation of put options
Contingent consideration and share purchase obligations relating to acquisitions have been included based on discounted management estimates of the most
likely outcome. The difference between the fair value of the liabilities and the actual amounts payable is charged to the Consolidated Income Statement as notional
finance costs over the life of the associated liability. Changes in the estimates of contingent consideration payable and the share purchase obligation are recognised
in finance income/expense. These require judgements around future revenue growth, profit margins and discount rates, which, if incorrect, could result in a material
adjustment to the value of these liabilities within the next financial year. Further details, including sensitivity analysis, are contained in note 17.
U. New standards and amendments not applied
The Group has not yet adopted certain new standards, amendments and interpretations to existing standards which have been published but are only effective for
accounting periods beginning on or after 1 February 2022 or later periods. These new pronouncements are listed below:
• IFRS 17 ‘Insurance Contracts’; and
• IFRS 10 ‘Consolidated Financial Statements’ and IAS 28 (amendments), Sale or Contribution of Assets between an Investor and its Associate or Joint Venture.
The Directors do not expect that the adoption of the standards listed above will have a material impact on the financial statements of the Group in future periods.
2 Segment information
Reportable segments
The Board of Directors has identified the operating segments based on the reports it reviews as the chief operating decision-maker (‘CODM’) to make strategic
decisions, assess performance and allocate resources. These are deemed to be both regional and service segments.
The Group’s business is separated into a number of brands which are considered to be the underlying cash-generating units (‘CGUs’). These brands are organised
into service segments based on the work they do for their customers and into geographical segments based on where the brand is located; within these reportable
segments the Group operates a number of separate businesses which generally offer complementary products and services to their customers.
139
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Financial statements
2 Segment information continued
Measurement of operating segment profit
The Board of Directors assesses the performance of the operating segments based on a measure of adjusted operating profit before intercompany recharges,
which reflects the internal reporting measure used by the Board of Directors. This measurement basis excludes the effects of certain fair value accounting charges,
amortisation of acquired intangibles and other costs not associated with the performance of the business, details of which are included in the Glossary section
on page 196. Total adjusted operating profit is reconciled to operating profit in note A2 to the Glossary, which in turn is reconciled to statutory profit before tax in
the Consolidated Income Statement. Head office costs relate to Group costs before allocation of intercompany charges to the operating segments. Inter-segment
transactions have not been separately disclosed as they are not material. The Board of Directors does not review the assets and liabilities of the Group on a
segmental basis and therefore this is not separately disclosed.
The Group has previously reported its results split into three operating segments: Brand Marketing, Data and Insights and Creative Technology. From 1 February
2021, the Group structure has been enhanced, moving from three segments to four: Customer Engagement, Customer Delivery, Customer Insight and Business
Transformation. Therefore the split of the revenue for the year ending 31 January 2021 has been restated to reflect this.
Year ended 31 January 2022
Revenue
Adjusted operating profit/(loss) after interest on lease liabilities
Year ended 31 January 2021
Revenue
Adjusted operating profit/(loss) after interest on lease liabilities
Year ended 31 January 2022
Revenue
Adjusted operating profit/(loss) after interest on lease liabilities
Year ended 31 January 2021
Revenue
Adjusted operating profit/(loss) after interest on lease liabilities
140
Customer
Engage
£’000
Customer
Delivery
£’000
Customer
Insight
£’000
Business
Transformation
£’000
Head office
£’000
Total
£’000
238,275
40,434
120,182
28,501
201,984
36,866
59,267
15,232
56,325
9,023
44,099
4,876
55,273
15,221
—
(13,832)
470,055
79,347
18,318
3,906
—
(11,394)
323,668
49,486
UK
£’000
EMEA
£’000
US
£’000
Asia Pacific
£’000
Head office
£’000
Total
£’000
189,586
30,910
11,375
2,504
249,687
58,355
126,811
22,402
9,621
1,997
170,467
34,150
19,407
1,410
16,769
2,331
—
(13,832)
470,055
79,347
—
(11,394)
323,668
49,486
Notes to the accounts continuedfor the year ended 31 January 2022Next Fifteen Communications Group plc | Annual Report 2022 Strategic report
Corporate governance
Financial statements
3 Employee information
Staff costs for all employees, including Directors, consist of:
Wages and salaries
Social security costs
Pension costs
Share-based payment charge (note 21)
The average monthly number of employees during the period, by geographical location, was as follows:
UK
Europe and Africa
US
Asia Pacific
Head office
Key management personnel are considered to be the Board of Directors as set out on pages 65 to 67.
Year ended
31 January
2022
£’000
213,850
15,619
4,848
24,628
Year ended
31 January
2021
£’000
161,630
12,045
4,227
11,628
258,945
189,530
Year ended
31 January
2022
Year ended
31 January
2021
1,174
109
907
425
71
2,686
969
101
854
337
56
2,317
141
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Financial statements
3 Employee information continued
Directors’ remuneration consists of:
Short-term employee benefits
Pension costs
Share-based payment charge
The highest paid Director received total emoluments of £1,174,000 (2021: £756,000).
4 Operating profit
This is arrived at after charging/(crediting):
Depreciation of owned property, plant and equipment
Depreciation of right-of-use assets
Amortisation of intangible assets
Impairment of right-of-use assets
Loss on sale and impairment of property, plant and equipment
Share-based payment charge
Share-based payment charge – adjusted (see glossary page 196)
Short-term sublease income
Short-term lease expense
Low-value lease expense
UK furlough grant – adjusted (see glossary page 196)
Other government grants
Foreign exchange loss
142
Year ended
31 January
2022
£’000
Year ended
31 January
2021
£’000
1,629
107
1,136
2,872
976
101
603
1,680
Year ended
31 January
2022
£’000
Year ended
31 January
2021
£’000
3,296
6,146
19,317
1,378
(189)
3,637
20,991
(12)
413
17
1,396
—
186
3,880
7,729
16,394
8,503
6,885
1,402
10,226
(453)
933
78
(1,396)
(748)
775
Notes to the accounts continuedfor the year ended 31 January 2022Next Fifteen Communications Group plc | Annual Report 2022 Strategic report
Corporate governance
Financial statements
5 Auditor’s remuneration
During the year the Group (including its overseas subsidiaries) obtained the following services from the Company’s auditor and their associates:
Fees payable to the Company’s auditor for the statutory audit of the Company accounts and consolidated annual statements
The auditing of financial statements of the subsidiaries pursuant to legislation
Non-audit services:
Tax advisory services
Other assurance services
6 Finance expense
Financial liabilities at amortised cost
Bank interest payable
Interest on lease liabilities
Financial liabilities at fair value through profit and loss
Unwinding of discount on share purchase obligation (note 17)
Change in estimate of future share purchase obligation (note 17)
Unwinding of discount on contingent and deferred consideration (note 17)
Change in estimate of future contingent consideration payable (note 17)
Other
Other interest payable
Finance expense
Year ended
31 January
2022
£’000
Year ended
31 January
2021
£’000
474
4
—
5
483
320
107
—
5
432
Year ended
31 January
2022
£’000
Year ended
31 January
2021
£’000
398
1,043
811
3,898
7,488
107,720
877
1,408
459
2,908
4,694
6,534
26
4
121,384
16,884
143
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Financial statements
7 Finance income
Financial assets at amortised cost
Bank interest receivable
Finance lease interest receivable
Financial liabilities at fair value through profit and loss
Change in estimate of future share purchase obligation (note 17)
Change in estimate of future contingent consideration (note 17)
Other
Other interest receivable
Finance income
8 Taxation
The major components of income tax expense for the year ended 31 January 2022 and year ended 31 January 2021 are:
Consolidated Income Statement
Current income tax
Current income tax expense
Adjustments in respect of current income tax in prior years
Deferred income tax
Relating to the origination and reversal of temporary differences
Adjustments in respect of deferred tax for prior years
Income tax (credit)/expense reported in the Consolidated Income Statement
Consolidated Statement of Changes in Equity
Tax credit relating to share-based payment
Income tax benefit reported in equity
144
Year ended
31 January
2022
£’000
Year ended
31 January
2021
£’000
35
65
—
915
34
1,049
43
34
176
1,202
4
1,459
Year ended
31 January
2022
£’000
Year ended
31 January
2021
£’000
17,109
(312)
(31,244)
(28)
(14,475)
(2,757)
(2,757)
8,472
(334)
(5,464)
(31)
2,643
(491)
(491)
Notes to the accounts continuedfor the year ended 31 January 2022Next Fifteen Communications Group plc | Annual Report 2022 Strategic report
Corporate governance
Financial statements
8 Taxation continued
The tax assessed for the year is higher than the standard rate of corporation tax in the UK of 19% (2021: 19%). The difference is explained below:
Factors affecting the tax (credit)/charge for the year
Loss before income tax
Corporation tax expense at 19% (2021: 19%)
Effects of:
Disallowed expenses
Recognition of previously unrecognised tax losses
Non-utilisation of tax losses
Higher rates of tax on overseas earnings
Deduction for overseas taxes
Adjustments in respect of prior years
Year ended
31 January
2022
£’000
Year ended
31 January
2021
£’000
(80,139)
(15,226)
(1,306)
(248)
5,315
2,947
(2)
21
(4,117)
(126)
(340)
—
4
305
—
(365)
(14,475)
2,643
The income tax expense for the year is based on the UK effective statutory rate of corporation tax of 19% (2021: 19%). Overseas tax is calculated at the rates prevailing
in the respective jurisdictions.
Net corporation tax paid during the year totalled £14.1m (2021: £8.4m).
145
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Financial statements
9 Dividend
Dividends paid during the year
Final dividend paid for prior year of 7p per Ordinary Share (2021: £Nil)
Interim dividend paid of 3.6p per Ordinary Share (2021: £Nil)
Non-controlling interest dividend1
Year ended
31 January
2022
£’000
Year ended
31 January
2021
£’000
6,491
3,341
9,832
2,538
—
—
—
686
1
During the year, a profit share was paid to the holders of the non-controlling interest of Blueshirt of £194,506 (2021: £159,595), M Booth of £489,732 (2021: £329,906), BCA of £1,854,029 (2021: £Nil), and Outcast of £Nil (2021: £196,152).
The ESOP waived its right to dividends in the financial years ended 31 January 2022 and 2021.
A final dividend of 8.4p per share (2021: 7p) has been proposed, which is a total amount of £7,796,136 (2021: £6,368,808). This has not been accrued. This makes the
total dividend for the year 12p per share (2021: 7p). The final dividend, if approved at the AGM on 23 June 2022, will be paid on 12 August 2022 to all shareholders
on the Register of Members as at 8 July 2022. The ex-dividend date for the shares is 7 July 2022.
146
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Corporate governance
Financial statements
10 Earnings per share
Loss attributable to ordinary shareholders
Weighted average number of Ordinary Shares
Dilutive LTIP & options shares
Dilutive growth deal shares1
Other potentially issuable shares
Diluted weighted average number of Ordinary Shares
Basic loss per share
Diluted loss per share2
Year ended
31 January
2022
£’000
Year ended
31 January
2021
£’000
(69,219)
(4,938)
Number
Number
92,395,619
89,382,909
2,389,017
916,215
2,386,786
820,997
1,552,359
2,062,239
98,087,637
93,818,504
(74.9)p
(74.9)p
(5.5)p
(5.5)p
1 This relates to the brand equity appreciation rights as discussed in note 1, section N.
2 The weighted average shares used in the basic loss per share calculation has also been used for the reported diluted loss per share due to the anti-dilutive effect of the weighted average shares calculation for the reported diluted loss
per share.
147
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Financial statements
11 Intangible assets
Cost
At 31 January 2020
Additions
Capitalised internal development
Acquired through business combinations1
Disposals
Exchange differences
At 31 January 2021
Additions
Capitalised internal development
Acquired through business combinations1
Disposals
Exchange differences
At 31 January 2022
Amortisation and impairment
At 31 January 2020
Charge for the year2
Disposals
Exchange differences
At 31 January 2021
Charge for the year2
Disposals
Exchange differences
At 31 January 2022
Net book value at 31 January 2022
Net book value at 31 January 2021
Software
£’000
Trade name
£’000
Customer
relationships
£’000
Non-compete
£’000
Goodwill
£’000
Total
£’000
12,836
290
1,819
5
(397)
(25)
14,528
40
2,614
810
(11)
15
16,565
—
—
2,108
—
(336)
18,337
—
—
1,795
—
226
66,610
—
—
7,207
—
(949)
6,871
—
—
1,286
—
(97)
112,476
—
—
14,735
—
(1,757)
215,358
290
1,819
25,341
(397)
(3,164)
72,868
8,060
125,454
239,247
—
—
15,830
—
562
—
—
913
—
72
—
—
14,994
—
1,107
40
2,614
34,342
(11)
1,982
17,996
20,358
89,260
9,045
141,555
278,214
8,159
1,684
(158)
(23)
9,662
2,122
(18)
10
11,776
6,220
4,866
6,042
1,441
—
(157)
7,326
1,576
—
98
9,000
11,358
11,011
31,681
11,944
—
(551)
43,074
14,530
—
348
57,952
31,308
29,794
3,376
1,325
—
(63)
4,638
1,089
—
38
5,765
3,280
3,422
10,692
—
—
78
10,770
—
—
(99)
59,950
16,394
(158)
(716)
75,470
19,317
(18)
395
10,671
95,164
130,884
183,050
114,684
163,777
1 During the year, the Group acquired SMG and BCA as well as other acquisitions and a number of trade and asset purchases, none of which are individually significant to the Group (note 26).
2 Amortisation charge for the period includes acquired intangibles of £1,089,000 for non-compete agreements, £14,530,000 for customer relationships, £1,576,000 for trade names and £492,000 relating to software.
148
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Corporate governance
Financial statements
11 Intangible assets continued
Impairment testing for cash-generating units containing goodwill
Goodwill acquired through business combinations is allocated to cash-generating units (‘CGUs’) for impairment testing as follows:
Archetype
Outcast (US)
M Booth (US)
Blueshirt (US)
Savanta1
ODD
Publitek
Twogether
Velocity
ELVIS
Activate (US)
Brandwidth
Planning-inc
CRE
Mach49 (US)
SMG
BCA (US)
Other2
2022
£’000
8,268
12,356
20,993
5,109
12,832
4,950
9,873
10,620
5,653
2,179
5,510
2,212
2,157
4,351
8,973
8,766
2,482
3,600
130,884
2021
£’000
8,268
12,077
20,519
4,993
9,608
4,950
9,873
10,620
5,653
2,179
5,386
2,212
2,157
4,351
8,771
—
—
3,067
114,684
1 The goodwill in Savanta has increased in the year due to the acquisition of YouthSight (£3,217,000) and the remainder of the change is due to change in foreign exchange.
2 Other goodwill represents goodwill on a number of CGUs, none of which is individually significant in comparison to the total carrying value of goodwill.
Goodwill is allocated on initial recognition to each of the Group’s CGUs that are expected to benefit from the synergies of the combination giving rise to the goodwill.
The CGUs represent the lowest level within the entity at which the goodwill is monitored for internal management purposes. This is a lower level than the operating
segments disclosed in note 2; the CGUs are allocated to operating segments based on their geographical location or the product or service they provide.
149
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Financial statements
11 Intangible assets continued
Impairment testing for cash-generating units containing goodwill continued
The Group performs an impairment testing process by considering:
Stage 1) The performance of the brands during the previous financial year and the value in use of the brands at 31 January 2022. The value in use is calculated by
taking the present value of expected future cash flows based on minimum expected standard growth rates applied to the Board-approved FY23 budget.
Stage 2) The value in use of the brands, calculated by taking the present value of expected future cash flows based on management’s best estimate of brand-
specific growth rates for the following four years applied to the Board-approved FY23 budget.
Note that the growth rates in stages 1 and 2 applied for year five are dependent on the geographical region of the respective brand. The long-term perpetuity growth
rates applied for year five onwards for the US, UK and APAC regions are 2% (2021: 2%), 1.5% (2021: 1.5%) and 1% (2021: 1%) respectively. The growth rates applied for
years two to five for the US, UK and APAC regions are 2% (2021: 2%), 2% (2021: 2%) and 3% (2021: 3%) respectively.
Sensitivity Analysis
The Group has performed sensitivity analysis on the assumptions used in the value-in-use calculations. The Group has performed two scenarios. Firstly, with all other
variables unchanged, if revenue and costs do not grow past the FY23 budget and there is no growth in perpetuity, no impairment would be required. Secondly, with
all other variables unchanged, if the discount rate increased by 5% to 16.9%, no impairment would be required.
Cash flow projections
The recoverable amounts of all CGUs have been determined from value-in-use calculations based on the pre-tax operating profits before non-cash transactions
including amortisation and depreciation taken from the most recent financial budgets approved by management for the next financial year. The Board-approved
budgets are based on assumptions of client wins and losses, rate card changes and cost inflation as well as any other one-off items expected in the year for that
particular CGU. The cash flow forecasts extrapolate the FY23 budgeted cash flows for the following four years based on the estimated regional growth rates, which is
applied to revenue and costs. This rate does not exceed the average long-term growth rate for the relevant markets. The value in use is compared with the combined
total of goodwill, intangible assets and tangible fixed assets. The growth rate in relation to the geographical region of the brand is then applied into perpetuity after
five years.
Pre-tax discount rate
A pre-tax rate, being the Board’s estimate of the discount rate of 11.9% (2021: 12.7%), has been used in discounting all projected cash flows. The Board considers a
pre-tax discount rate of 11.9% to be calculated using appropriate methodology and reference to market yields of long-term government bonds. This rate is already in
the higher end of the spectrum amongst its peers, and the Board views the rate as accurately reflecting the return expected by a market participant. The Board has
considered whether to risk affect the discount rate used for the different brands. Given the nature of each business, that they operate in well-developed territories
and are largely similar digital media communication businesses dependent on the mature economies in which they operate, the Board has considered no risk
adjustment to the individual discount rates is required. Further, a scenario run using a higher discount rate reflective of US expected market returns indicated no
goodwill impairment. Instead, the CGU forecast cash flows have been risk adjusted to reflect the economies in which they operate.
150
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Corporate governance
Financial statements
12 Property, plant and equipment
Cost
At 31 January 2020
Exchange differences
Additions
Acquired through business combinations
Disposals
At 31 January 2021
Exchange differences
Additions
Acquired through business combinations
Disposals
At 31 January 2022
Accumulated depreciation
At 31 January 2020
Exchange differences
Charge for the year
Disposals
At 31 January 2021
Exchange differences
Charge for the year
Impairment
Disposals
At 31 January 2022
Net book value at 31 January 2022
Net book value at 31 January 2021
Short leasehold
improvements
£’000
Office
equipment
£’000
Office
furniture
£’000
Motor
vehicles
£’000
18,499
(387)
386
74
(5,518)
13,054
196
475
—
(602)
13,123
8,057
(277)
1,736
(2,494)
7,022
139
1,382
1,378
(750)
9,171
3,952
6,032
9,297
(130)
1,231
48
(1,803)
8,643
45
2,341
51
(1,343)
9,737
7,146
(102)
1,493
(1,619)
6,918
25
1,495
—
(1,338)
7,100
2,637
1,725
3,814
(91)
381
5
(747)
3,362
12
290
105
(1,391)
2,378
2,183
(89)
651
(530)
2,215
16
419
—
(1,189)
1,461
917
1,147
2
—
—
—
—
2
—
—
—
(2)
—
2
—
—
—
2
—
—
—
(2)
—
—
—
Total
£’000
31,612
(608)
1,998
127
(8,068)
25,061
253
3,106
156
(3,338)
25,238
17,388
(468)
3,880
(4,643)
16,157
180
3,296
1,378
(3,279)
17,732
7,506
8,904
151
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Financial statements
13 Trade and other receivables
Current
Trade receivables
Less: provision for impairment of trade receivables
Trade receivables – net
Other receivables
Prepayments
Accrued income
Finance lease receivables
Non-current
Rent deposits
2022
£’000
2021
£’000
94,591
(591)
94,000
2,405
5,385
14,112
3,774
59,825
(476)
59,349
1,405
4,146
9,389
3,241
119,676
77,530
821
860
Trade receivables disclosed above are measured at amortised cost. There were no significant changes in the accrued income balances during the reporting period,
other than the increase reflecting the change in revenue.
152
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Financial statements
13 Trade and other receivables continued
As of 31 January 2022, trade receivables of £591,000 (2021: £476,000) were impaired. Movements in the provision were as follows:
At start of year
Provision for receivables impairment
Receivables written off during the year as uncollectable
Unused amounts reversed
Foreign exchange movements
At end of year
2022
£’000
476
415
(233)
(76)
9
591
2021
£’000
310
478
(269)
(25)
(18)
476
The provision for receivables impairment has been determined using an expected credit loss model by reference to historical default rates. Owing to the immaterial
level of the provision for impairment of receivables, no further disclosure is made. The Group considers there to be no material difference between the fair value of
trade and other receivables and their carrying amount in the balance sheet.
As at 31 January, the analysis of trade receivables that were not impaired is as follows:
Not past due
Up to 30 days
31 to 60 days
Greater than 61 days
At end of period
2022
£’000
63,637
18,968
6,880
4,515
94,000
2021
£’000
44,516
10,344
2,899
1,590
59,349
153
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Financial statements
14 Trade and other payables
Current
Trade creditors
Other taxation and social security
Short-term compensated absences
Other creditors
Accruals
Deferred income
Non-current
Other creditors
2022
£’000
23,254
8,421
1,930
10,925
29,513
46,290
120,333
401
401
2021
£’000
13,964
5,593
1,766
5,295
14,997
35,704
77,319
1,576
1,576
The Group considers that the carrying amount of trade and other payables approximates to their fair value with the exception of obligations under finance leases;
refer to note 19.
There were no significant changes in the deferred income balances during the reporting period, other than the increase reflecting the change in revenue. All the
brought forward deferred income balance was recognised as revenue in the current reporting period. There was no revenue recognised in the current reporting
period that related to performance obligations that were satisfied in a prior year.
154
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Corporate governance
Financial statements
15 Provisions
At 31 January 2020
Additions
On acquisition of subsidiary
Used during the year
Exchange differences
At 31 January 2021
Additions
On acquisition of subsidiary
Used during the year
Exchange differences
At 31 January 2022
Current
Non-current
Property 1
£’000
Acquisition
payments 2
£’000
1,122
36
18
(486)
5
695
4
—
—
(4)
695
150
545
4,821
8,041
—
(1,256)
(11)
11,595
15,167
—
(5,454)
2
21,310
7,628
13,682
Other 3
£’000
521
20
—
(35)
—
506
—
—
—
—
506
—
506
Total
£’000
6,464
8,097
18
(1,777)
(6)
12,796
15,171
—
(5,454)
(2)
22,511
7,778
14,733
1 Property provisions are primarily for dilapidations and include assumptions of a cost per square foot required to make good the property at the end of the lease.
2
Acquisition payments are provisions for the portion of consideration which is payable subject to continuing employment of the previous owners within the Group. The expected liability is recognised over the required employment term of
the seller and is separately recognised as an employment-related acquisition payment provision.
3 Other includes provisions for potential tax liabilities and redundancy provisions.
155
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Financial statements
16 Leases
The movements in the year ended 31 January 2022 were as follows:
Right-of-use assets:
Cost
At 1 February 2020
Exchange differences
Additions
Acquired through business combinations
Disposals
At 31 January 2021
Exchange differences
Additions
Acquired through business combinations
Disposals
At 31 January 2022
Accumulated depreciation
At 1 February 2020
Exchange differences
Charge for the year
Impairment
Disposals
At 31 January 2021
Exchange differences
Charge for the year
Impairment
Disposals
At 31 January 2022
Net book value at 31 January 2022
Net book value at 31 January 2021
156
Land and
buildings
£’000
48,471
(1,348)
1,137
3,543
(6,201)
45,602
688
1,379
398
(787)
47,280
6,816
(940)
7,729
8,503
(2,514)
19,594
470
6,146
1,761
(639)
27,332
19,948
26,008
Notes to the accounts continuedfor the year ended 31 January 2022Next Fifteen Communications Group plc | Annual Report 2022 Strategic report
Corporate governance
Financial statements
16 Leases continued
Lease liabilities:
At 1 February 2021
Exchange differences
On acquisition of subsidiary
Additions
Interest expense related to lease liabilities
Disposals
Repayment of lease liabilities
At 31 January 2022
Current
Non-current
Land and
buildings
£’000
42,769
485
683
1,282
1,043
(1,286)
(11,993)
32,983
10,698
22,285
The following table shows the breakdown of the lease expense between amounts charged to operating profit and amounts recognised as finance income and
finance costs:
Depreciation of right-of-use assets
Short-term lease expense
Low-value lease expense
Short-term sublease income
Charge to operating profit
Sublease finance income
Lease liability interest expense
Lease charge to profit before income tax
2022
£’000
6,146
413
17
(12)
6,564
(65)
1,043
7,542
2021
£’000
7,729
933
78
(453)
8,287
(34)
1,408
9,661
157
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Corporate governance
Financial statements
16 Leases continued
The maturity of the lease liabilities is as follows:
Amounts payable:
Within one year
In two to five years
After five years
Total gross future liability
Effect of discounting
Lease liability at 31 January
The Group does not face a significant liquidity risk with regard to its lease liabilities. Refer to note 19 for management of liquidity risk.
2022
£’000
2021
£’000
11,448
21,427
2,006
34,881
(1,898)
32,983
11,981
28,998
4,723
45,702
(2,933)
42,769
158
Notes to the accounts continuedfor the year ended 31 January 2022Next Fifteen Communications Group plc | Annual Report 2022 Strategic report
Corporate governance
Financial statements
17 Other financial liabilities
At 31 January 2020
Arising during the year1
Changes in estimates2
Exchange differences
Utilised3
Reclassification
Unwinding of discount
At 31 January 2021
Arising during the year1
Changes in estimates2
Exchange differences
Utilised3
Reclassification
Unwinding of discount
At 31 January 2022
Current
Non-current
Deferred
consideration
£’000
Contingent
consideration 1
£’000
Other contingent
liability
£’000
2,715
—
—
—
(4,037)
2,405
179
1,262
—
—
—
(1,300)
133
38
133
133
—
42,181
12,885
5,332
(1,979)
(14,635)
(2,405)
4,515
45,894
9,073
106,805
3,795
(10,199)
(133)
6,306
161,541
36,496
125,045
—
—
—
—
—
—
—
—
3,888
—
170
—
—
1,144
5,202
—
5,202
Share
purchase
obligation
£’000
3,367
—
2,732
(50)
—
—
459
6,508
—
3,898
35
—
—
811
Total
£’000
48,263
12,885
8,064
(2,029)
(18,672)
—
5,153
53,664
12,961
110,703
4,000
(11,499)
—
8,299
11,252
178,128
1,535
9,717
38,164
139,964
1
Contingent consideration on acquisitions – during the year, the Group acquired a controlling stake in SMG and BCA, as well as a number of other acquisitions, none of which are material to the Group. (2021: Mach49, CRE and Marlin). See
note 26 for additional information on these acquisitions.
2 Gross movements in changes in assumptions are disclosed in notes 6 and 7.
3 The amounts utilised were settled £9.7m in cash and £1.8m in shares.
The estimates around contingent consideration and share purchase obligations are considered by management to be an area of significant judgement, with any
changes in assumptions and forecasts creating volatility in the income statement. Management estimates the fair value of these liabilities taking into account
expectations of future payments. The expectation of future payments is based on an analysis of the approved FY23 budget with further consideration being given
to current and forecast wider market conditions, together with current trading and recent significant contract wins. An assumed medium-term growth expectation is
then applied which is specific to each individual entity over the course of the earn-out period and discounted back to present value using a pre-tax discount rate.
159
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Financial statements
17 Other financial liabilities continued
Changes in the estimates of contingent consideration payable and the share purchase obligation are recognised in finance income/expense. If the judgements
around future revenue growth, profit margins and discount rates are incorrect, this could result in a material adjustment to the value of these liabilities within the next
financial year. An increase in the liability would result in an increase in interest expense, while a decrease would result in a further gain.
Sensitivity analysis
The following table shows the increase to the value of the combined liabilities due to earn-out agreement which would occur were there to be an increase in the
estimated future revenue growth rate, profit margin and the discount rate. A range of percentage point increases/decreases applied to the assumptions used by
management have been shown below.
Net revenue growth rate
Profit margin
Discount rate
5% Increase
£’000
10% Increase
£’000
15% Increase
£’000
9,805
25,924
(17,406)
24,539
41,893
35,005
47,529
(31,845)
(43,952)
There is also sensitivity around the timing of certain earn-out payments; the effect of deferred timing by one year on the earn-out agreements would have approximately
a £3,696,000 impact on the liabilities.
When increasing the estimated future revenue growth rate, profit margin and the discount rate for the most sensitive individual earn-out, the value of the liability
increases as follows:
Net revenue growth rate
Profit margin
Discount rate
160
5% Increase
£’000
10% Increase
£’000
15% Increase
£’000
7,897
22,661
(15,261)
21,357
34,229
30,461
36,593
(27,808)
(38,233)
Notes to the accounts continuedfor the year ended 31 January 2022Next Fifteen Communications Group plc | Annual Report 2022 Strategic report
Corporate governance
Financial statements
18 Deferred taxation
Temporary differences between the carrying value of assets and liabilities in the balance sheet and their relevant value for tax purposes result in the following
deferred tax assets and liabilities:
Accelerated
capital
allowances
£’000
Short-term
compensated
absences
£’000
Share-based
remuneration
£’000
Provision for
impairment
of trade
receivables
£’000
Excess book
basis over
tax basis of
intangible
assets
£’000
Other
temporary
differences
£’000
Tax losses
£’000
At 31 January 2020
Reclassification
(Charge)/credit to income
Exchange differences
Acquisition of subsidiaries
Taken to equity
At 31 January 2021
Credit to income
Exchange differences
Acquisition of subsidiaries
Taken to equity
At 31 January 2022
(1,170)
377
508
12
(7)
—
(280)
85
(2)
(25)
—
(222)
252
—
(38)
(7)
—
—
207
22
3
—
—
232
1,546
(780)
133
—
—
589
1,488
1,319
—
—
2,514
5,321
85
—
43
(5)
—
—
123
24
3
—
—
150
244
780
4,136
(250)
(1,028)
—
3,882
29,134
533
(3,392)
—
5,864
(377)
1,108
(223)
74
—
6,446
528
175
—
—
608
—
(395)
6
—
—
219
160
(3)
—
—
Total
£’000
7,429
—
5,495
(467)
(961)
589
12,085
31,272
709
(3,417)
2,514
30,157
7,149
376
43,163
161
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Corporate governance
Financial statements
18 Deferred taxation continued
After netting off balances, the following are the deferred tax assets and liabilities recognised in the Consolidated Balance Sheet:
Net deferred tax balance
Deferred tax assets
Deferred tax liabilities
Net deferred tax asset
2022
£’000
2021
£’000
46,350
(3,187)
43,163
15,314
(3,229)
12,085
Deferred tax has been calculated using the anticipated rates that will apply when the assets and liabilities are expected to reverse based on tax rates enacted
or substantively enacted by the balance sheet date. Notwithstanding the current year statutory loss at a Group level, the recoverability of deferred tax assets is
supported by the expected level of future profits in the countries concerned.
The estimated value of the deferred tax asset not recognised in respect of tax losses available to carry forward is £0.4m (2021: £0.2m).
At the balance sheet date, the aggregate amount of the temporary differences in relation to the investment in subsidiaries for which deferred tax liabilities have not
been recognised was £10.4m (2021: £7.9m). No liability has been recognised in respect of these differences as the Group is in a position to control the timing of the
reversal of the temporary differences and the Group considers that it is probable that such differences will not reverse in the foreseeable future.
19 Financial instruments
Financial risk management, policies and strategies
The Group’s principal financial instruments comprise bank loans, finance leases, cash and short-term deposits. The main purpose of these financial instruments is to
provide finance for the Group’s operations. The Group has various other financial assets and liabilities such as trade receivables and payables, which arise directly
from operations.
The main risks arising from the Group’s financial instruments are interest rate risk, liquidity risk, foreign exchange risk and credit risk. The Board reviews and agrees
policies for managing each of these risks and they are summarised below.
Interest rate risk
The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s long-term debt obligations.
The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held constant, on the Group’s profit before
tax at 31 January 2022, based on period-end balances and rates.
162
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Corporate governance
Financial statements
19 Financial instruments continued
Interest rate risk continued
The sensitivity analyses provided are hypothetical only and should be used with caution as the impacts provided are not necessarily indicative of the actual impacts
that would be experienced because the Group’s actual exposure to market rates changes as the Group’s portfolio of debt and cash changes. In addition, the effect of
a change in a particular market variable on fair values or cash flows is calculated without considering interrelationships between the various market rates or mitigating
actions that would be taken by the Group. The changes in valuations are estimates of the impact of changes in market variables and are not a prediction of future
events or anticipated gains or losses.
Group
Liquidity risk
The Group manages its risk to a shortage of funds with a mixture of long and short-term committed facilities.
Movement
in basis points
+200
2022
£’000
(455)
2021
£’000
(260)
On 2 September 2021, the Group entered into a new multicurrency £60m revolving credit facility (‘RCF’) with a £40m accordion, with HSBC and Bank of Ireland,
which is available until 2 September 2024 (with further extension options to 2 September 2026). This replaces the previous facilities agreements with HSBC of £40m
revolving credit facility and a £20m loan. The interest rate is variable dependent on a Leverage Ratio. The Group also has a $7m facility available in the US.
At 31 January 2022 the Group had an undrawn amount of £37,440,663 (2021: £31,848,833) on the RCF in the UK and $3,779,363 (2021: $3,220,637) available on the
$7m US facility (this allows for the letters of credit in place).
The following table summarises the maturity profile based on the remaining period between the balance sheet date and the contractual maturity date of the Group’s
financial liabilities at 31 January 2022 and 31 January 2021, based on contractual undiscounted payments:
At 31 January 2022
Financial liabilities
At 31 January 2021
Financial liabilities
Within
one year
£’000
Between two
and five years
£’000
More than
five years
£’000
Total
£’000
123,699
228,313
33,298
385,310
70,581
101,177
4,723
176,481
163
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Financial statements
19 Financial instruments continued
Currency risk
As a result of significant global operations, the Group’s balance sheet can be affected significantly by movements in the foreign exchange rates against sterling.
This is largely through the translation of balances denominated in a currency other than the functional currency of an entity. The Group has transactional currency
exposures in the US, Europe and the Asia Pacific region, including foreign currency bank accounts and intercompany recharges. The Group considers the use of
currency derivatives to protect significant US dollar and euro currency exposures against changes in exchange rates; however, the Group has not held derivative
financial instruments at the end of either period.
The following table demonstrates the sensitivity to reasonably possible changes in exchange rates, with all other variables held constant, of the Group’s profit before
tax based on period-end balances, year average and period-end rates:
US dollar
Euro
Australian dollar
Indian rupee
Weakening
against sterling
20%
20%
20%
20%
2022
£’000
479
(391)
(238)
64
2021
£’000
(4,647)
(512)
(228)
(17)
The following table demonstrates the sensitivity to reasonable possible changes in exchange rates, with all other variables held constant, of the Group’s net assets
on period-end balances and rates:
US dollar
Euro
Australian dollar
Indian rupee
164
Weakening
against sterling
20%
20%
20%
20%
2022
£’000
3,557
(549)
(397)
(115)
2021
£’000
(13)
(509)
(349)
(110)
Notes to the accounts continuedfor the year ended 31 January 2022Next Fifteen Communications Group plc | Annual Report 2022 Strategic report
Corporate governance
Financial statements
19 Financial instruments continued
Credit risk
The Group’s principal financial assets are bank balances, cash and trade and other receivables which represent the Group’s maximum exposure to credit risk in
relation to financial assets. The Group trades only with recognised, creditworthy third parties. It is the Group’s policy that customers who wish to trade on credit
terms be subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis with the result that the Group’s exposure to
bad debts has not been significant. The amounts presented in the balance sheet are net of provisions for impairment of trade receivables, estimated by the Group’s
management based on an expected credit loss model driven by historical experience and factors specific to certain debtors, see note 13.
The credit risk on liquid funds is limited because the counterparties are reputable banks with high credit ratings assigned by international credit rating agencies,
although the Board recognises that in the current economic climate these indicators cannot be relied upon exclusively.
Maximum exposure to credit risk
Total trade and other receivables
Cash and cash equivalents
2022
£’000
119,676
58,216
2021
£’000
77,530
26,831
Capital risk management
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders through
the optimisation of the debt and equity balance. Total capital of the Group is calculated as total equity as shown in the Consolidated Balance Sheet, plus net debt.
Net debt is calculated as total borrowings, less cash and cash equivalents. This measure of net debt excludes any acquisition-related contingent liabilities or
share purchase obligations. The quantum of these obligations is dependent on estimations of forecast profitability. Settlement dates are variable and range from
2022 to 2027.
Total loans and borrowings1
Less: cash and cash equivalents
Net cash excluding lease liabilities
Total equity
Total capital
1 Total loans and borrowings is made up of current obligations (£22.5m) and non-current obligations (£Nil).
2022
£’000
22,478
(58,216)
(35,738)
61,459
2021
£’000
12,810
(26,831)
(14,021)
116,881
25,721
102,860
165
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Corporate governance
Financial statements
19 Financial instruments continued
Capital risk management continued
Net cash excluding lease liabilities
Share purchase obligation
Contingent consideration
Other contingent liability
Deferred consideration
Net debt plus earn-out liabilities
The movement in net debt/(cash) is as follows:
Total loans and borrowings
Less: cash and cash equivalents
At
1 February
2020
£’000
38,007
(28,661)
Cash
(inflows)/
outflows
from
operations
£’000
(24,912)
(22,026)
Net debt/(cash) excluding lease liabilities
9,346
(46,938)
Lease liabilities
Net debt/(cash) including lease liabilities
54,233
63,579
(12,647)
(59,585)
Acquisitions
and
contingent
consideration
£’000
—
23,636
23,636
3,823
27,459
Foreign
exchange,
fair value
and
non-cash
movements
£’000
(285)
220
(65)
(2,640)
(2,705)
2022
£’000
(35,738)
11,252
161,541
5,202
133
142,390
Foreign
exchange,
fair value
and
non-cash
movements
£’000
95
(7)
88
1,524
1,612
2021
£’000
(14,021)
6,508
45,894
—
1,262
39,643
At
1 February
2022
£’000
22,478
(58,216)
(35,738)
32,983
(2,755)
At
1 February
2021
£’000
12,810
(26,831)
Cash
(inflows)/
outflows
from
operations
£’000
6,073
(56,020)
(14,021)
(49,947)
Acquisitions
and
contingent
consideration
£’000
3,500
24,642
28,142
683
42,769
28,748
(11,993)
(61,940)
28,825
Externally imposed capital requirement
Under the terms of the Group’s banking covenants the Group must meet certain criteria based on the ratio of net debt to adjusted EBITDA; net debt plus earn-out
liabilities (note 17) to adjusted EBITDA; and adjusted net finance charges to adjusted EBITDA. The Group maintains long-term cash forecasts which incorporate forecast
covenant positions as part of the Group’s capital and cash management. There have been no breaches of the banking covenants in the current or prior period.
Fair values of financial assets and liabilities
Fair value is the amount at which a financial instrument can be exchanged in an arm’s-length transaction between informed and willing parties, other than a forced
or liquidation sale. The book value of the Group’s financial assets and liabilities equals the fair value of such items as at 31 January 2022, with the exception of lease
liabilities. The book value of obligations under finance leases is £32,983,000 (2021: £42,769,000) and the fair value is £34,881,000 (2021: £45,702,000). The fair value
of obligations under finance leases is estimated by discounting future cash flows to net present value and is Level 3 within the fair value hierarchy.
166
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Corporate governance
Financial statements
19 Financial instruments continued
Financial instruments – detailed disclosures
Financial instruments recognised in the balance sheet
The IFRS 9 categories of financial assets and liabilities included in the balance sheet and the line in which they are included are as follows:
At 31 January 2022
Non-current financial assets
Investment in equity instruments
Other receivables
Current financial assets
Cash and cash equivalents
Trade and other receivables
Current financial liabilities
Trade and other payables
Lease liabilities
Provisions
Contingent consideration¹
Share purchase obligation¹
Deferred consideration¹
Non-current financial liabilities
Loans and borrowings
Lease liabilities
Provisions
Other payables
Contingent consideration¹
Other contingent liability¹
Share purchase obligation¹
1 See note 17.
At fair value
through profit
or loss –
mandatorily
measured
£’000
—
—
—
—
—
—
—
—
—
36,496
1,535
—
38,031
—
—
—
—
125,045
5,202
9,717
139,964
FVTOCI
£’000
8,483
—
8,483
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Financial
liabilities at
amortised
cost
£’000
Financial
assets at
amortised
cost
£’000
—
—
—
—
—
—
65,622
10,698
7,778
—
—
133
84,231
22,478
22,285
14,733
401
—
—
—
59,897
Total
£’000
8,483
821
9,304
—
821
821
58,216
114,291
58,216
114,291
172,507
172,507
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
65,622
10,698
7,778
36,496
1,535
133
122,262
22,478
22,285
14,733
401
125,045
5,202
9,717
199,861
167
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Corporate governance
Financial statements
19 Financial instruments continued
Financial instruments – detailed disclosures continued
Financial instruments recognised in the balance sheet continued
The Group has no fair value Level 1 instruments (2021: none). The investments in equity instruments are Level 2 instruments. Level 2 fair value measurements are
those derived from inputs other than quoted prices, such as historical quoted prices.
All other instruments at fair value through profit or loss were Level 3 instruments as per the table above in the current year and were as per the table below in the
prior year. Level 3 financial instruments are valued using the discounted cash flow method to capture the present value of the expected future economic benefits that
will flow out of the Group arising from the contingent consideration or share purchase obligation. Unrealised gains or losses are recognised within finance income/
expense; see notes 6 and 7. They are not based on observable market data.
At 31 January 2021
Non-current financial assets
Investment in equity instruments
Other receivables
Current financial assets
Cash and cash equivalents
Trade and other receivables
Current financial liabilities
Loans and borrowings
Trade and other payables
Lease liabilities
Provisions
Contingent consideration¹
Share purchase obligation¹
Deferred consideration¹
168
At fair value
through profit
or loss –
mandatorily
measured
£’000
—
—
—
—
—
—
—
—
—
—
1,206
9,700
—
10,906
Financial
liabilities at
amortised
cost
£’000
—
—
—
—
—
—
5,000
36,022
10,957
5,656
—
—
1,262
58,897
FVTOCI
£’000
955
—
955
—
—
—
—
—
—
—
—
—
—
—
Financial
assets at
amortised
cost
£’000
—
860
860
26,831
73,384
100,215
—
—
—
—
—
—
—
—
Total
£’000
955
860
1,815
26,831
73,384
100,215
5,000
36,022
10,957
5,656
1,206
9,700
1,262
69,803
Notes to the accounts continuedfor the year ended 31 January 2022Next Fifteen Communications Group plc | Annual Report 2022 Strategic report
Corporate governance
Financial statements
19 Financial instruments continued
Financial instruments – detailed disclosures continued
Financial instruments recognised in the balance sheet continued
At 31 January 2021
Non-current financial liabilities
Loans and borrowings
Lease liabilities
Provisions
Other payables
Contingent consideration¹
Share purchase obligation¹
1 See note 17.
Interest-bearing loans and borrowings
The table below provides a summary of the Group’s loans and borrowing as at 31 January 2022:
Current
Variable rate bank loan
Non-current
Variable rate bank loan
At fair value
through profit
or loss –
mandatorily
measured
£’000
—
—
—
—
36,194
5,302
41,496
Financial
liabilities at
amortised
cost
£’000
Financial
assets at
amortised
cost
£’000
FVTOCI
£’000
—
—
—
—
—
—
—
7,810
31,812
7,140
1,576
—
—
48,338
—
—
—
—
—
—
—
Total
£’000
7,810
31,812
7,140
1,576
36,194
5,302
89,834
Effective interest rate
2022
£’000
2021
£’000
HSBC Bank base rate + 1.50%
—
5,000
HSBC Bank base rate + 1.50%
22,478
7,810
The Group is able to draw down in both GBP and USD under the revolving credit facility (‘RCF’). The fair value of the borrowings not denominated in GBP as at
31 January 2022 is US$11,000,000 (£8,198,000) (2021: US$11,000,000 (£8,013,000)). As a result of ineffectiveness, £Nil was transferred during the period from the
hedging reserve to the income statement (2021: £Nil).
169
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20 Share capital
Called-up share capital
Ordinary Shares of 2.5p each:
Authorised, allotted, called-up and fully paid
At start of year
Issued in the year in respect of contingent and deferred consideration and share purchase obligations
Issued in the year in satisfaction of vested LTIPs (note 21)
Issued in the year in respect of growth share sales
At end of year
2022
Number
2022
Nominal Value
£’000
2021
Number
2021
Nominal Value
£’000
90,982,974
2,274
86,552,648
2,163
964,776
113,425
749,970
24
3
19
1,661,610
187,001
2,581,715
42
5
64
92,811,145
2,320
90,982,974
2,274
Fully paid Ordinary Shares carry one vote per share and the right to dividends. No amounts were received for the newly issued shares in the year.
21 Share-based payments
The Group uses a Black-Scholes model to calculate the fair value of options on grant date for new issues and modifications for LTIPs. At each period end the
cumulative expense is adjusted to take into account any changes in the estimate of the likely number of shares expected to vest. Details of the relevant LTIP
schemes are given in the following note. All the share-based payment plans are subject to non-market performance conditions such as adjusted earnings per share
targets and continued employment. All schemes are equity-settled. The Group uses a weighted average probability model to value the brand appreciation rights as
permitted under IFRS 2.
In the period ended 31 January 2022 the Group recognised a charge of £24,628,000 (2021: £11,628,000) made up of £3,637,000 (2021: £1,402,000) in respect of
employment-related LTIP shares, share options and restricted stock units; £582,000 (2021: £2,185,000) given in respect of the grant of brand equity interests of
30% in Brandwidth Marketing Limited and 12% in Publitek Limited (2021: 8.5% in M Booth & Associates LLC, 9.5% in ODD London Limited, 15% in Savanta Group
Limited and 20% in Twogether Creative Limited); £5,242,000 (2021: £Nil) given in respect of the additional new incentive scheme for the sellers of Activate Marketing
Services LLC, as well as £15,167,000 (2021: £8,041,000) for employment-linked acquisition-related payments.
170
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Financial statements
21 Share-based payments continued
Movement on options and performance shares granted (represented in Ordinary Shares):
Long-Term Incentive Plan – performance shares
Outstanding
31 January
2021
Number
(’000)
1,078
Granted
Number
(’000)
377
Lapsed
Number
(’000)
(58)
Exercised
Number
(’000)
Outstanding
31 January
2022
Number
(’000)
Exercisable
31 January
2022
Number
(’000)
(113)
1,284
242
The fair value of performance shares granted in the period calculated using a Black-Scholes model was as follows:
Fair value of performance shares granted under the LTIP (p)
Share price at date of grant (p)
Risk-free rate (%)
Expected life (years)
Expected volatility (%)
Dividend yield (%)
May
2021
757
848
1.44
3
46.9
0.83
September
2021
September
2021
1,018
1,120
1.44
1
48.0
0.63
1,006
1,120
1.44
3
48.0
0.63
Expected volatility was determined by calculating the historical volatility of the Company’s share price, over a period equal to the expected life of the options.
Performance shares issued by the Company under the Next Fifteen Communications Group plc Long-Term Incentive Plan are granted at a nil exercise price. The
weighted average share price at the date of exercise for share options exercised in the year was 782p (2021: 365p). For share options outstanding at the end of the
year the weighted average remaining contractual life is one year (2021: one year).
171
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22 Performance shares
The Company has issued options over its shares to employees that remain outstanding as follows:
Performance shares
Next Fifteen Communications Group plc
Long-Term Incentive Plan
Number
of shares
Performance
period start date
Performance
period end date
Performance
share grant date
47,593
80,798
194,762
74,564
508,554
342,303
1 February 2017
1 February 2018
1 February 2019
1 February 2019
1 February 2020
1 February 2021
31 January 2022
31 January 2023
31 January 2022
31 January 2024
31 January 2023
31 January 2024
2 May 2017
10 April 2018
25 April 2019
25 April 2019
30 July 2020
6 May 2021
32,000
28 September 2021
28 September 2022
28 September 2021
3,000
28 September 2021
28 September 2024
28 September 2021
1,283,574
During the period the Company issued 113,425 shares to satisfy the vesting under the Next 15 LTIPs. These were initially subscribed for by the ESOP. No shares are
now held in treasury (see note 23). The Company’s current Long-Term Incentive Plan is the 2015 LTIP, which was approved by shareholders at the Company’s 2015
AGM. Under the 2015 LTIP performance shares or share options may be awarded. The performance is measured over a period of either three or five consecutive
financial years of the Group, commencing with the financial year in which the award was granted. The Committee decided that for the FY22 awards, initially, there
will be two performance conditions:
(a) an earnings per share (‘EPS’) target, which will determine 67% of the total vesting. Diluted adjusted EPS growth is calculated from the information published in the
Group’s accounts and is based on the adjusted EPS measure. For certain participants, if the growth in the Company’s earnings per share in the relevant year is
at least 38%, 100% of 67% of the total award will vest. If the compound growth in EPS in the relevant year is between 20% and 38% then between 25% and 100%
of 67% of the total award will vest on a straight-line basis. For certain other participants the targets are different, whereby if the growth in the Company’s earnings
per share in the relevant year is at least 50%, 100% of 67% of the total award will vest. If the compound growth in EPS in the relevant year is between 20% and
50% then between 25% and 100% of 67% of the total award will vest on a straight-line basis. For all participants, if EPS does not grow at an average of 20% or
more, the full award will lapse; and
(b) a key performance indicator (‘KPI’) target, which will determine 33% of the total vesting. Each participant will have a number of KPIs relating to his or her role.
The Remuneration Committee will determine the extent to which the KPIs have been met in each relevant year. 100% of 33% of the total award will vest if the KPIs
have been met in full. A smaller percentage of 33% of the total award will vest if the Committee determines that the KPIs have been substantially met.
172
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Corporate governance
Financial statements
23 Investment in own shares
Employee share ownership plan (‘ESOP’)
The purpose of the ESOP is to enable the Company to offer participation in the ownership of its shares to Group employees, principally as a reward and incentive
scheme. Arrangements for the distribution of benefits to employees, which may be the ownership of shares in the Company or the granting of options over shares
in the Company held by the ESOP, are made at the ESOP’s discretion in such manner as the ESOP considers appropriate. Administration costs of the ESOP are
accounted for in the profit and loss account of the Company as they are incurred.
At 31 January 2022 the ESOP held Nil (2021: Nil) Ordinary Shares in the Company.
The ESOP subscribed for 113,425 newly issued shares which were allotted and immediately disposed of in order to satisfy LTIP vesting of 113,425 shares for £Nil
consideration (2021: 187,001 shares for £Nil consideration). Nil shares were subscribed for, allotted and immediately disposed of in respect of satisfaction of a
restricted stock arrangement for £Nil proceeds (2021: Nil shares for £Nil proceeds).
24 Other reserves
At 31 January 2020
Purchase and take on of shares
Movement due to ESOP LTIP and growth shares exercises
At 31 January 2021
Purchase and take on of shares
Movement due to ESOP LTIP and growth shares exercises
At 31 January 2022
Merger
reserve
£’000
3,075
—
—
3,075
—
—
3,075
ESOP
reserve¹
£’000
—
(5)
5
—
(3)
3
—
Hedging
reserve
£’000
(2,467)
—
—
(2,467)
—
—
(2,467)
Total
other
reserves
£’000
608
(5)
5
608
(3)
3
608
1 The ESOP Trust’s investment in the Group’s shares is deducted from equity in the Consolidated Balance Sheet as if they were treasury shares and presented in the ESOP reserve.
173
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Financial statements
25 Commitments and contingent liabilities
Operating leases – Group as lessee
As a result of the transition to IFRS 16, leases previously classified as operating leases have now been recognised on balance sheet, except for the short-term leases
and leases of low-value assets which are included below.
As at 31 January 2022, the Group’s total future minimum lease rentals are as follows:
In respect of operating leases which will be paid in the following periods:
Within one year
In two to five years
After five years
26 Acquisitions and equity transactions
During the year the following material transactions took place:
1.
the acquisition of UK-based Shopper Media Group Limited; and
2. the acquisition of US-based Blueshirt Capital Advisors LLC.
More details on each transaction are provided below.
2022
Land and
buildings
£’000
29
—
—
29
Other
£’000
14
20
—
34
2021
Land and
buildings
£’000
10
—
—
10
Other
£’000
69
56
—
125
On 9 April 2021, Next 15 purchased the entire share capital of Shopper Media Group Limited (‘SMG’) and its subsidiaries Capture Marketing Limited, Lobster Agency
Limited, and Threefold Agency Limited. SMG specialises in commerce marketing activation, connecting retailers and brands with shoppers at the point of purchase
both online and in-store.
Goodwill of £8,766,000 arises from anticipated profitability and future operating synergies from the acquisition.
174
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Corporate governance
Financial statements
26 Acquisitions and equity transactions continued
1. Shopper Media Group Limited (‘SMG’)
In the post-acquisition period SMG has contributed £12,524,000 to net revenue and £4,572,000 to profit before tax. If acquired on 1 February 2021 SMG would have
contributed net revenue of £15,029,000 and profit before tax of £5,486,000 to the Group results. The following table sets out the estimated book values of the
identifiable assets acquired and their fair value to the Group.
Non-current assets
Acquired intangible assets
Property, plant and equipment
Current assets
Cash and cash equivalents
Other current assets1
Current liabilities
Deferred tax liability
Net assets acquired
Goodwill
Consideration
Initial consideration settled in cash2
Initial consideration settled in Ordinary Shares of the Parent
Total discounted contingent consideration
1 The fair value of receivables acquired is £8,947,000.
2 This includes initial consideration paid for the business and cash paid for working capital.
Book value
at acquisition
£’000
Fair value
adjustments
£’000
Fair value
to the Group
£’000
—
217
10,106
11,819
(13,371)
—
8,771
13,382
—
—
—
—
(2,963)
10,419
13,382
217
10,106
11,819
(13,371)
(2,963)
19,190
8,766
27,956
18,914
3,916
5,126
27,956
None of the goodwill is expected to be deductible for tax purposes. Deal costs (included in other operating costs) amount to £250,000. Further consideration is
payable based on the profit before interest and tax of SMG over the next four years.
175
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Financial statements
26 Acquisitions and equity transactions continued
2. Blueshirt Capital Advisors LLC
On 1 May 2021, Next 15 acquired a controlling interest in Blueshirt Capital Advisors LLC (‘BCA’), the tech focused capital markets advisory business. Next 15 initially
owned 20% of BCA and as part of the shareholders’ agreement Next 15 has exercised the option to increase its shareholding from 20% to 51%. Next 15 has the option
to increase its shareholding in BCA to 80% in two years’ time.
Goodwill of £2,406,000 ($3,331,000) arises from anticipated profitability and future operating synergies from the acquisition.
In the post-acquisition period BCA has contributed £8,671,000 to net revenue and £4,604,000 to profit before tax. If acquired on 1 February 2021 BCA would have
contributed net revenue of £11,561,000 and profit before tax of £6,139,000 to the Group results. The following table sets out the estimated book values of the
identifiable assets acquired and their fair value to the Group. The due diligence over the identifiable assets acquired is still in progress; therefore, the fair value of
the assets used below are provisional.
Non-current assets
Acquired intangible assets
Property, plant and equipment
Current assets
Cash and cash equivalents
Other current assets1
Current liabilities
Net assets acquired
Goodwill2
Non-controlling interests
Investment in equity accounted associate
Consideration
Consideration settled in cash2
1 The fair value of receivables acquired is £1,220,000.
2 Goodwill is denominated in USD and therefore the exchange rate at the point of acquisition has been used.
None of the goodwill is expected to be deductible for tax purposes.
176
Book value
at acquisition
£’000
Fair value
adjustments
£’000
Fair value
to the Group
£’000
—
3
677
1,262
(786)
1,156
2,122
—
—
—
—
2,122
2,122
3
677
1,262
(786)
3,278
2,406
(566)
(1,168)
3,950
3,950
Notes to the accounts continuedfor the year ended 31 January 2022Next Fifteen Communications Group plc | Annual Report 2022
Strategic report
Corporate governance
Financial statements
26 Acquisitions and equity transactions continued
The following table summarises the net cash outflow and value of shares issued on acquisition of subsidiaries during the year ending 31 January 2022:
SMG
BCA
Other1
1 Other represents amounts in relation to a number of acquisitions, none of which is individually significant to the Group.
Consideration
settled in cash
£’000
Cash and cash
equivalent
balances
acquired
£’000
18,914
3,950
2,790
(10,106)
(677)
(417)
Total
net cash
outflow
£’000
8,808
3,273
2,373
Value of
shares issued
£’000
3,916
—
—
25,654
(11,200)
14,454
3,916
177
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Financial statements
27A Subsidiaries
The Group’s subsidiaries as at 31 January 2022 are listed below.
Legal Entity
Activate Marketing Services LLC
Agent3 Limited
Agent3 LLC
Agent3 Pty Ltd
Archetype Agency AB
Archetype Agency Beijing Limited
Archetype Agency BV
Archetype Agency GmbH
Archetype Agency Limited
Archetype Agency Limited
Archetype Agency LLC
Archetype Agency Private Ltd
Archetype Agency Pte Ltd
Archetype Agency Pty Ltd
Archetype Agency S.L.
Archetype Agency S.R.L.
Archetype Agency SARL
Archetype Agency SDN. BHD.
August.One Communications
International Limited
Berne (UK) Limited
Bite Communications Group Limited
Bite Communications Limited
Blueshirt Capital Advisors LLC
Country of
Incorporation
USA
United Kingdom
USA
Australia
Sweden
China
Netherlands
Germany
Hong Kong
United Kingdom
USA
India
Singapore
Australia
Spain
Italy
France
Malaysia
United Kingdom
United Kingdom
United Kingdom
United Kingdom
USA
Directly
owned
by the
Company
Percentage
voting rights
held by Group
✓
✓
✓
✓
100
56.89
56.89
56.89
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
56.89
100
100
51
Address
CT Corp System, 818 West Seventh Street, Suite 930, Los Angeles, CA 90017
75 Bermondsey Street, London, England, SE1 3XF
CT Corp System, 818 West Seventh Street, Suite 930, Los Angeles, CA 90017
GRANT THORNTON AUSTRALIA, Level 17, 383 Kent Street Sydney, Australia
1, Ferkens gränd, 111 30 Stockholm, Sweden
Room 1703, 1705, 14F, Tower 2, Guanghuala Soho, No.22 Guanghua Road, Chaoyang
District, Beijing, 100020, China
Silodam 1D, 1013AL, Amsterdam, Netherlands
Nymphenburger Str. 168 80634, Munich, Germany
Rooms 1102 &1103 11th Floor, 299QRC, Nos. 287-299 Queens Road Central, Sheung
Wan, Hong Kong
75 Bermondsey Street, London, England, SE1 3XF
The Corporation Trust Company, 1209 Orange Street – Corporation Trust Center, New
Castle County, Wilmington, DE 19801
Plot No.7, Second Floor, TDI Centre, Jasola, New Delhi, 110025, India
36 Prinsep Street, #05-01/02, 188648, Singapore
GRANT THORNTON AUSTRALIA, Level 17, 383 Kent Street Sydney, Australia
Calle Gran Vía, 27 Madrid Spain
Piazzale Principessa, Clotilde 8, CAP 20121, Milan, Italy
4-6 boulevard Montmartre 75009 Paris France
BO3-B-12-1, Level 12, Menara 3A, Kuala Lumpur, Malaysia
75 Bermondsey Street, London, England, SE1 3XF
75 Bermondsey Street, London, England, SE1 3XF
75 Bermondsey Street, London, England, SE1 3XF
75 Bermondsey Street, London, England, SE1 3XF
CT Corporation System, 330 North Brand Boulevard, Glendale, CA 91203-2336
178
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27A Subsidiaries continued
Legal Entity
Country of
Incorporation
Directly
owned
by the
Company
Brandwidth Group Limited
United Kingdom
Brandwidth LLC
Brandwidth Marketing Limited
BYND Limited
BYND LLC
Capture Marketing Limited
CommunicateResearch Limited
Conversion Rate Experts Limited
ELVIS Communications Limited
Encore Digital Media Limited
HPI Research Limited
Hypertext Communications Private Limited
Hypertext Pte Ltd
IF.Agency LLC
Lobster Agency Limited
M.Booth & Associates LLC
M.Booth Health LLC
Mach49 LLC
Mach49 Limited
Mach49 Singapore Pte Ltd
Market Making Limited
Marlin PR Limited
Narration LLC
USA
United Kingdom
United Kingdom
USA
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
India
Singapore
USA
United Kingdom
USA
USA
USA
United Kingdom
Singapore
United Kingdom
United Kingdom
USA
✓
✓
✓
✓
✓
✓
✓
Percentage
voting rights
held by Group
100
75 Bermondsey Street, London, England, SE1 3XF
Address
100 The Corporation Trust Company, 1209 Orange Street – Corporation Trust Center, New
Castle County, Wilmington, DE 19801
100
100
100
100
100
100
100
100
100
100
100
100
100
75 Bermondsey Street, London, England, SE1 3XF
75 Bermondsey Street, London, England, SE1 3XF
CT Corp System, 818 West Seventh Street, Suite 930, Los Angeles, CA 90017
75 Bermondsey Street, London, England, SE1 3XF
75 Bermondsey Street, London, England, SE1 3XF
75 Bermondsey Street, London, England, SE1 3XF
75 Bermondsey Street, London, England, SE1 3XF
3 Melville Street, Edinburgh, Scotland, EH3 7PH
75 Bermondsey Street, London, England, SE1 3XF
Plot No.7, Second Floor, TDI Centre, Jasola, New Delhi, 110025, India
600 North Bridge Road, #23-01 Parkview Square, Singapore, 188778, Singapore
The Corporation Trust Company, 1209 Orange Street – Corporation Trust Center,
New Castle County, Wilmington, DE 19801
75 Bermondsey Street, London, England, SE1 3XF
100 The Corporation Trust Company, 1209 Orange Street – Corporation Trust Center, New
Castle County, Wilmington, DE 19801
100 The Corporation Trust Company, 1209 Orange Street – Corporation Trust Center, New
Castle County, Wilmington, DE 19801
100
100
100
100
100
CT Corporation System, 330 North Brand Boulevard, Glendale, CA 91203-2336
75 Bermondsey Street, London, England, SE1 3XF
22 Malacca Street #04-03 RB Capital Building Singapore 048980
75 Bermondsey Street, London, England, SE1 3XF
75 Bermondsey Street, London, England, SE1 3XF
100 The Corporation Trust Company, 1209 Orange Street – Corporation Trust Center, New
Castle County, Wilmington, DE 19801
179
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Financial statements
27A Subsidiaries continued
Legal Entity
Nectar Communications LLC
Next Fifteen Communications
Corporation
Next Fifteen HoldCo1 Limited
ODD Communications Limited
ODD London Limited
OpinionPanel Limited
Outcast London Limited
Palladium Group Limited
Planning-inc Limited
Publitek GmbH
Publitek Limited
Publitek LLC
Savanta Analytics Limited
Savanta Analytics Private Limited
Savanta Group Limited
Savanta Group LLC
Shopper Media Group Limited
Technical Publicity Limited
Text 100 (Proprietary) Limited
Country of
Incorporation
USA
USA
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
United Kingdom
Germany
United Kingdom
USA
Canada
India
United Kingdom
USA
United Kingdom
United Kingdom
South Africa
Text 100 International Limited
United Kingdom
Text 100 Pty Ltd
The Blueshirt Group LLC
The Craft Consulting Limited
The Lexis Agency Limited
Australia
USA
United Kingdom
United Kingdom
180
Directly
owned
by the
Company
Percentage
voting rights
held by Group
Address
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
100
CT Corporation System, 330 North Brand Boulevard, Glendale, CA 91203-2336
100 The Corporation Trust Company, 1209 Orange Street – Corporation Trust Center, New
Castle County, Wilmington, DE 19801
100
100
100
100
100
100
100
100
100
100
100
3 Melville Street, Edinburgh, Scotland, EH3 7PH
75 Bermondsey Street, London, England, SE1 3XF
75 Bermondsey Street, London, England, SE1 3XF
75 Bermondsey Street, London, England, SE1 3XF
75 Bermondsey Street, London, England, SE1 3XF
75 Bermondsey Street, London, England, SE1 3XF
75 Bermondsey Street, London, England, SE1 3XF
Nymphenburger Straße 168, 80634, Munchen, Germany
75 Bermondsey Street, London, England, SE1 3XF
CT Corporation System, 330 North Brand Boulevard, Glendale, CA 91203-2336
3250 Bloor Street West, East Tower, Suite 600 Toronto, ON, M8X 2X9, Canada
99.98
C-1101 Antriksh Golf View 2, Sector-78, Noida, Gautam Buddha Nagar, Uttar Pradesh,
201301, India
100
100
100
100
100
100
100
89.3
56.89
100
CT Corporation System, 330 North Brand Boulevard, Glendale, CA 91203-2336
3 Melville Street, Edinburgh, Scotland, EH3 7PH
75 Bermondsey Street, London, England, SE1 3XF
75 Bermondsey Street, London, England, SE1 3XF
13 Wellington Road, Parktown, 2193, Private Bag X60500, Houghton, Johannesburg,
2041, South Africa
75 Bermondsey Street, London, England, SE1 3XF
CT Corporation System, 330 North Brand Boulevard, Glendale, CA 91203-2336
Level 17, 383 Kent Street, Sydney NSW 2000, Australia
75 Bermondsey Street, London, England, SE1 3XF
75 Bermondsey Street, London, England, SE1 3XF
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Financial statements
27A Subsidiaries continued
Legal Entity
The Outcast Agency LLC
Threefold Agency Limited
To This Day Limited
Twogether Creative Limited
Twogether Creative LLC
Velocity Partners Limited
Velocity Partners US Inc
Vox Public Relations India Private Ltd
Country of
Incorporation
USA
United Kingdom
United Kingdom
United Kingdom
USA
United Kingdom
USA
India
Directly
owned
by the
Company
Percentage
voting rights
held by Group
✓
✓
100
100
100
100
100
100
100
100
CT Corporation System, 330 North Brand Boulevard, Glendale, CA 91203-2336
Address
75 Bermondsey Street, London, England, SE1 3XF
75 Bermondsey Street, London, England, SE1 3XF
75 Bermondsey Street, London, England, SE1 3XF
CT Corporation System, 330 North Brand Boulevard, Glendale, CA 91203-2336
75 Bermondsey Street, London, England, SE1 3XF
CT Corporation System, 28 Liberty Street, New York, NY 10005
Plot No.7, Second Floor, TDI Centre, Jasola, New Delhi, 110025, India
All shares held are a class of Ordinary Shares with the exception of the US LLCs where LLC units are held.
The principal activity of the subsidiary undertakings is digital communications consultancy specialising predominantly in the technology and consumer sectors.
All subsidiary undertakings operate in the country in which they have been incorporated. All subsidiary undertakings listed are included in the consolidated results.
None of the Group’s subsidiaries have a non-controlling interest that is individually material to the Group. As a result the disclosure requirements for subsidiaries with
a material non-controlling interest under IFRS 12 are not considered necessary.
The following companies are exempt from the requirements relating to the audit of individual accounts for the year/period ended 31 January 2022 by virtue of section
479A of the Companies Act 2006: Agent3 Limited (08331678), Archetype Agency Limited (03329933), August.One Communications International Limited (03224261),
Berne (UK) Limited (06577006), Bite Communications Group Limited (04131879), Bite Communications Limited (03023521), Brandwidth Group Limited (09599858),
Brandwidth Marketing Limited (03860505), BYND Limited (07123452), Capture Marketing Limited (06667381), Communicate Research Limited (04810991), Conversion
Rate Experts Limited (05895439), ELVIS Communications Limited (04768344), Encore Digital Media Limited (SC449653), HPI Research Limited (05816194), Lobster
Agency Limited (10331017), Mach49 Limited (12281031), Market Making Limited (07913465), Marlin PR Limited (06480768), Next Fifteen Holdco1 Limited (SC364548),
ODD Communications Limited (07861569), ODD London Limited (05107477), OpinionPanel Limited (05013113), Outcast London Limited (07831770), Palladium Group
Limited (09460746), Planning-inc Limited (04118854), Publitek Limited (05287915), Savanta Group Limited (SC281352), Shopper Media Group Limited (10366845),
Technical Publicity Limited (02384040), Text 100 International Limited (02433862), The Craft Consulting Limited (09439145), The Lexis Agency Limited (04404752),
Threefold Agency Limited (10366888), To This Day Limited (10479051), Twogether Creative Limited (07824276) and Velocity Partners Limited (04128107).
181
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Financial statements
27B Associates
The Group’s associates and investments as at 31 January 2022 are listed below:
Legal Entity
Country of Incorporation
Fearless Labs Limited
United Kingdom
Phrasee Limited
StartPulsing Limited
United Kingdom
United Kingdom
* The interest in Phrasee Limited was divested on 14 March 2022.
Directly
owned by
the Company
Percentage
owned by
the group
Address
✓
✓
✓
20.98%
75 Bermondsey Street, London, England, United Kingdom, SE1 3XF
10% *
10%
82 St John Street, London, United Kingdom, EC1M 4JN
1st Floor 143-149 Fenchurch Street, London, England, EC3M 6BL
28 Related-party transactions
The ultimate controlling party of the Group is Next Fifteen Communications Group plc (incorporated and registered in England and Wales). The Company has a
related-party relationship with its subsidiaries (note 27) and with its Directors. Transactions between the Company and its subsidiaries have been eliminated on
consolidation and are not disclosed in this note. During the period to 31 January 2022 there were the following related-party transactions:
Brand
Blueshirt
Services
Consultancy
Blueshirt Capital Advisors was an associate of
Next 15 for part of the year
Related party
Next Fifteen Communications Group plc
Consultancy
Fearless Labs is an associate of Next 15
Income
impact
2022
£’000
233
47
Asset
at year end
2022
£’000
—
—
Income
impact
2021
£’000
823
—
Asset
at year end
2021
£’000
771
—
Dividends were paid to Directors of the Company during the year in proportion to their shareholdings in the Company. Tim Dyson, Peter Harris, Penny Ladkin-Brand,
Helen Hunter and Robyn Perriss received dividends of £535,460, £40,930, £9,023, £Nil and £Nil respectively (2021: £Nil, £Nil, £Nil, £Nil and £Nil). Key management
personnel compensation is disclosed in note 3.
182
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Financial statements
29 Operating lease rental receivables
As at 31 January, the Group’s total future minimum lease payments receivable under non-cancellable leases are as follows:
In respect of operating leases which will be receivable in the period:
Within one year
In two to five years
2022
£’000
245
—
245
2021
£’000
251
—
251
30 Events after the balance sheet date
Engine Acquisition Limited
On 8 March 2022 Next 15 acquired Engine Acquisition Limited (“Engine UK”). Engine UK is a broad-based digital transformation, communications and creative
business with approximately 600 staff and 300 UK and international clients. The acquisition of Engine UK for an enterprise value of £77.5m, with £61.7m paid on
completion in cash.
The Acquisition was funded from the Company’s debt facilities and the proceeds of a placing of new ordinary shares in the Company. A total of 4,505,000 new
ordinary shares in the capital of the Company of 2.5p each have been placed by Numis Securities Limited and Joh. Berenberg, Gossler & Co. KG at a price of 1,110p
per Placing Share, raising gross proceeds of approximately £50m (before expenses). We expect to recognise goodwill on this acquisition due to the anticipated
profitability and operating synergies. Due to the recent timing of the acquisition, the IFRS 3 acquisition accounting has not yet been completed.
Significant new contract win
In February 2022, Next 15 announced that its wholly owned subsidiary Mach49, the growth incubator for global businesses, has entered into a five-year strategic
alliance with a global technology and digital company, currently operating in stealth mode. Under the agreement, they will be tasked with helping create and launch
a series of innovation-led, technology-driven, sustainable ventures across the world.
Over the term of the contract, total fees including third party expenses are expected to be in excess of $400 million, with revenues in the first year to be approximately
$50m. This has materially increased the earnout payable to Mach49’s equity holders and the discounted increase in the potential liability has been included in our
statutory profit and loss account as a finance expense.
183
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Strategic report
Corporate governance
Financial statements
Company balance sheet
as at 31 January 2022 and 31 January 2021
Non-current assets
Intangible assets
Tangible assets
Right-of-use assets
Investments in subsidiaries
Investment in financial assets
Deferred tax assets
Current assets
Trade and other receivables
Current tax asset
Current liabilities
Borrowings
Trade and other payables
Lease liabilities
Provisions
Contingent consideration
Deferred consideration
Net current (liabilities)/assets
Total assets less current liabilities
Non-current liabilities
Borrowings
Other financial liabilities
Lease liabilities
Provisions
Net assets
184
Note
2
3
4
5
10
6
7
4
9
8
8
8
4
9
2022
£’000
—
1,387
4,284
213,176
8,146
109
35,260
2,259
—
34,179
1,691
7,006
9,836
—
22,437
10,618
3,116
13,235
2022
£’000
227,102
37,519
52,712
(15,193)
211,909
49,406
162,503
2021
£’000
313
1,310
5,663
183,925
834
892
36,421
2,259
5,000
23,270
1,973
4,636
1,596
1,262
7,810
8,349
5,478
6,076
2021
£’000
192,937
38,680
(37,737)
943
193,880
(27,713)
166,167
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Strategic report
Corporate governance
Financial statements
Company balance sheet continued
as at 31 January 2022 and 31 January 2021
Equity
Share capital
Share premium account
Merger reserve
Share-based payment reserve
Other reserve
Retained earnings
Note
11
2022
£’000
2,320
104,800
3,075
11,029
26,460
14,819
2022
£’000
2021
£’000
2,274
92,408
3,075
9,008
26,460
32,942
2021
£’000
Equity attributable to owners of the Company
162,503
166,167
The following notes are an integral part of this Company Balance Sheet.
The Company reported a loss for the financial year ended 31 January 2022 of £15,603,000 (2021: profit of £3,175,000).
These financial statements were approved and authorised for issue by the Board on 4 April 2022.
Peter Harris
Chief Financial Officer
Company number 01579589
185
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Corporate governance
Financial statements
Company statement of changes in equity
for the year ended 31 January 2022 and 31 January 2021
At 1 February 2020
Profit for the period
Fair value loss on investments in equity instruments
designated as FVTOCI
Shares issued in satisfaction of vested share options and
performance shares
Shares issued on acquisition
Movement in relation to share-based payments
Movement due to ESOP share purchases
Movement due to ESOP share option exercises
At 1 February 2021
Loss for the period
Fair value gain on investments in equity instruments
designated as FVTOCI
Dividends
Shares issued in satisfaction of vested share options and
performance shares
Shares issued on acquisition
Movement in relation to share-based payments
Movement due to ESOP share purchases
Movement due to ESOP share option exercises
Share
capital
£’000
2,163
—
—
69
42
—
—
—
Share
premium
account
£’000
76,019
—
—
10,162
6,227
—
—
—
Merger
reserve
£’000
3,075
—
—
—
—
—
—
—
Share-
based
payment
reserve
£’000
8,136
—
—
(5)
—
877
—
—
2,274
92,408
3,075
9,008
—
—
—
22
24
—
—
—
—
—
—
5,385
7,007
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(3)
—
2,024
—
—
At 31 January 2022
2,320
104,800
3,075
11,029
1 Other reserves relates to the hedging reserve.
The following notes are an integral part of this Company Statement of Changes in Equity.
ESOP
reserve
£’000
—
—
—
—
—
—
(5)
5
—
—
—
—
—
—
—
(3)
3
—
Other
reserve 1
£’000
26,460
—
—
—
—
—
—
—
26,460
—
—
—
—
—
—
—
—
Retained
earnings
£’000
29,771
3,175
(4)
—
—
—
—
—
32,942
(15,603)
7,312
(9,832)
—
—
—
—
—
Total
£’000
145,624
3,175
(4)
10,226
6,269
877
(5)
5
166,167
(15,603)
7,312
(9,832)
5,404
7,031
2,024
(3)
3
26,460
14,819
162,503
186
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Strategic report
Corporate governance
Financial statements
Notes forming part of the Company financial statements
for the year ended 31 January 2022
1 Accounting policies
A. Basis of preparation
Next Fifteen Communications Group plc is a company incorporated in the United Kingdom under the Companies Act. The address of the registered office is given
on the page 209. The nature of the Company’s operations and its principal activities are set out in the Strategic Report on pages 1 to 63. The Company meets the
definition of a qualifying entity under FRS 100 (Financial Reporting Standard 100) issued by the Financial Reporting Council. These financial statements were prepared
in accordance with FRS 101 (Financial Reporting Standard 101) ‘Reduced Disclosure Framework’ as issued by the Financial Reporting Council.
The separate financial statements have been prepared on the historical cost basis except for the revaluation of certain financial instruments measured at fair value
at the end of each reporting period, and are in accordance with applicable accounting standards in the United Kingdom. The principal accounting policies adopted
are the same as those set out in note 1 to the consolidated financial statements except as noted below.
As permitted by section 408 of the Companies Act 2006 the Company has elected not to present its own profit and loss account or statement of comprehensive
income for the year. The profit attributable to the Company is disclosed in the footnote to the Company’s balance sheet.
The auditor’s remuneration for audit and other services is disclosed in note 5 to the consolidated financial statements.
The new standards and amendments which have not yet been adopted are disclosed in note 1, section U, to the consolidated financial statements.
As permitted by FRS 101, the Company has taken advantage of the disclosure exemptions available under that standard in relation to business combinations,
share-based payments, financial instruments, capital management, presentation of comparative information in respect of certain assets, presentation of a cash flow
statement, standards not yet effective, impairment of assets and related-party transactions. Where required, equivalent disclosures are given in the Group accounts
of Next Fifteen Communications Group plc. The Group accounts of Next Fifteen Communications Group plc are available to the public and are at the beginning of
this section.
The monthly average number of employees during the year was 58 and employee costs for the year totalled £7,402,000 (2021: £4,813,000). This was made up of
£5,231,000 in respect of wages and salaries (2021: £3,632,000); £916,000 in respect of social security (2021: £584,000); £205,000 in respect of pension costs (2021:
£162,000) as well as £1,050,000 in relation to share-based payment charges (2021: £435,000). Disclosures relating to the remuneration of the Parent company’s
Directors are included in the Directors’ remuneration report on pages 83 to 100.
B. Investments in subsidiaries
An investment in a subsidiary is recognised at cost less any provision for impairment.
187
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Corporate governance
Financial statements
Notes forming part of the Company financial statements continued
for the year ended 31 January 2022
1 Accounting policies continued
C. Going concern
The Company’s business activities, together with the factors likely to affect its future development, performance and position, are set out in the Strategic Report
section of the annual report, which also describes the financial position of the Company; its cash flows, liquidity position and borrowing facilities; the Company’s
objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its
exposure to credit risk and liquidity risk.
Although the Company is in a net current liability position, the Directors have a reasonable expectation that the Company has adequate resources to continue
in operational existence for the foreseeable future, including receiving dividends from its subsidiaries. Thus, they continue to adopt the going concern basis of
accounting in preparing the annual financial statements.
D. Critical accounting judgements and key sources of estimation uncertainty
Critical judgements in applying the Group’s accounting policies
There are no critical judgements, apart from those involving estimations (which are dealt with separately below), that the Directors have made in the process of
applying the Group’s accounting policies and that have the most significant effect on the amounts recognised in financial statements.
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation uncertainty at the reporting period that may have a significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below.
I. Impairment of investments in subsidiaries
Determining whether the Company’s investments in subsidiaries have been impaired requires estimations of the investments’ values in use. The value-in-use
calculations require the entity to estimate the future cash flows expected to arise from the investments and suitable discount rates in order to calculate present
values. The carrying amount of investments in subsidiaries at the balance sheet date was £213m.
II. Contingent consideration, share purchase obligation and valuation of put options
Contingent consideration and share purchase obligations relating to acquisitions have been included based on discounted management estimates of the most
likely outcome. The difference between the fair value of the liabilities and the actual amounts payable is charged to the Consolidated Income Statement as notional
finance costs over the life of the associated liability. Changes in the estimates of contingent consideration payable and the share purchase obligation are recognised
in finance income/expense. These require judgements around future revenue growth, profit margins and discount rates, which, if inappropriate, would result in a
material adjustment to the value of these liabilities within the next financial year. Further details are contained in note 17 in the Group financial statements and note
8 in the Company financial statements.
188
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Corporate governance
Financial statements
2 Intangible assets
Cost
At 1 February 2021
Additions
At 31 January 2022
Accumulated depreciation
At 1 February 2021
Charge for the year
At 31 January 2022
Net book value
At 31 January 2022
At 31 January 2021
3 Tangible assets
Cost
At 1 February 2021
Additions
At 31 January 2022
Accumulated depreciation
At 1 February 2021
Charge for the year
At 31 January 2022
Net book value
At 31 January 2022
At 31 January 2021
Computer
software
£’000
3,721
2
3,723
3,408
315
3,723
—
313
Total
£’000
3,254
805
4,059
1,944
728
2,672
1,387
1,310
189
Short leasehold
improvements
£’000
Office
equipment
£’000
2,432
520
2,952
1,287
548
1,835
1,117
1,145
822
285
1,107
657
180
837
270
165
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Strategic report
Corporate governance
Financial statements
Notes forming part of the Company financial statements continued
for the year ended 31 January 2022
4 Leases
The movements in the year ended 31 January 2022 were as follows:
Right-of-use assets:
Cost
At 1 February 2020
Additions
At 31 January 2021
Additions
At 31 January 2022
Accumulated depreciation
At 1 February 2020
Charge for the year
At 31 January 2021
Charge for the year
At 31 January 2022
Net book value at 31 January 2022
Net book value at 31 January 2021
190
Land and
buildings
£’000
10,214
769
10,983
532
11,515
4,099
1,221
5,320
1,911
7,231
4,284
5,663
Next Fifteen Communications Group plc | Annual Report 2022
Strategic report
Corporate governance
Financial statements
4 Leases continued
Lease liabilities
At 31 January 2021
Interest expense related to lease liabilities
Disposals
Repayment of these liabilities
At 31 January 2022
The maturity of the lease liabilities is as follows:
Amounts payable:
Within one year
In two to five years
After five years
Total gross future liability
Effect of discounting
Lease liability at 31 January
5 Investments
Cost
At 1 February 2021
Acquisitions1
At 31 January 2022
Land and
buildings
£’000
7,451
175
(784)
(2,035)
4,807
2021
£’000
2,163
4,841
939
7,943
(492)
7,451
Total
£’000
183,925
29,251
213,176
2022
£’000
1,806
2,766
520
5,092
(285)
4,807
1
On 9 April 2021, the Company purchased 100% of the issued share capital of Shopper Media Group Limited (‘SMG’) which led to an increase of £28.0m. The remaining increase represents a number of investments, none of which are
individually significant in comparison to the total carrying value of the investments. Refer to note 26 in the Group financial statements for further details of the acquisitions made in the year.
The Directors consider the value of investments in subsidiary undertakings to be not less than that stated in the balance sheet of the Company.
191
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Corporate governance
Financial statements
Notes forming part of the Company financial statements continued
for the year ended 31 January 2022
5 Investments continued
The Company’s subsidiaries are those as listed in note 27 of the consolidated financial statements.
6 Trade and other receivables
Amounts falling due within one year
Amounts due from subsidiary undertakings
Other debtors
Prepayments and accrued income
Other taxation
Total trade and other receivables
7 Trade and other payables
Overdraft
Trade creditors
Amounts owed to subsidiary undertakings
Other taxation and social security
Other creditors
Accruals and deferred income
Total trade and other payables
192
Company
2022
£’000
Company
2021
£’000
31,339
2,742
976
203
33,758
1,643
745
275
35,260
36,421
Company
2022
£’000
17,824
722
12,490
175
43
2,925
34,179
Company
2021
£’000
12,644
1,074
8,514
175
—
863
23,270
Next Fifteen Communications Group plc | Annual Report 2022
Strategic report
Corporate governance
Financial statements
8 Non-current liabilities
Bank loan¹
Between one and two years
Between two and five years
After five years
Contingent consideration
Between one and two years
Between two and five years
After five years
Deferred consideration
Between one and two years
Between two and five years
After five years
Share purchase obligation
Between one and two years
Between two and five years
After five years
Total
Company
2022
£’000
22,437
—
22,437
—
10,737
9,836
901
—
—
—
—
—
9,717
—
9,717
—
Company
2021
£’000
12,810
5,000
7,810
—
4,643
1,596
3,047
—
1,262
1,262
—
—
5,302
—
5,302
—
42,891
24,017
1 The entire bank facility is secured on guarantees from the guarantor pool.
The bank loans are valued at the net proceeds drawn down at the exchange rates prevailing at the time they are drawn. The foreign currency element of the loans
is revalued at the prevailing rate at 31 January 2022.
The Company has no fair value Level 1 instruments (2021: none). The Company’s investments in financial assets are Level 2 instruments and are measured at
historic quoted prices. All other instruments at fair value through profit or loss are Level 3 instruments being the contingent consideration and share purchase
obligation liabilities.
Level 3 financial instruments are valued using the discounted cash flow method to capture the present value of the expected future economic benefits that will flow
out of the Group arising from the contingent consideration or share purchase obligation. They are not based on observable market data.
193
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Corporate governance
Financial statements
Notes forming part of the Company financial statements continued
for the year ended 31 January 2022
9 Provisions
At 31 January 2021
Additions
Utilised in period
At 31 January 2022
Employment-
related
acquisition
liabilities
£’000
10,712
14,261
(4,732)
Total
£’000
10,712
14,261
(4,732)
20,241
20,241
Employment-related acquisition liabilities are provisions for the portion of consideration which is payable subject to continuing employment of the previous owners
within the Group. The expected liability is recognised over the required employment term of the seller and is separately recognised as an employment-related
acquisition payment provision.
10 Deferred tax
Deferred tax is provided as follows:
At 31 January 2020
Credit to income
At 31 January 2021
Charge to income
At 31 January 2022
11 Share capital and reserves
Authorised, allotted, called up and fully paid
92,811,145 Ordinary Shares of 2.5p each
Accelerated
capital
allowances
£’000
35
85
120
(75)
45
Other
£’000
720
52
772
(708)
64
Total
£’000
755
137
892
(783)
109
2022
£’000
2021
£’000
2,320
2,274
For details on changes to issued share capital in the year, please refer to note 20 in the Group financial statements. For details of the dividends declared and paid
in the year, please refer to note 9 in the Group financial statements.
194
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Financial statements
12 Related-party transactions
During the period the Company received the following amounts in respect of Head Office costs and intercompany interest from undertakings which were not wholly
owned at the balance sheet date:
Agent3 Limited
Fearless Labs
Blueshirt Capital Advisors LLC
Blueshirt Group LLC
Intercompany interest
Recharges
Year ended
31 January
2022
£’000
Year ended
31 January
2021
£’000
—
27
—
—
—
—
—
—
Year ended
31 January
2022
£’000
2,052
—
233
381
Year ended
31 January
2021
£’000
1,316
—
—
257
At 31 January the Company had the following intercompany amounts receivable from/(payable to) the subsidiaries below:
Agent3 Limited
Fearless Labs
Blueshirt Capital Advisors LLC
Blueshirt Group LLC
Year ended
31 January
2022
£’000
Year ended
31 January
2021
£’000
632
—
238
102
859
—
—
121
195
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Strategic report
Corporate governance
Financial statements
Glossary – Alternative performance measures
for the 12-month period ended 31 January 2022 (unaudited)
Introduction
In the reporting of financial information, the Directors have adopted various alternative performance measures (‘APMs’). The Group includes these non-GAAP
measures as they consider these measures to be both useful and necessary to the readers of the financial statements to help understand the performance of the
Group. The Group’s measures may not be calculated in the same way as similarly titled measures reported by other companies and therefore should be considered
in addition to IFRS measures.
Purpose
The Director’s believe that these APMs are highly relevant as they reflect how the Board measures the performance of the business and align with how shareholders
value the business. They also allow understandable like-for-like, year-on-year comparisons and more closely correlate with the cash inflows from operations and
working capital position of the Group.
They are used by the Group for internal performance analyses and the presentation of these measures facilitates better comparability with other industry peers as
they adjust for non-recurring or uncontrollable factors which materially affect IFRS measures.
The identification of adjusting items is a judgement in terms of which costs or credits are not associated with the trading of the business or otherwise impact the
comparability of the Group’s results year-on-year. Adjusting items for the Group include amortisation of acquired intangibles, the change in estimate and unwinding of
discount on acquisition-related liabilities, deal costs, growth share charges, employment-related acquisition costs, restructuring costs, UK furlough grant and property
impairment.
196
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Corporate governance
Financial statements
Glossary – Alternative performance measures continued
for the 12-month period ended 31 January 2022 (unaudited)
The adjusted measures are also used for the performance calculation of the adjusted earnings per share used for the vesting of employee share options, banking
covenants and cash flow analysis.
APMs
Relevant IFRS measure
Adjustments to reconcile to IFRS measure
Definition and purpose
Profit and loss measures
Net revenue
Revenue
• Excludes direct costs as shown on the
consolidated income statement
Reconciliation A1
Organic net
revenue growth
Revenue growth
No direct equivalent
Net revenue bridge, in Financial Review
Adjusted operating profit
after interest on finance
lease liabilities
Operating profit
• Excludes exceptional adjusting items
• Excludes amortisation of
acquired intangibles
• Includes interest on lease liabilities
Reconciliation A2
Excludes the direct pass-through costs, as this is more closely aligned to the fees the
Group earns for their product and services. This is a key management incentive metric.
Net revenue growth at constant currency, excluding impact of the acquisitions and
disposals in the last 12 months. For acquisitions made in the prior year, only the
corresponding months of ownership are included in the calculation of growth. This
is a key management incentive metric.
Operating profit before the impact of adjusting items and after interest on lease
liabilities. The Group considers this to be an important measure of Group
performance and is consistent with how the Group is reported and assessed by the
Board and is a key management incentive metric.
Adjusted operating
profit margin
Operating profit margin
• Not applicable
Adjusted operating profit margin is calculated based on the operating profit after
interest on finance lease liabilities as a percentage of net revenue.
Adjusted profit before tax
Profit before tax
• Excludes exceptional adjusting items
• Excludes amortisation of
acquired intangibles
• Excludes fair value remeasurements
of financial instruments
Reconciliation A4
Profit before the impact of adjusting items and tax. The Group considers this to be
an important measure and is consistent with how the Group is reported and
assessed by the Board.
This measure allows for understandable like-for-like, year-on-year comparisons as
and facilitates better comparability with other industry peers as they adjust for
non-recurring or uncontrollable factors.
Adjusted diluted earnings
per share
Diluted earnings per
share
• Excludes exceptional adjusting items
Reconciliation A6
Profit after tax attributable to owners of the Parent and before the impact of adjusting
items, divided by the weighted average number of ordinary shares in issue during the
financial year adjusted for the effects of any potentially dilutive options.
This is an important measure for the Group and is used within the performance
calculates used for the vesting of employee share options. It allows for understandable
like-for-like, year-on-year comparisons as it adjust for non-recurring and uncontrollable
measures including remeasurement of acquisition-related liabilities.
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Strategic report
Corporate governance
Financial statements
Glossary – Alternative performance measures continued
for the 12-month period ended 31 January 2022 (unaudited)
APMs
Relevant IFRS measure
Adjustments to reconcile to IFRS measure
Definition and purpose
Net finance expense
Finance expense/
income
• Excludes exceptional adjusting items
Total net finance costs excluding interest on leases and adjusted items. The Group
considers this to be an important measure and better reflects the underlying finance
cost of the business by adjusting for non-cash items and the remeasurements of
acquisition-related liabilities that can vary significantly.
Tax measures
Effective tax rate on
adjusted profit
Balance sheet measures
Effective tax rate
• Adjusting items and their tax impact
Reconciliation A7
Total income tax rate for the Group excluding the tax effect of items which are
adjusted for in arriving at the adjusted profit before income tax. This measure is
more representative of the Group’s tax payable position and its ongoing tax rate.
Net cash/(debt)
None
• Reconciliation of net debt
Reconciliation A8
Net debt comprises total loans and borrowings less cash and cash equivalents.
Net debt does not include any contingent consideration as it is conditional upon
future events which are not yet certain at the balance sheet date. It also excludes
lease liabilities.
This measure is a good indication of the strength of the Group’s balance sheet
position and is widely used by credit rating agencies.
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Financial statements
Glossary – Alternative performance measures continued
for the 12-month period ended 31 January 2022 (unaudited)
A1: Reconciliation of net revenue
Revenue
Direct costs
Net revenue
A2: Reconciliation of adjusted operating profit to statutory operating profit
Operating profit
Interest on finance lease liabilities
Operating profit after interest on finance lease liabilities
Charge for employee incentive schemes1
Employment-related acquisition payments2
Deal costs3
Costs associated with restructuring4
UK furlough grant5
Property impairment6
Gains on investment activities7
Total adjusted costs in operating profit excluding amortisation
Amortisation of acquired intangibles8
Total adjusted costs in operating profit
Adjusted operating profit after interest on finance lease liabilities
Year ended
31 January
2022
£’000
470,055
(107,952)
Year ended
31 January
2021
£’000
323,668
(56,782)
362,103
266,886
Year ended
31 January
2022
£’000
Year ended
31 January
2021
£’000
39,985
(1,043)
38,942
5,891
15,167
486
—
1,396
233
(455)
22,718
17,687
40,405
79,347
13,688
(1,408)
12,280
2,424
8,041
371
2,746
(1,396)
10,018
—
22,204
15,002
37,206
49,486
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Strategic report
Corporate governance
Financial statements
Glossary – Alternative performance measures continued
for the 12-month period ended 31 January 2022 (unaudited)
A2: Reconciliation of adjusted operating profit to statutory operating profit continued
1
This charge relates to transactions whereby a restricted grant of brand equity was given to key management in Brandwidth Marketing Limited and Publitek Limited (total of £0.6m) (2021: M Booth & Associates LLC, Twogether Creative Limited,
Savanta Group Limited and ODD London Limited) at nil cost which holds value in the form of access to future profit distributions as well as any future sale value under the performance-related mechanism set out in the share sale agreement.
The remaining £5.2m of the charge relates to an additional new incentive scheme for the sellers of Activate. This value is recognised as an upfront share-based payment in the income statement in the year of grant as the agreements do
not include service requirements, thus the cost accounting is not aligned with the timing of the anticipated benefit of the incentive, namely the growth of the relevant brands. It also includes £67,000 (2021: £239,000) of charges associated
with equity transactions accounted for as share-based payments. The Group determines that these brand appreciation rights (or growth shares) should be excluded from performance as the cost accounting is not aligned to the timing of the
anticipated benefit of the incentive, namely growth of the relevant brands.
2 This charge relates to payments linked to the continuing employment of the sellers which is being recognised over the required period of employment. Although these costs are not exceptional or non-recurring, the Group determines they should
be excluded from the performance, as the costs solely relate to acquiring the business. The sellers of the business are typically paid market rate salaries and bonuses in addition to these acquisition-related payments and therefore the Group
determines these costs solely relate to acquiring the business. Adjusting for these within the Group’s adjusted performance measures gives a better reflection of the Group’s profitability and enhances comparability year on year.
3 These costs are directly attributable to business combinations and although the charge is not significant, the charges are excluded from performance as they would not have been incurred had the business combination not occurred and a
higher or lower spend has no relation on the organic business. They do not relate to the trading of the Group and are added back each year to aid comparability of the Group’s profitability year on year.
4 In the prior year the Group incurred restructuring costs which primarily relates to Covid-19 redundancy costs taken in the year in response to the pandemic in addition to writing off intangibles. These costs related to specific transformational
events; they did not relate to trading of the relevant brand and therefore have been added back to aid comparability of performance year on year. These costs were made up of £2.5m staff-related costs and £0.2m of other costs relating to
the intangible write offs.
5 Subsequent to the balance sheet as at 31 January 2021, as a result of Covid-19, a number of the UK agencies received government support from the UK furlough scheme which was accounted for as a reduction in staff costs in the prior year.
Subsequent to the balance sheet date, the Group has repaid all amounts received from the UK government. As a result of the receipt and repayment being accounted for in two separate years, the amounts paid in the current year are added
back to aid comparability of the Group’s profitability year on year.
6 In the current period the Group has recognised charges relating to the reorganisation of the property space across the Group. This charge is made up of credits relating to right-of-use assets which were impaired in the prior year and have
subsequently been sublet or assigned ahead of expectation. As well as additional excess property identified during the year and therefore taken an impairment charge of right-of-use assets and leasehold improvements. The Group has
adjusted for this credit to align to the treatment of the impairment in the prior year and because the additional one-off credit does not relate to the trading of the business and therefore added back to aid comparability.
7 In the current period the Group acquired a controlling interest in BCA and became a subsidiary of the Group, previously accounted for as an associate. As a result of this change, the Group recognised a gain on the revaluation of the previously
held investment in equity-accounted associate of £0.9m. The remaining charge relates to the loss on disposal of a separate controlling interest, whereby the Group retained an associate interest at the year end. The overall credit relates to
specific transformational events and do not relate to the trading of the relevant brand and therefore have been added back to aid comparability of the performance year on year.
8 In line with its peer group, the Group adds back amortisation of acquired intangibles. Judgement is applied in the allocation of the purchase price between intangibles and goodwill, and in determining the useful economic lives of the acquired
intangibles. The judgements made by the Group are inevitably different to those made by our peers and as such amortisation of acquired intangibles has been added back to aid comparability.
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Corporate governance
Financial statements
Glossary – Alternative performance measures continued
for the 12-month period ended 31 January 2022 (unaudited)
A3: Measurement of segment net revenue and adjusted operating profit
The Board of Directors assesses the performance of the operating segments based on a measure of adjusted operating profit before intercompany recharges,
which reflects the internal reporting measure used by the Board of Directors. Other information provided to them at a Group level is measured in a manner
consistent with that in the financial statements. Head office costs relate to Group costs before allocation of intercompany charges to the operating segments.
Inter-segment transactions have not been separately disclosed as they are not material. The Group has previously reported its results split into three divisions:
Brand Marketing, Data and Insights and Creative Technology. From 1 February 2021, the Group structure has been enhanced, moving from three segments to four:
Customer Engagement, Customer Delivery, Customer Insight and Business Transformation. The following tables provides additional information that has been
deemed useful to the readers of the financial statements and shows the split of alternative performance measures by operating and geographical segments which
have been reconciled elsewhere within this glossary.
Year ended 31 January 2022
Net revenue
Segment adjusted operating profit/(loss) after interest on finance lease liabilities
Adjusted operating profit margin
Organic net revenue growth
Year ended 31 January 2021
Net revenue
Segment adjusted operating profit/(loss) after interest on finance lease liabilities
Adjusted operating profit margin
Organic net revenue (decline)/growth
Customer
Engage
£’000
Customer
Delivery
£’000
Customer
Insight
£’000
Business
Transformation
£’000
Head office
£’000
Total
£’000
187,566
40,434
21.6%
15.7%
166,534
36,866
22.1%
(9.2)%
79,951
28,501
35.6%
40.0%
49,557
15,232
30.7%
17.2%
42,109
9,023
21.4%
18.6%
33,073
4,876
14.7%
(3.6)%
52,477
15,221
29.0%
99.9%
17,722
3,906
22.0%
9.0%
—
(13,832)
—
—
—
(11,394)
—
—
362,103
79,347
21.9%
26.1%
266,886
49,486
18.5%
(3.4)%
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Financial statements
Glossary – Alternative performance measures continued
for the 12-month period ended 31 January 2022 (unaudited)
A3: Measurement of segment net revenue and adjusted operating profit continued
UK
£’000
EMEA
£’000
US
£’000
Asia Pacific
£’000
Head office
£’000
Total
£’000
Year ended 31 January 2022
Net revenue
Segment adjusted operating profit/(loss) after interest on finance lease liabilities
Adjusted operating profit margin
Organic net revenue growth
Year ended 31 January 2021
Net revenue
Segment adjusted operating profit/(loss) after interest on finance lease liabilities
Adjusted operating profit margin
Organic net revenue decline
137,491
30,910
22.5%
18.3%
106,247
22,402
21.1%
(6.4)%
10,041
2,504
24.9%
21.3%
8,610
1,997
23.2%
(4.7)%
199,348
58,355
29.3%
33.2%
138,383
34,150
24.7%
(0.8)%
15,223
1,410
9.3%
11.9%
13,646
2,331
17.1%
(5.5)%
A4: Reconciliation of adjusted profit before income tax and statutory loss before income tax
Loss before income tax
Unwinding of discount on contingent and deferred consideration (note 17)1
Unwinding of discount on share purchase obligation (note 17)1
Total adjusting items in operating profit
Change in estimate of future contingent consideration payable (note 17)2
Change in estimate of future share purchase obligation (note 17)2
Adjusted profit before income tax
—
(13,832)
—
—
—
(11,394)
—
—
Year ended
31 January
2022
£’000
(80,139)
7,488
811
40,405
106,805
3,898
79,268
362,103
79,347
21.9%
26.1%
266,886
49,486
18.5%
(3.4)%
Year ended
31 January
2021
£’000
(1,306)
4,694
459
37,206
5,332
2,732
49,117
The unwinding of discount on these liabilities is also excluded from performance on the basis that it is non-cash and the balance is driven by the Group’s assessment of the time value of money and this exclusion ensures comparability.
The Group adjusts for the remeasurement of the acquisition-related liabilities within the adjusted performance measures in order to aid comparability of the Group’s results year on year as the charge/credit from remeasurement can vary
significantly depending on the brand’s performance. It is non-cash and its directional impact to the income statement is opposite to the brand’s performance driving the valuations.
1
2
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Corporate governance
Financial statements
Glossary – Alternative performance measures continued
for the 12-month period ended 31 January 2022 (unaudited)
A5: Reconciliation of adjusted staff costs
Staff costs
Reorganisation costs
UK furlough grant
Charges associated with equity transactions accounted for as share-based payments
Employment-related acquisition payments
Adjusted staff costs
Year ended
31 January
2022
£’000
258,945
—
(1,396)
(5,824)
(15,167)
Year ended
31 January
2021
£’000
189,530
(2,458)
1,396
(2,185)
(8,041)
236,558
178,242
A6: Reconciliation of adjusted earnings per share
Adjusted and diluted adjusted earnings per share have been presented to provide additional useful information. The adjusted earnings per share is the performance
measure used for the vesting of employee share options and performance shares.
Loss attributable to ordinary shareholders
Unwinding of discount on contingent and deferred consideration
Unwinding of discount on share purchase obligation
Change in estimate of future contingent consideration payable
Change in estimate of share purchase obligation
Costs associated with the current period restructure
Charge for employee incentive schemes
Property impairment
Deal costs
Employment-related acquisition payments
UK furlough grant
Gains on investment activities
Amortisation of acquired intangibles
Tax effect of adjusting items above
Adjusted earnings attributable to ordinary shareholders
Year ended
31 January
2022
£’000
(69,219)
7,488
811
106,805
3,898
—
5,891
233
486
15,167
1,396
(455)
17,687
(31,629)
58,559
Year ended
31 January
2021
£’000
(4,938)
4,694
459
5,332
2,732
2,746
2,424
10,018
371
8,041
(1,396)
—
15,002
(7,280)
38,205
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Corporate governance
Financial statements
Glossary – Alternative performance measures continued
for the 12-month period ended 31 January 2022 (unaudited)
A6: Reconciliation of adjusted earnings per share continued
Weighted average number of Ordinary Shares
Dilutive LTIP shares
Dilutive growth deal shares
Other potentially issuable shares
Diluted weighted average number of Ordinary Shares
Adjusted earnings per share
Diluted adjusted earnings per share
A7: Reconciliation of tax expense in the Consolidated Income Statement to adjusted tax expense
Income tax (credit)/expense reported in the Consolidated Income Statement
Add back tax on adjusting items:
Costs associated with the current period restructure and office moves
Unwinding of discount on and change in estimates of contingent and deferred consideration (note 17)
Share-based payment charge
Amortisation of acquired intangibles
Employment-related acquisition liabilities
Adjusted tax expense
Adjusted profit before income tax
Adjusted effective tax rate
204
Number
Number
92,395,619
89,382,909
2,389,017
916,215
2,386,786
820,997
1,552,359
2,062,239
98,087,637
93,818,504
63.4p
59.7p
42.7p
40.7p
Year ended
31 January
2022
£’000
Year ended
31 January
2021
£’000
(14,475)
2,643
1,422
27,287
414
2,507
—
17,155
79,268
21.64%
1,965
1,956
141
3,196
21
9,922
49,117
20%
Next Fifteen Communications Group plc | Annual Report 2022
Strategic report
Corporate governance
Financial statements
Glossary – Alternative performance measures continued
for the 12-month period ended 31 January 2022 (unaudited)
A8: Reconciliation of net debt
Total loans and borrowings
Less: cash and cash equivalents
Net cash
Share purchase obligation (note 17)
Contingent consideration (note 17)
Deferred consideration (note 17)
Other contingent liability (note 17)
Net debt plus earn-out liabilities
Year ended
31 January
2022
£’000
Year ended
31 January
2021
£’000
22,478
(58,216)
(35,738)
11,252
161,541
133
5,202
142,390
12,810
(26,831)
(14,021)
6,508
45,894
1,262
—
39,643
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Strategic report
Corporate governance
Financial statements
Five-year financial information
for the 12-month period ended 31 January 2022 (unaudited)
Profit and loss
Net revenue
Staff costs
Operating profit
Net finance expense
(Loss)/profit before income tax
Income tax credit/(expense)
(Loss)/profit for the year
Non-controlling interests
(Loss)/profit attributable to owners of the Parent
Balance sheet
Non-current assets
Net current (liabilities)/assets
Non-current liabilities
Total equity attributable to owners of the Parent
Non-controlling interests
Total equity
206
Year ended
2022
IFRS
£’000
Year ended
2021
IFRS
£’000
Year ended
2020
IFRS
£’000
Year ended
2019
IFRS
£’000
Year ended
2018
IFRS
£’000
362,103
258,945
39,985
(120,335)
(80,139)
14,475
(65,664)
3,555
(69,219)
266,158
(1,651)
(203,048)
59,829
1,630
61,459
266,886
189,530
13,688
(15,425)
(1,306)
(2,643)
(3,949)
989
(4,938)
216,072
(6,128)
(93,063)
116,957
(76)
116,881
248,469
171,180
19,413
(14,061)
5,556
(2,717)
2,839
577
2,262
224,093
153,247
20,677
(1,917)
18,825
(4,299)
14,526
639
13,887
196,811
136,346
17,225
(3,955)
13,296
(4,000)
9,296
664
8,632
224,370
155,028
120,082
1,780
(113,439)
113,296
(585)
112,711
10,792
(54,367)
112,529
(1,076)
111,453
15,014
(58,775)
76,964
(643)
76,321
Next Fifteen Communications Group plc | Annual Report 2022
Strategic report
Corporate governance
Financial statements
Five-year financial information continued
for the 12-month period ended 31 January 2022 (unaudited)
Cash flow
(Loss)/profit for the year
Non-cash adjustments and working capital movements
Net cash generated from operations
Income tax paid
Net cash from operating activities
Acquisition of subsidiaries net of cash acquired
Acquisition of property, plant and equipment
Net cash outflow from investing activities
Net cash movement in bank borrowings
Dividends paid to owners of the Parent
Net cash (outflow)/inflow from financing activities
Increase/(decrease) in cash for the year
Dividend per share (p)
Basic earnings per share (p)
Diluted earnings per share (p)
Key performance indicators and other non-statutory measures
Adjusted staff costs as a % of net revenue1
Adjusted EBITDA2
Adjusted profit before income tax3
Diluted adjusted earnings per share (p)3
Net cash/(debt)4
1 Staff costs excluding restructuring costs. See glossary for further information.
2 Operating profit before depreciation, amortisation, acquisition-related consideration movements and other adjusting items.
3 See glossary for further information.
4 Net debt excludes contingent consideration and share purchase obligations. See glossary for further information.
Year ended
2022
IFRS
£’000
Year ended
2021
IFRS
£’000
Year ended
2020
IFRS
£’000
Year ended
2019
IFRS
£’000
Year ended
2018
IFRS
£’000
(65,664)
158,525
92,861
(14,109)
78,752
(14,454)
(3,107)
(32,160)
9,573
(9,832)
(15,214)
31,378
12.0
(74.9)
(74.9)
65.3
91,462
79,268
59.7
35,738
(3,949)
76,882
72,933
(8,423)
64,510
(8,097)
(1,998)
(26,994)
(24,912)
—
(39,126)
(1,610)
7.0
(5.5)
(5.5)
66.8
63,895
49,117
40.7
14,021
2,839
46,662
49,501
(5,993)
43,508
(18,501)
(3,460)
(28,340)
13,039
(6,759)
(6,826)
8,342
2.5
2.7
2.5
65.6
56,764
40,237
34.8
(9,346)
14,526
23,856
38,382
(6,237)
32,145
(19,281)
(5,648)
(37,154)
(10,922)
(5,243)
645
(4,364)
7.56
17.5
16.3
65.9
41,733
36,004
33.1
(5,177)
9,296
19,569
28,865
(4,284)
24,581
(9,824)
(2,974)
(19,399)
4,484
(4,121)
(2,034)
3,148
6.30
11.6
10.5
67.0
34,388
29,338
27.8
(11,593)
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Strategic report
Corporate governance
Financial statements
Shareholder information
Financial calendar
Preliminary results
2022 full-year results announcement
5 April 2022
Annual General Meeting
23 June 2022
2023 half-year results announcement
October 2022
Year end
31 January 2023
2023 full-year results announcement
April 2023
Final dividend
Ex-dividend date
Record date
Last date for DRIP election
7 July 2022
8 July 2022
18 July 2022
Payment of 2022 final dividend
12 August 2022
Interim dividend
Ex-dividend date
Record date
October 2022
October 2022
Last date for DRIP election
November 2022
Payment of 2022 final dividend
November 2022
These dates are provisional and may be subject
to change.
Annual General Meeting
Please see page 103 for further details.
Managing your shares and
shareholder communications
The Company’s shareholder register is maintained
by its registrar, Link Group. Information on how
to manage your shareholdings can be found at
www.signalshares.com. Shareholders can contact
Link Group in relation to all administrative enquiries
relating to their shares, such as a change of
personal details, the loss of a share certificate,
out-of-date dividend cheques, change of dividend
payment methods and to apply for the Dividend
Reinvestment Plan.
Shareholders who have not yet elected to receive
shareholder documentation in electronic form can
sign up by registering at www.signalshares.com.
Should shareholders who have elected for electronic
communications require a paper copy of any of the
Company’s shareholder documentation, or wish
to change their instructions, they should contact
Link Group.
Registrar
Link Group
10th Floor, Central Square
29 Wellington Street
Leeds LS1 4DL
Telephone from the UK: 0371 664 0300
Calls are charged at the standard geographic rate
and will vary by provider. Lines are open Monday to
Friday (9.00 a.m.– 5.30 p.m.).
Telephone from overseas: +44 (0)371 664 0300
Calls outside the UK will be charged at the applicable
international rate.
E-mail: enquiries@linkgroup.co.uk
Dividends
Dividends can be paid directly into your bank
account. This is the easiest way for shareholders
to receive dividend payments and avoids the
risk of lost or out-of-date cheques. A dividend
mandate form is available from Link Group or at
www.signalshares.com.
For dividends payable on or after 6 April 2018 the
dividend nil rate will only apply to the first £2,000 of
a person’s dividend income. Please refer to HMRC’s
website www.gov.uk/tax-on-dividends or seek advice
from a professional tax adviser if you have any doubt
about how this impacts your tax position.
Link Group is also able to pay dividends to shareholder
bank accounts in many currencies worldwide through
the International Payment Service. An administrative
fee will be deducted from each dividend payment.
Further details can be obtained from Link Asset
Services or at http://ips.linkassetservices.com/.
Dividend Reinvestment Plan
The Company operates a Dividend Reinvestment
Plan (‘DRIP’) which enables shareholders to buy the
Company’s shares on the London Stock Exchange
with their cash dividend. Further information about
the DRIP is available from Link Group. If shareholders
would like their future dividends to qualify for the
DRIP, completed application forms must be returned
to the registrar.
Shareholder fraud
Fraud is on the increase and many shareholders
are targeted every year. If you have any reason to
believe that you may have been the target of fraud,
or attempted fraud, in relation to your shareholding,
please contact Link Group immediately. More detailed
information can be found on the FCA website at:
www.fsa.gov.uk/consumerinformation/
scamsandswindles/investment_scams/boiler_room.
208
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Financial statements
Investor relations
Investor-relations@next15.com
Registered office
Next Fifteen Communications Group plc
75 Bermondsey Street
London
SE1 3XF
T: +44 (0)20 7908 6444
Company number
01579589
Website
www.next15.com
Advisers
Nominated adviser and joint broker
Numis Securities
45 Gresham Street
London
EC1V 7BF
Joint broker
Berenberg
Joh. Berenberg, Gossler & Co. KG
London Branch
60 Threadneedle Street
London
EC2R 8HP
External Auditor
Deloitte LLP
2 New Street Square
London
EC4A 3BZ
Bankers
HSBC Bank plc
8 Canada Square
London
E14 5HQ
Bank of Ireland
4th Floor,
Bow Bells House
1 Bread St
London
EC4M 9BE
209
Next Fifteen Communications Group plc | Annual Report 2022 Strategic report
Corporate governance
Financial statements
References
References:
Customer Insight
1.
Market research: The Business Research
Company (2020)
2. Data management: Estimate
3.
4.
Data analytics & implementation: Market and
Markets- Global Cloud Analytics (2021)
Customer Relationship Management (CRM)
implementation: Research and Markets (2021)
Customer Delivery
7.
E-commerce implementation: International Data
Corporation (IDC, 2021)
Business Transformation
12. Strategy Consulting: The Business Research
Company (2020)
8.
9.
Search Engine Optimisation (SEO): Business
Wire (2021)
12.1.
Inc Environmental, Social and Governance
(ESG): Business Wire (2021)
Media buying & Planning: Research and
Markets (2021)
12.2. Inc People Change Management (PCM):
Absolute Market Insights (2020)
10. Social Media Management: Markets and
13. Digital Transformation: Market and Markets-
Markets (2021)
Global Cloud Analytics (2021)
Customer Experience
5. Customer experience: International Data
Corporation (IDC, 2021)
6. Content, communications & creative:
Technavio (2021)
11. Lead Generation: Business Wire (2021)
210
Next Fifteen Communications Group plc | Annual Report 2022
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Next Fifteen Communications Group plc
75 Bermondsey Street
London SE1 3XF
T: +44 (0)20 7908 6444
www.next15.com