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Weak Aussie dollar and strong UK and Europe performance helps Enero grow profits

Melhuish

Melhuish

Marketing services holding group Enero’s overseas operations have driven an 857% profit spike for the business, as Australasian revenue continued to slip in the first half of the 2015/2016 financial year.

The group, which includes BMF, Naked, The Leading Edge, Frank PR, CPR, Dark Blue Sea and Hotwire among its businesses, posted overall net revenue growth of 3% to $57.6m, with earnings before interest, tax, depreciation and amortisation up 57% on the previous year to $7.2m.

The result remained within the company’s guidance as profits rose from $400,000 to $3.7 million – a lift of 857%.

Its position was also helped by the weakening Australian dollar, which lifted reported net revenue by $4.3 million.

Net revenue for Australasian operations dropped 21.8% from $29.3m to $22.9m, while operating EBITDA dropped 25% to $3.3m.

However, margins were maintained, down just 0.6% to 14.4%.

“Revenue is closer in line with 2HFY15 of $24.1m, (5% down on 1HFY16 vs 2HFY15) showing more stability in revenue base, but we continue to focus efforts on new business conversion,” Enero said in its report to the ASX.

“BMF (is) in a stronger position retaining a number of clients, achieving new business wins and confirming its excellent creative reputation.”

However, the company admitted smaller agencies were finding the local market tough.

“Smaller agencies were more susceptible to client losses (and) experienced difficult trading conditions in the period.”

Enero also highlighted its lack of exposure to a single client as a major strength, with the largest client representing just 9% of group net revenue and the top 10 clients accounting for 37% of total revenue across more than 550 client relationships.

enero

Enero’s revenue split across industry sectors

The geographical contribution to Enero’s earnings is now weighted more heavily to Europe and the UK, up from 37% of net revenue in the first half of the 2015 financial year to 47%, with the decline in the value of the Australian dollar against the pound and euro and the improving economic outlook in the UK key factors.

At the same time Australasia’s share has dropped from 52% to 40% and the US share of revenue rose 2% to 13%.

Commenting on the full year 2014/2015 results in August, CEO Matthew Melhuish said the company would be focusing on lifting is business in the US in the current financial year.

The group said work continued to grow the US operation.

“(We) continue to build capabilities organically in addition to hiring and relocating senior management to the New York office,” the report said today.

“Further time (is) needed to settle teams in. (We are) assessing plans to achieve scale and access to larger revenue opportunities in the short and medium term.”

In January the group brought back “unmarketable” parcels of shares from small shareholders.

Enero shares were trading up 7% at 92 cents at 12.30pm today following the release of the results.

Simon Canning

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