-Shares fall despite positive trading update
-Uncertainty remains over proposed M&C Saatchi acquisition
-Fears over decline in global marketing spend
Shares in specialist marketing firm Next Fifteen Communications (NFC:AIM) fell by over 4% despite the group announcing positive trading ahead of its AGM today.
Over the last month shares have fallen by 35%.
Management reiterated that first quarter revenues grew 68% to £130 million, driven by 37% organic growth.
Trading has remained strong throughout May and adjusted profit before tax remains ahead of management's expectations.
FEARS OF SLOWDOWN IN MARKETING SPEND
Investors have been focused on the increasing risks of a global recession as rising inflation is forcing consumers to cut back on their discretionary consumption.
This has significant implication for both economic growth and marketing spend.
Consumption accounts for approximately 68% of aggregate demand in the British economy.
Any reduction in spending by consumers is likely to have a significant negative impact on economic growth.
If consumers are spending less and economic growth is much lower then companies are likely to reduce the amount of money they allocate to marketing expenditure.
This concern explains in part why Next Fifteen price to earnings ratio has fallen and dragged the shares lower.
M&C SAATCHI ACQUISITION UNCERTAINTY
Another factor acting as a brake on Next Fifteen's shares is the uncertainty surrounding their proposed acquisition of M&C Saatchi.
Next Fifteen recently outbid AdvancedAdvt (ADVT) the acquisition vehicle headed by serial software entrepreneur Vin Murria, for M&C Saatchi (SAA).
The rationale for the merger is to create a business with a broader scale and geographic scope. M&C Saatchi has an established presence in Asia and Australia, whereas Next15 is more focused on the UK and US markets.
However following the recent collapse in the Next Fifteen share price the M&C Saatchi board have withdrawn their support for the proposed takeover. The offer included 0.1637 of Next Fifteen shares and 40p per share in cash.
M&C Saatchi directors 'no longer consider the terms of the Next 15 offer to be fair and reasonable solely on the basis of the deterioration in value of Next 15 shares since the announcement date,' the London-based advertising agency explained.