Hungry Fuse 8 engaged in acquisition talks with companies

The Leeds-based group yesterday reported a year of growing profits and sales, which it hopes will give investors confidence in its growth prospects.

Fuse 8, founded a decade ago in Leeds, said operating profits before the £437,000 cost of its entry to the Alternative Investment Market increased 14 per cent to £684,000 in the year to the end of March. Revenues grew eight per cent to £3.6m.

Fuse 8 completed its reverse acquisition in July 2010 to enter the junior stock market. It took the first step of its acquisition strategy in November when it bought a London-based agency, Delete Digital Marketing, by issuing 1.25m new shares worth £400,000.

Chief executive Nigel Hunter said the results were its fifth consecutive year of growth.

Fuse 8 has more than 100 clients, including Arla and Persimmon, and offers digital marketing services ranging from website design and build to search engine optimisation. It has offices in London, Leeds and Russia.

“We went into the market knowing that if we could get some good figures out there it would stand us in good stead for a big acquisition,” said Mr Hunter. “Before the end of the calendar year we will probably do one (acquisition) and then one or two every year after.”

Shares in the company nudged up 1p to 27.5p, a 3.8 per cent increase.

Currently about 81 per cent of the company’s share capital is not in public hands, with the bulk held between Mr Hunter, its founders Mark Walton and Andy Hutchinson, and a staff pension scheme.

Mr Hunter admitted this has kept Fuse 8’s stock fairly illiquid, but said a big deal will likely involve issuing shares to free up some of its share capital, rather than using debt.

He added the company is “heavily engaged” in acquisition talks with three or four companies. Its targets are either in Leeds or London. He added the group has been approached by a number of distressed companies, but is not considering these, and instead wants “meaningful businesses with good potential”.

“It’s very likely that we will raise funds into the market,” said Mr Hunter. “(They must be) well run and well managed by staff who are happy to be part of the Fuse 8 story. (They will receive) part cash, part shares in return.”

The company grew its client base during the year, adding Ikea, the London Stock Exchange and Unilever. However, it also experienced weaker public sector spending, where clients were slower to commit to spending.

“The hardest part was making sure that we stayed focused,” said Mr Hunter. “We, like everybody, were hit by the public sector spending cuts. We had a relatively small window into that.”