Public Policy Holding Company (LON:PPHC), an international leader in lobbying and public affairs, continues to make waves in the industry. The group recently released an impressive FY24 update and announced a strategic acquisition of TrailRunner International LLC, a global communications advisory firm. According to Zeus analysts Carl Smith and Andy Hanson, PPHC is poised for significant growth, highlighting its value to shareholders and its robust market positioning.
FY24 Highlights: Resilience and Revenue Growth
PPHC has reported an estimated 10.8% increase in FY24 revenue to $149.6 million. Although slightly below Zeus expectations, the performance underscores the company’s resilience. Government Relations revenue grew by 7%, while Public Affairs achieved a remarkable 13% increase, thanks to renewed project-based work and its acquisition of Pagefield in 2023. Diversified Services also shone, with a 47% growth from a smaller base.
Carl Smith noted, “PPHC’s firms are well-positioned to help clients navigate the complexities of the new US government and associated policy changes, ensuring robust growth opportunities in the near term.”
The TrailRunner Acquisition: A Strategic Move
PPHC is further solidifying its presence in corporate consultancy with the $33 million acquisition of TrailRunner International LLC. TrailRunner brings expertise in corporate affairs, crisis management, and sports advisory, adding 80 employees across Texas, Tennessee, New York, California, and international markets.
Carl Smith and Andy Hanson highlighted, “TrailRunner has consistently outperformed expectations with an 18% CAGR since 2018, and its integration into PPHC’s portfolio will create cross-selling opportunities across the group’s 1,200 clients. We expect this acquisition to enhance PPHC’s EBITDA margins and significantly strengthen its position in growth markets.”
The deal is structured with $28 million in cash and $5 million in PPHC shares, with completion set for April 2025. Analysts project that TrailRunner will boost PPHC’s FY25 adjusted EBITDA by 10% and FY26 by 15%, paving the way for long-term success.
Financial Discipline and Valuation
PPHC is showing strong financial discipline, evidenced by its decision to reduce the dividend payout ratio to focus on reinvestment and long-term shareholder value. Net debt has improved, closing at $17.3 million, and leverage is expected to remain manageable post-acquisition.
Zeus analysts pointed out that “PPHC shares are materially undervalued at 7.6x FY25 P/E, especially when compared to peers with lower margins and slower revenue growth. Our DCF valuation of 230p suggests a 70% upside, making PPHC an attractive proposition for investors.”
In Closing
PPHC’s strategy of blending organic growth with selective acquisitions continues to deliver results. With a strong track record, expanding capabilities, and a solid financial base, the company is well-placed for future success. As Zeus analysts Carl Smith and Andy Hanson remarked, “With its growth strategy, high margins, and strong cash generation, PPHC represents a compelling investment opportunity in the professional services sector.”
