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Building on recovery

Ebiquity 14 July 2021 Update

Ebiquity

Building on recovery

Half year update

Media

14 July 2021

Price

57p

Market cap

£45m

Net debt at 30 June 2021 (£m) (excludes £0.75m US PPP debt)

9.6

Shares in issue

78.4m

Free float

86.9%

Code

EBQ

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

3.6

40.2

94.9

Rel (local)

3.5

35.7

63.9

52-week high/low

57.0p

18.4p

Business description

Ebiquity is a leading, independent global media consultancy, working for over 70 of the world’s 100 leading brands to optimise their media investments.

Next events

Interim results

23 September 2021

Analysts

Fiona Orford-Williams

+44 (0)20 3077 5739

Max Hayes

+44 (0)20 3077 5700

Ebiquity is a research client of Edison Investment Research Limited

Ebiquity’s period-end trading update indicates a good first half performance, with revenues of £32m, up 19% on the prior period. The group has also posted an operating profit – undisclosed but ahead of the £1.0m delivered in H220. The progress is a result of a mix of factors, including new business wins (notably in digital), with some benefit from work deferred from FY20. We leave our forecasts unchanged for now, noting that any revisions at the interims in September are more likely to be on the upside. The share price performance year-to-date has been strong (up 195%), but the valuation remains at a sizeable discount to peers.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

12/19

68.1

4.7

2.9

0.0

19.7

N/A

12/20

55.9

(1.3)

(1.9)

0.0

N/A

N/A

12/21e

61.0

2.6

2.5

0.5

22.8

0.9

12/22e

68.3

5.0

4.7

1.3

12.1

2.3

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Pushing ahead on digital and ESG

Ebiquity’s reconfigured Digital Innovation Centre, built on Digital Decisions, looks to be achieving its goal of providing a more comprehensive and integrated digital media offering. Although Google’s withdrawal of support for third-party cookies has been pushed back to FY23, the direction of travel remains the same and the need for advertisers to optimise and benchmark their digital media spend in a complex ecosystem is unlikely to diminish. The group’s new KPIs (see March update note) show management’s commitment to driving this aspect of the group’s business. Ebiquity has also stepped up its capabilities in socially responsible advertising, which fits well with heightened concerns on brand safety. These initiatives should help meet the objective of increasing service lines per client and driving revenues.

Upside potential to forecasts

Our current FY21 forecast for revenue of £61.0m implies a flat H221 on H220, but with an improving margin to take the full year PBT to £2.6m. Given the CEO’s comment that further progress is expected in H2, this implies that the risk may be on the upside. Period end net debt of £10.3m, which was in line with management expectations, consisted of £9.3m cash and £19.7m of gross debt (£18.9m excluding the US PPP debt of £0.75m, which we expect to be credited in H221).

Valuation: Strong year-to-date performance

Ebiquity’s valuation discount is narrowing as execution of the business plan progresses. Year-to-date, the shares are up by 195%, bottoming at 18.4p in February, with marketing services peers having gained 49% on average as the outlook for advertising spend have firmed up. Parity with these peers for FY22 across P/E, EV/EBITDA and EV/EBIT multiples would suggest a value of 77p. This is lower than the 89p cited in our last report, reflecting the erosion of forward multiples from raised growth expectations not yet reflected in prices.

Exhibit 1: Financial summary

£000s

2019

2020

2021e

2022e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

68,133

55,907

61,000

68,320

Cost of Sales

(36,212)

(31,219)

(32,940)

(36,893)

Gross Profit

31,921

24,687

28,060

31,427

EBITDA

 

 

8,603

1,797

5,015

7,350

Operating Profit (before amort. and except.)

 

 

5,567

(334)

3,500

5,900

Amortisation of acquired intangibles

(1,169)

(1,122)

(1,122)

(1,122)

Highlighted items

(9,044)

(3,325)

0

0

Share-based payments

(117)

1,906

(150)

(150)

Reported operating profit

(4,763)

(2,875)

2,228

4,628

Net Interest

(898)

(875)

(924)

(917)

Joint ventures & associates (post tax)

0

0

0

0

Forex

0

(137)

0

0

Profit Before Tax (norm)

 

 

4,669

(1,346)

2,576

4,983

Profit Before Tax (reported)

 

 

(5,661)

(3,887)

1,304

3,711

Reported tax

(1,477)

150

(618)

(1,196)

Profit After Tax (norm)

2,738

(1,372)

1,958

3,123

Profit After Tax (reported)

(7,138)

(3,737)

686

2,515

Minority interests

(451)

(186)

(34)

(125)

Discontinued operations

(1,018)

220

0

0

Net income (normalised)

2,275

(1,557)

1,926

3,001

Net income (reported)

(8,156)

(3,703)

652

2,390

Average Number of Shares Outstanding (m)

79.5

81.6

78.2

78.4

EPS - normalised (p)

 

 

2.9

(1.9)

2.5

4.7

EPS - normalised continuing diluted (p)

 

 

2.8

(1.9)

2.4

4.6

EPS - basic reported (p)

 

 

(10.8)

(4.5)

0.8

3.0

Dividend per share (p)

0.00

0.00

0.50

1.25

EBITDA Margin (%)

12.6

3.2

8.2

10.8

Normalised Operating Margin (%)

8.2

-0.6

5.7

8.6

BALANCE SHEET

Fixed Assets

 

 

47,060

44,322

42,899

41,728

Intangible Assets

35,172

34,698

33,461

32,289

Tangible Assets

10,902

8,199

8,013

8,014

Tax, receivables, Investments & other

986

1,425

1,425

1,425

Current Assets

 

 

35,074

35,610

37,203

40,898

Stocks

0

0

0

0

Debtors

26,838

24,318

25,904

29,013

Cash & cash equivalents

8,236

11,121

11,127

11,715

Other

0

171

171

171

Current Liabilities

 

 

(21,195)

(22,189)

(22,241)

(23,041)

Creditors

(14,659)

(15,986)

(16,541)

(17,340)

Tax and social security

(4,424)

(1,953)

(1,953)

(1,953)

Short term borrowings (incl. positive loan fees)

22

45

45

45

Other incl lease liabilities

(2,134)

(4,295)

(3,792)

(3,793)

Long Term Liabilities

 

 

(23,047)

(26,997)

(26,997)

(26,997)

Long term borrowings

(13,868)

(19,675)

(19,675)

(19,675)

Other long term liabilities

(9,179)

(7,322)

(7,322)

(7,322)

Net Assets

 

 

37,892

30,746

30,863

32,589

Minority interests

1,179

442

442

442

Shareholders' equity

 

 

36,713

30,304

30,421

32,147

CASH FLOW

Op Cash Flow before WC and tax

8,603

1,797

5,015

7,350

Working capital

(702)

4,171

(1,031)

(2,309)

Exceptional & other

(2,962)

(3,325)

0

0

Tax

(1,345)

(2,285)

(618)

(1,196)

Operating Cash Flow

 

 

3,594

358

3,366

3,845

Capex

(3,235)

(1,316)

(1,500)

(1,499)

Acquisitions/disposals

23,862

(2,118)

(486)

0

Net interest

(718)

(550)

(924)

(917)

Equity financing

253

0

0

0

Dividends

(1,052)

(444)

(450)

(841)

Other

0

0

0

0

Net Cash Flow

22,704

(4,070)

6

587

Opening net debt/(cash)

 

 

27,486

5,610

8,509

8,503

FX

(204)

117

0

0

Other non-cash movements

(624)

1,055

0

0

Closing net debt/(cash)

 

 

5,610

8,509

8,503

7,915

Source: Company accounts, Edison Investment Research

General disclaimer and copyright

This report has been commissioned by Ebiquity and prepared and issued by Edison, in consideration of a fee payable by Ebiquity. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Ebiquity and prepared and issued by Edison, in consideration of a fee payable by Ebiquity. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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