CMA clearance; trading news

Ebiquity 28 November 2018 Update
Download PDF

Ebiquity

CMA clearance; trading news

Trading update

Media

28 November 2018

Price

60p

Market cap

£45m

Net debt (£m) as at 30 June 2018

25.7

Shares in issue

74.8m

Free float

99%

Code

EBQ

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(20.0)

26.3

(40.9)

Rel (local)

(20.9)

37.0

(37.6)

52-week high/low

110.5p

38.0p

Business description

Ebiquity is an independent marketing analytics specialist providing a range of business-critical data, analysis and consultancy services to advertisers and media owners on an international basis. It operates across three divisions: Analytics & Tech, Media and Intel (which it is disposing of).

Next events

Pre-close update

End January

Prelims

2019

Analysts

Fiona Orford-Williams

+44 (0)20 3077 5739

Russell Pointon

+44 (0)20 3077 5740

Ebiquity is a research client of Edison Investment Research Limited

Ebiquity has now received full CMA clearance for the disposal of Ad Intel, which will be transformative for the balance sheet (a net inflow of £20m). As might be expected, the process has been disruptive and absorbed management time. The trading update indicates higher investment levels within the rest of the group, which will supress operating profits in FY18e. Some good new business wins lay the ground for better performance in FY19e, but we have withdrawn our forecasts for now until there is greater clarity. Confidence may take a while to rebuild, but the weakness in the share price may provide an opportunity in a group fundamentally well placed to benefit from changes in the global advertising market.

Year end

Revenue (£m)

EBIT*

(£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

12/16

83.6

13.0

11.8

11.3

0.65

5.3

1.1

12/17

87.4

12.0

11.0

9.4

0.71

6.4

1.2

12/18e

89.0

7.5

6.3

5.2

0.75

11.5

1.3

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

Changes to forecasts

Until completion of the disposal, our figures continue to include Ad Intel, but we will update at that point. For the current year, revenue guidance is now for 8% growth in the continuing divisions, bringing our FY18e group forecast down from £91.2m to £89.0m. Our FY18 EBIT estimate is reduced from £10.5m to £7.5m reflecting; the impact of continued uncertainty at Ad Intel while the investigation was ongoing; underperformance of the US analytics business; and delays in anticipated German revenues. Excluding Ad Intel, our indicative pro-forma numbers show FY18e revenues of £69.0m, with EBIT of £5.9m (an EBIT margin of 8.5%). For the moment, we have withdrawn our FY19e forecasts but expect to reinstate shortly when there is greater clarity over the prospects for the continuing business.

Fundamentals unchanged

Ebiquity’s direction of travel, stepping up its offering in contract compliance, advanced analytics and tech advisory, is sensible, given the shifting nature of the advertising market. The transition has proved bumpier than had been hoped. The net proceeds of disposal will substantially reduce balance sheet leverage and facilitate the investment programme.

Valuation: Short-term weakness

We believe the setback in the share price on the back of the trading update could provide a buying opportunity in what remains a profitable and attractive business, with a strong balance sheet and good cash conversion characteristics. The rehabilitation process may take a while and management now needs to deliver on rebased expectations to close the valuation gap with smaller, quoted media companies, which are trading on an FY1 EV/EBITDA of 8.8x vs Ebiquity on 7.6x.

Exhibit 1: Financial summary

£000s

2016

2017

2018e

31-December

IFRS

IFRS

IFRS

INCOME STATEMENT

31-Dec

31-Dec

31-Dec

Revenue

 

 

83,569

87,374

89,000

EBITDA

 

 

14,574

14,035

9,743

Operating Profit (before amort. and except.)

 

 

12,959

12,026

7,500

Amortisation of acquired intangibles

(1,865)

(1,952)

(1,950)

Exceptionals

(2,777)

(3,801)

(1,600)

Share-based payments

(560)

(738)

(1,000)

Reported operating profit

7,757

5,535

2,950

Net Interest

(1,132)

(1,044)

(1,200)

Joint ventures & associates (post tax)

0

0

0

Exceptionals

0

0

0

Profit Before Tax (norm)

 

 

11,827

10,982

6,300

Profit Before Tax (reported)

 

 

6,625

4,491

1,750

Reported tax

(2,230)

(2,043)

(1,512)

Profit After Tax (norm)

9,257

8,085

4,788

Profit After Tax (reported)

4,395

2,448

238

Minority interests

(245)

(384)

(585)

Discontinued operations

0

0

0

Net income (normalised)

9,012

7,701

4,203

Net income (reported)

4,150

2,064

(347)

Average Number of Shares Outstanding (m)

77.2

77.9

78.1

EPS - normalised (p)

 

 

11.7

9.7

5.4

EPS - normalised fully diluted (p)

 

 

11.3

9.4

5.2

EPS - basic reported (p)

 

 

5.4

2.7

(0.4)

Dividend per share (p)

0.65

0.71

0.75

EBITDA Margin (%)

17.4

16.1

10.9

Normalised Operating Margin

15.5

13.8

8.4

BALANCE SHEET

Fixed Assets

 

 

75,855

75,771

74,978

Intangible Assets

72,079

72,440

71,947

Tangible Assets

2,438

1,829

1,529

Investments & other

1,338

1,502

1,502

Current Assets

 

 

35,078

37,241

37,665

Stocks

0

0

0

Debtors

19,291

20,978

21,607

Cash & cash equivalents

6,662

4,732

4,527

Other

9,125

11,531

11,531

Current Liabilities

 

 

(25,912)

(24,549)

(24,771)

Creditors

(17,809)

(20,066)

(20,288)

Tax and social security

(1,850)

(1,598)

(1,598)

Short term borrowings

(4,476)

(1,572)

(1,572)

Other

(1,777)

(1,313)

(1,313)

Long Term Liabilities

 

 

(32,728)

(35,481)

(34,231)

Long term borrowings

(30,210)

(32,000)

(30,750)

Other long term liabilities

(2,518)

(3,481)

(3,481)

Net Assets

 

 

52,293

52,982

53,641

Minority interests

761

1,040

1,040

Shareholders' equity

 

 

53,054

54,022

54,681

CASH FLOW

Op Cash Flow before WC and tax

14,574

14,035

9,743

Working capital

(2,835)

(2,002)

(407)

Exceptional & other

(957)

(4,085)

(1,600)

Tax

(166)

(2,207)

(1,512)

Net operating cash flow

 

 

10,616

5,741

6,224

Capex

(2,351)

(2,231)

(2,500)

Acquisitions/disposals

(4,431)

(3,082)

(900)

Net interest

(1,074)

(921)

(1,200)

Equity financing

26

160

0

Dividends

(838)

(495)

(579)

Other

(1,017)

(46)

0

Net Cash Flow

931

(874)

1,045

Opening net debt/(cash)

 

 

28,661

28,024

28,840

FX

(633)

58

0

Other non-cash movements

339

0

Closing net debt/(cash)

 

 

28,024

28,840

27,795

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 Edison analyst 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 2018 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2018. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd who holds an Australian Financial Services Licence (Number: 427484). 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

Neither this document and associated email (together, the "Communication") constitutes or form part of any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities, nor shall it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. Any decision to purchase shares in the Company in the proposed placing should be made solely on the basis of the information to be contained in the admission document to be published in connection therewith.

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 (nor will such persons be able to purchase shares in the placing).

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

Neither this Communication nor any copy (physical or electronic) of it may be (i) taken or transmitted into the United States of America, (ii) distributed, directly or indirectly, in the United States of America or to any US person (within the meaning of regulations Regulation S made under the US Securities Act 1933, as amended), (iii) taken or transmitted into or distributed in Canada, Australia, the Republic of Ireland or the Republic of South Africa or to any resident thereof, except in compliance with applicable securities laws, (iv) taken or transmitted into or distributed in Japan or to any resident thereof for the purpose of solicitation or subscription or offer for sale of any securities or in the context where the distribution thereof may be construed as such solicitation or offer, or (v) or taken or transmitted into any EEA state other than the United Kingdom. Any failure to comply with these restrictions may constitute a violation of the securities laws or the laws of any such jurisdiction. The distribution of this Communication in or into other jurisdictions may be restricted by law and the persons into whose possession this document comes should inform themselves about, and observe, any such restrictions.

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

295 Madison Avenue, 18th Floor

10017, New York

US

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

295 Madison Avenue, 18th Floor

10017, New York

US

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 Edison analyst 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 2018 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2018. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd who holds an Australian Financial Services Licence (Number: 427484). 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

Neither this document and associated email (together, the "Communication") constitutes or form part of any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities, nor shall it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. Any decision to purchase shares in the Company in the proposed placing should be made solely on the basis of the information to be contained in the admission document to be published in connection therewith.

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 (nor will such persons be able to purchase shares in the placing).

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

Neither this Communication nor any copy (physical or electronic) of it may be (i) taken or transmitted into the United States of America, (ii) distributed, directly or indirectly, in the United States of America or to any US person (within the meaning of regulations Regulation S made under the US Securities Act 1933, as amended), (iii) taken or transmitted into or distributed in Canada, Australia, the Republic of Ireland or the Republic of South Africa or to any resident thereof, except in compliance with applicable securities laws, (iv) taken or transmitted into or distributed in Japan or to any resident thereof for the purpose of solicitation or subscription or offer for sale of any securities or in the context where the distribution thereof may be construed as such solicitation or offer, or (v) or taken or transmitted into any EEA state other than the United Kingdom. Any failure to comply with these restrictions may constitute a violation of the securities laws or the laws of any such jurisdiction. The distribution of this Communication in or into other jurisdictions may be restricted by law and the persons into whose possession this document comes should inform themselves about, and observe, any such restrictions.

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

295 Madison Avenue, 18th Floor

10017, New York

US

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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Share this with friends and colleagues

You may be interested in