H1 progress in continuing business

Ebiquity 24 July 2018 Update
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Ebiquity

H1 progress in continuing business

Trading update

Media

24 July 2018

Price

56.5p

Market cap

£42m

£1:US$1.32

Net debt (£m) at end December 2017

28.9

Shares in issue

74.3m

Free float

99%

Code

EBQ

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(13.5)

(16.1)

(48.9)

Rel (local)

(14.0)

(19.3)

(50.5)

52-week high/low

123.5p

57.5p

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 is being disposed of).

Next events

Interim figures

25 September 2018

Analysts

Fiona Orford-Williams

+44 (0)20 3077 5739

Neil Shah

+44 (0)20 3077 5715

Ebiquity is a research client of Edison Investment Research Limited

Ebiquity’s H118 trading update indicates a good revenue performance from both the Media and Analytics & Tech segments, together ahead 7% y-o-y on a like-for-like basis. The referral to a Phase 2 CMA investigation of the Intel disposal has led to uncertainty and a 9% fall in Intel revenues, with a consequent impact on profits. Our revised forecasts for FY18 reflect this, but the improving performance of the (larger) balance leaves FY19 estimates unchanged. The share price has drifted 15% since the CMA referral. A full rerating may have to wait for a resolution, but the current discount appears overdone.

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

5.0

1.2

12/17

87.4

12.0

11.0

9.4

0.71

6.0

1.3

12/18e

91.2

10.5

9.3

8.0

0.71

7.1

1.3

12/19e

96.5

12.1

11.3

9.7

0.78

5.8

1.4

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

Adjustments to FY18 forecasts, FY19 unchanged

The Media and Analytics & Tech segments have an encouragingly strong pipeline. This has led to some accelerated investment to take better advantage of opportunities. Profits are consequently more heavily weighted to H2 than had been anticipated. Our full-year forecast for operating profit has been trimmed 7% from £11.3m to £10.5m as the impact of the uncertainty and inertia on Intel work their way through. This is a fixed-cost business and therefore pressure on revenue will have more of an impact on profit. Our FY18 EPS estimate comes down 10% to 8.0p. For the following year, we assume continued flat revenues for Intel should the sale not proceed, while the two continuing segments perform well on the momentum of the strong pipeline. The net impact is that our FY19 estimates are unchanged.

Industry issues supportive

The marketing sector continues to undergo considerable change, driven at least in part by issues of accountability and transparency, with both marketers and agencies finding their business models challenged. Ebiquity’s positioning as a leading independent media and marketing consultancy looks increasingly compelling. The delay in the disposal is frustrating from a management time perspective but also in freeing up capital to invest further in the continuing, faster-growth business.

Valuation: Discount overdone

Having fallen 49% over the last year, the shares are now trading on a sizeable discount to the cohort of smaller marketing services stocks. These are on a current year P/E of 12.2x and EV/EBIT of 10.4x, putting Ebiquity on a discount of over 40%. Even given the delay in Intel disposal and its impact on the business, this seems overly pessimistic.

Exhibit 1: Financial summary

£000s

2016

2017

2018e

2019e

31-December

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

31-Dec

31-Dec

31-Dec

31-Dec

Revenue

 

 

83,569

87,374

91,200

96,464

EBITDA

 

 

14,574

14,035

12,743

14,458

Operating Profit (before amort. and except.)

 

 

12,959

12,026

10,500

12,058

Amortisation of acquired intangibles

(1,865)

(1,952)

(1,950)

(1,900)

Exceptionals

(2,777)

(3,801)

(1,600)

0

Share-based payments

(560)

(738)

(1,000)

(1,000)

Reported operating profit

7,757

5,535

5,950

9,158

Net Interest

(1,132)

(1,044)

(1,200)

(808)

Joint ventures & associates (post tax)

0

0

0

0

Exceptionals

0

0

0

0

Profit Before Tax (norm)

 

 

11,827

10,982

9,300

11,250

Profit Before Tax (reported)

 

 

6,625

4,491

4,750

8,350

Reported tax

(2,230)

(2,043)

(2,232)

(2,700)

Profit After Tax (norm)

9,257

8,085

7,068

8,550

Profit After Tax (reported)

4,395

2,448

2,518

5,650

Minority interests

(245)

(384)

(585)

(600)

Discontinued operations

0

0

0

0

Net income (normalised)

9,012

7,701

6,483

7,950

Net income (reported)

4,150

2,064

1,933

5,050

Average Number of Shares Outstanding (m)

77.2

77.9

78.1

78.9

EPS - normalised (p)

 

 

11.7

9.7

8.3

10.1

EPS - normalised fully diluted (p)

 

 

11.3

9.4

8.0

9.7

EPS - basic reported (p)

 

 

5.4

2.7

2.5

6.4

Dividend per share (p)

0.65

0.71

0.71

0.78

EBITDA Margin (%)

17.4

16.1

14.0

15.0

Normalised Operating Margin

15.5

13.8

11.5

12.5

BALANCE SHEET

Fixed Assets

 

 

75,855

75,771

74,978

73,878

Intangible Assets

72,079

72,440

71,947

71,197

Tangible Assets

2,438

1,829

1,529

1,179

Investments & other

1,338

1,502

1,502

1,502

Current Assets

 

 

35,078

37,241

39,946

47,338

Stocks

0

0

0

0

Debtors

19,291

20,978

21,607

22,256

Cash & cash equivalents

6,662

4,732

6,808

13,552

Other

9,125

11,531

11,531

11,531

Current Liabilities

 

 

(25,912)

(24,549)

(24,771)

(25,000)

Creditors

(17,809)

(20,066)

(20,288)

(20,517)

Tax and social security

(1,850)

(1,598)

(1,598)

(1,598)

Short term borrowings

(4,476)

(1,572)

(1,572)

(1,572)

Other

(1,777)

(1,313)

(1,313)

(1,313)

Long Term Liabilities

 

 

(32,728)

(35,481)

(34,231)

(34,231)

Long term borrowings

(30,210)

(32,000)

(30,750)

(30,750)

Other long term liabilities

(2,518)

(3,481)

(3,481)

(3,481)

Net Assets

 

 

52,293

52,982

55,922

61,986

Minority interests

761

1,040

1,040

1,040

Shareholders' equity

 

 

53,054

54,022

56,962

63,026

CASH FLOW

Op Cash Flow before WC and tax

14,574

14,035

12,743

14,458

Working capital

(2,835)

(2,002)

(407)

(420)

Exceptional & other

(957)

(4,085)

(1,600)

0

Tax

(166)

(2,207)

(2,232)

(2,700)

Net operating cash flow

 

 

10,616

5,741

8,504

11,339

Capex

(2,351)

(2,231)

(2,500)

(2,600)

Acquisitions/disposals

(4,431)

(3,082)

(900)

(600)

Net interest

(1,074)

(921)

(1,200)

(808)

Equity financing

26

160

0

0

Dividends

(838)

(495)

(578)

(587)

Other

(1,017)

(46)

0

0

Net Cash Flow

931

(874)

3,326

6,744

Opening net debt/(cash)

 

 

28,661

28,024

28,840

25,514

FX

(633)

58

0

0

Other non-cash movements

339

0

0

Closing net debt/(cash)

 

 

28,024

28,840

25,514

18,770

Source: Company accounts, Edison Investment Research

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Ebiquity and prepared and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and 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 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. This document is provided 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.
Edison has a restrictive policy relating to personal dealing. 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. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. 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. 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 (ie 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. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. 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.

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

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Ebiquity and prepared and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and 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 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. This document is provided 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.
Edison has a restrictive policy relating to personal dealing. 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. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. 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. 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 (ie 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. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. 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.

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

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