Ebiquity — Activity levels recovering

Ebiquity (AIM: EBQ)

Last close As at 18/04/2024

35.50

0.00 (0.00%)

Market capitalisation

49m

More on this equity

Research: TMT

Ebiquity — Activity levels recovering

Ebiquity’s pre-close trading update indicates recovery as expected in H220, from both a pick-up in demand from existing clients and a good performance in winning new business. The group therefore returned to profit in the second half, leaving it with a small adjusted operating loss for the full year, slightly below our earlier estimate of a small profit. The performance on net debt was better than our modelling, with the group ending the year with net debt of £7.7m (Edison estimate £8.8m). Ebiquity’s share price has not kept pace with those of the UK-based agencies since our November Outlook report, exaggerating the rating differential.

Fiona Orford-Williams

Written by

Fiona Orford-Williams

Director, TMT

TMT

Ebiquity

Activity levels recovering

Trading update

Media

15 February 2021

Price

19p

Market cap

£15m

Net debt (£m) at 31 December 2020

7.7

Shares in issue

78.4m

Free float

94.8%

Code

EBQ

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(1.8)

(8.8)

(43.7)

Rel (local)

(0.2)

(13.3)

(37.1)

52-week high/low

39.0p

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

Final results

25 March 2021

Analyst

Fiona Orford-Williams

+44 (0)20 3077 5739

Ebiquity is a research client of Edison Investment Research Limited

Ebiquity’s pre-close trading update indicates recovery as expected in H220, from both a pick-up in demand from existing clients and a good performance in winning new business. The group therefore returned to profit in the second half, leaving it with a small adjusted operating loss for the full year, slightly below our earlier estimate of a small profit. The performance on net debt was better than our modelling, with the group ending the year with net debt of £7.7m (Edison estimate £8.8m). Ebiquity’s share price has not kept pace with those of the UK-based agencies since our November Outlook report, exaggerating the rating differential.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

12/18

69.4

5.2

3.5

0.7

5.4

3.7

12/19

68.7

5.3

3.6

0.0

5.3

N/A

12/20e

57.0

(0.5)

(0.8)

0.0

N/A

N/A

12/21e

60.0

3.1

2.6

0.5

7.3

2.6

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

Market set for recovery in FY21

In FY20, the global advertising market was severely affected by the COVID-19 pandemic from Q2 on, but the recovery during H220 was stronger than had initially been expected. Key commentators now expect the global market to have declined between 4% and 9% for the year, with a steeper decline in TV and traditional media advertising spend and growth in digital spend. All the main forecasters expect a good rebound in FY21, with comparators difficult in Q1 before easing in Q2. For FY21, estimates are for global growth in a range of 6–12%, with most assuming that FY19 spending levels will not be recouped before FY22. Again, there are large variations between geographies and by media type.

The main opportunity is in digital

The growth in the digital advertising market has been boosted by the shift in consumer spending online. There is a clear need for credible products to provide accurate and actionable information to brand owners regarding the efficacy of their online advertising spend. Ebiquity's new digital reporting service, Digital Decisions, is particularly aimed at this market. The group already works with over 70 of the world’s largest advertisers, so the news that it is winning new business as well as benefiting from a resurgence in confidence bodes well. Management reports that the group has made an encouraging start to the new financial year.

Valuation: Valuation differential increased

As prospects for recovery in advertising spend have strengthened, share prices of the smaller agency groups have risen notably, with those stocks used in our peer comparison in our November note up by an average of 75% since that date, while Ebiquity’s price has dipped 9%. This has exacerbated the valuation differential. For Ebiquity to be priced at parity on FY21 P/E, EV/EBIT and EV/EBITDA multiples, the share price would need to reach 54p, from the 28p calculated then.

Exhibit 1: Financial summary

£000s

2018

2019

2020e

2021e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

69,368

68,733

57,000

60,000

EBITDA

 

 

7,761

9,203

1,801

5,432

Operating Profit (before amort. and except.)

 

 

6,342

6,167

375

4,006

Amortisation of acquired intangibles

(1,240)

(1,169)

(1,112)

(1,112)

Exceptionals

(6,233)

(9,044)

(914)

0

Share-based payments

(223)

(117)

1,651

(150)

Reported operating profit

(1,354)

(4,163)

(0)

2,744

Net Interest

(1,151)

(898)

(875)

(925)

Joint ventures & associates (post tax)

0

0

0

0

Exceptionals

0

0

0

0

Profit Before Tax (norm)

 

 

5,191

5,269

(500)

3,081

Profit Before Tax (reported)

 

 

(2,504)

(5,061)

(875)

1,819

Reported tax

(1,985)

(1,931)

130

(739)

Profit After Tax (norm)

3,413

3,338

(370)

2,341

Profit After Tax (reported)

(4,489)

(6,538)

(745)

1,079

Minority interests

(489)

(451)

(250)

(250)

Discontinued operations

(845)

(1,018)

0

0

Net income (normalised)

3,551

2,875

(619)

2,093

Net income (reported)

(5,334)

(7,556)

(995)

829

Average Number of Shares Outstanding (m)

78.6

79.5

79.0

78.5

EPS - normalised (p)

 

 

3.7

3.6

(0.8)

2.7

EPS - normalised continuing diluted (p)

 

 

3.5

3.6

(0.8)

2.6

EPS - basic reported (p)

 

 

(7.4)

(10.1)

(1.3)

1.1

Dividend per share (p)

0.71

0.00

0.00

0.50

EBITDA Margin (%)

11.2

13.4

3.2

9.1

Normalised Operating Margin (%)

9.1

9.0

0.7

6.7

BALANCE SHEET

Fixed Assets

 

 

45,400

47,060

45,743

43,861

Intangible Assets

43,251

35,172

34,931

33,793

Tangible Assets

1,170

10,902

9,458

8,714

Investments & other

979

986

1,354

1,354

Current Assets

 

 

65,935

35,822

35,023

37,010

Stocks

0

0

0

0

Debtors

29,408

27,586

24,205

25,479

Cash & cash equivalents

8,793

8,236

10,818

11,530

Other

27,734

0

0

0

Current Liabilities

 

 

(27,539)

(21,195)

(19,044)

(18,984)

Creditors

(18,150)

(14,659)

(12,862)

(13,068)

Tax and social security

(1,681)

(4,424)

(3,812)

(3,812)

Short term borrowings

(2,314)

36

45

45

Other

(5,394)

(2,148)

(2,415)

(2,149)

Long Term Liabilities

 

 

(36,282)

(23,047)

(28,562)

(28,119)

Long term borrowings

(33,965)

(13,868)

(19,706)

(19,706)

Other long-term liabilities

(2,317)

(9,179)

(8,856)

(8,413)

Net Assets

 

 

47,514

38,640

33,160

33,768

Minority interests

992

1,179

1,179

1,179

Shareholders' equity

 

 

46,522

37,461

31,981

32,589

CASH FLOW

Op Cash Flow before WC and tax

7,761

9,203

1,801

5,432

Working capital

(367)

(1,302)

1,710

(1,068)

Exceptional & other

(6,233)

(2,244)

(914)

0

Tax

(1,952)

(1,345)

(1,870)

(739)

Operating Cash Flow

 

 

(791)

4,312

727

3,624

Capex

(1,784)

(3,235)

(814)

(1,500)

Acquisitions/disposals

(858)

23,862

(3,354)

(486)

Net interest

(1,068)

(718)

(875)

(925)

Equity financing

252

253

612

0

Dividends

(791)

(1,256)

(1,315)

0

Other

0

0

0

0

Net Cash Flow

(5,040)

23,218

(5,019)

713

Opening net debt/(cash)

 

 

28,840

27,486

5,596

8,843

FX

(91)

(204)

380

0

Other non-cash movements

6,485

(1,124)

1,392

0

Closing net debt/(cash)

 

 

27,486

5,596

8,843

8,131

Source: Company accounts, Edison Investment Research. Note: Estimates unchanged


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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