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Last close As at 08/06/2023
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Market capitalisation
GBP46m
Research: TMT
The MISSION Group’s FY22 results are in line with the year-end trading update at the operating income level and a little ahead at the headline PBT and EPS level. Organic revenue growth of 6% was boosted to +10% by acquisition, with a headline operating margin of 10.9%, a shade behind the prior year figure of 11.1% reflecting well-documented cost pressures. The group has been extending its offering through acquisition and organic growth, with a particular focus on data, digital and social media. Management aspires to reach £100m of operating income by FY25, with margin improvements as it reaps the benefits of scale. FY23 has reportedly started well, with further new client wins. The shares continue to trade at a substantial discount to peers, which we regard as overstated.
The MISSION Group |
FY25 operating income target of £100m
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28 March 2023 |
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The MISSION Group’s FY22 results are in line with the year-end trading update at the operating income level and a little ahead at the headline PBT and EPS level. Organic revenue growth of 6% was boosted to +10% by acquisition, with a headline operating margin of 10.9%, a shade behind the prior year figure of 11.1% reflecting well-documented cost pressures. The group has been extending its offering through acquisition and organic growth, with a particular focus on data, digital and social media. Management aspires to reach £100m of operating income by FY25, with margin improvements as it reaps the benefits of scale. FY23 has reportedly started well, with further new client wins. The shares continue to trade at a substantial discount to peers, which we regard as overstated.
Further strengthening of the foundations
Since the start of the year, The MISSION has expanded its offering further with the acquisition of global data science and digital analytics consultancy Mezzo Labs (price undisclosed), and established Turbine, an integrated growth digital agency specialising in measurable media, as discussed with CEO James Clifton in this interview. FY23 has reportedly started well, with new client wins such as Macmillan, adding to a blue-chip roster exceptional in the longevity of its client relationships, with 47% of FY22 revenue coming from clients of over five years’ standing. The newly stated ambition to reach £100m of operating income implies an acceleration of top-line growth from the current market forecast and, in our view, looks ambitious but achievable. With the restructuring, clearer areas of focus and greater cohesion across the group, we believe there is a clear path to margin expansion.
Comfortable debt headroom despite restructuring
End FY22 net debt was £11.4m, from £7.1m at the half-year, post the cash impact of previously flagged restructuring charges. Including the non-cash goodwill write-down, exceptional restructuring costs were £7.0m for the year. Since the year end, the group acquired Mezzo Labs and has a further £1.4m of consideration for earlier acquisitions due during FY23. Group facilities are £20m and post the restructuring, cash conversion should be more positive in FY23. The bulk of additional acquisition obligations fall in FY25 and FY26, implying comfortable cover.
Valuation: Still well below peers
The MISSION’s share price is up 21% year to date, a better performance than that of other quoted smaller global advertising stocks, up 11% on average. Nevertheless, the valuation still stands at a marked discount to the FY23e peer average of 13.9x P/E and 7.2x EV/EBITDA (FY24e:10.5x and 5.5x, respectively). Parity across both metrics for both years implies a share price of 92p.
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Consensus estimates
Source: Refinitiv. Note: *PBT and EPS are normalised. |
The MISSION Group is a research client of Edison Investment Research Limited.
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Research: Healthcare
AFT Pharmaceuticals (AFT) has announced that it has signed three additional licensing agreements for Maxigesic IV – with Labatec in Switzerland and Pharma Bavaria in Argentina and Paraguay. The product franchise continues its international expansion, with the deals following the recent launches of Maxigesic IV in five European countries. To date (FY23, ending 31 March) AFT’s flagship product, Maxigesic, is available in 61 countries (across all dose forms), up 15 from the prior year. This is marginally lower than the target of 63 countries for FY23, but the company also announced achieving its first product registration in China with Crystawash Extend, its long-lasting sanitiser. China launches are generally highly sought after, and this announcement should provide access to the larger offline retail and hospitals segments (c 75% of the over-the-counter (OTC) market in China). Currently AFT only has an online retail presence in China (under the Cross Border E-Commerce OTC scheme).
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