The MISSION Group — Looking for the bounce back

The MISSION Group (AIM: TMG)

Last close As at 26/04/2024

46.00

0.00 (0.00%)

Market capitalisation

GBP42m

More on this equity

Research: TMT

The MISSION Group — Looking for the bounce back

The MISSION’s trading update indicates the group had a comfortably better Q4 than expected, with the full-year PBT over £1m, against our forecast £0.5m. Cash performance was significantly ahead, with a year-end net debt position of £1.3m allowing the payment of the delayed final 1.53p dividend from FY19. We will update our FY20 numbers with the full results in April. We have trimmed our FY21 forecast revenue by 7.5% to reflect the ongoing impact of the pandemic in H121, reducing PBT from £9.0m to £7.1m. We also publish our first thoughts on FY22, on an improving trend. The shares remain priced at a significant discount to peers on earnings multiples.

Fiona Orford-Williams

Written by

Fiona Orford-Williams

Director, TMT

TMT

The MISSION Group

Looking for the bounce back

Year-end trading update

Media

20 January 2021

Price

66p

Market cap

£60m

Net debt (£m) at 31 December 2020

1.3

Shares in issue

91.0m

Free float

52.7%

Code

TMG

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

9.0

9.0

(15.8)

Rel (local)

6.0

(4.8)

(5.5)

52-week high/low

108p

36p

Business description

The MISSION Group is a collective of creative integrated and specialist agencies, employing 1,150 people in the UK, Europe, Asia and the US.

Next events

Final results

14 April 2021

Analyst

Fiona Orford-Williams

+44 (0)20 3077 5739

The MISSION Group is a research client of Edison Investment Research Limited

The MISSION’s trading update indicates the group had a comfortably better Q4 than expected, with the full-year PBT over £1m, against our forecast £0.5m. Cash performance was significantly ahead, with a year-end net debt position of £1.3m allowing the payment of the delayed final 1.53p dividend from FY19. We will update our FY20 numbers with the full results in April. We have trimmed our FY21 forecast revenue by 7.5% to reflect the ongoing impact of the pandemic in H121, reducing PBT from £9.0m to £7.1m. We also publish our first thoughts on FY22, on an improving trend. The shares remain priced at a significant discount to peers on earnings multiples.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

12/18

77.6

9.2

8.5

2.1

7.8

3.2

12/19

81.0

10.2

9.0

2.3

7.3

3.5

12/20e

62.7

0.5

0.7

0.0

94.3

0.0

12/21e

70.4

7.1

6.1

1.8

8.6

2.7

12/22e

76.4

10.5

8.9

2.1

7.3

3.2

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptionals and share-based payments. FY20 figures do not reflect update.

Set for margin uplift

As described in our last update note in December, the group has been making good progress on its objectives to deliver profitable growth through driving revenues by leveraging its skill set across the agencies and rebuilding revenues from its exceptionally loyal client base. FY21e profits will benefit from the reduced overhead of fewer London offices, plus the uplift to margin from the roll out of MISSION Made. This is a 24/7 centralised production, product and innovation studio to supply the group agencies with digital and motion graphics capability launched with four participating agencies in October 2020. As normal, H2 is expected to outperform H1, with the pattern in FY21 likely to be exaggerated by ongoing economic restrictions relating to the COVID-19 pandemic. Our initial thoughts on FY22 are predicated on group revenue slightly outstripping that achieved in FY19.

Strengthened balance sheet gives flexibility

The indicated year-end net cash position of £1.3m is well ahead of the £8.2m we had modelled, and we await the release of full-year numbers in April to identify where the benefit has arisen. This has allowed for the reinstatement of the dividend, paused as the pandemic spread in Q220. It may also allow for further acquisitions to add a capability, a sector or a geographic exposure.

Valuation: Discount to peers persists

As is the case for MISSION, forecasts for peers remain highly subjective to assumptions on the speed and scale of the recovery, so we have continued to look at an average over FY19, FY20e and FY21e. MISSION’s shares trade at a discount to peers on EV/EBIT (11.5x 2021) and P/E on this basis. Parity indicates a share price of 87.6p (up from 76.9p in December), reflecting positive share price performances in the sector as advertising spending levels look set to recover. This is 33% above the current level.

Exhibit 1: Financial summary

£'000s

2018

2019

2020e

2021e

2022e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Turnover

 

 

159,916

171,091

128,107

146,972

156,619

Cost of Sales

(82,331)

(90,118)

(65,448)

(76,597)

(80,219)

Revenue

77,585

80,972

62,659

70,376

76,400

EBITDA

 

 

11,334

12,225

2,636

8,759

12,151

Operating Profit (before amort. and except.)

 

9,919

10,753

1,386

7,609

11,001

Intangible Amortisation

(1,286)

(1,980)

(1,004)

(1,004)

(1,004)

Headline Adjustments

(546)

(990)

(450)

(500)

(500)

Other

(1)

69

85

90

95

Operating Profit

8,086

7,852

701

6,869

10,256

Net Interest

(735)

(668)

(922)

(599)

(596)

Profit Before Tax (norm)

 

 

9,183

10,154

549

7,100

10,500

Profit Before Tax (FRS 3)

 

 

7,722

8,294

99

5,685

9,130

Tax

(1,710)

(1,868)

32

(1,527)

(2,342)

Profit After Tax (norm)

7,473

8,286

581

5,573

8,158

Profit After Tax (FRS 3)

6,012

6,426

131

4,158

6,788

Average Number of Shares Outstanding (m)

83.3

84.1

88.2

91.1

91.3

EPS - normalised (p)

 

 

8.7

9.5

0.7

6.1

9.0

EPS - normalised fully diluted (p)

 

 

8.5

9.0

0.7

6.1

8.9

EPS - (IFRS) (p)

 

 

7.1

7.5

0.0

4.4

7.3

Dividend per share (p)

2.1

2.3

0.0

1.8

2.1

Gross Margin (%)

48.5

47.3

48.9

47.9

48.8

EBITDA Margin (%)

7.1

7.1

2.1

6.0

7.8

Operating Margin (before GW and except.) (%)

6.2

6.3

1.1

5.2

7.0

BALANCE SHEET

Fixed Assets

 

 

107,002

107,396

109,241

111,175

110,146

Intangible Assets

96,121

95,859

98,304

100,388

99,409

Tangible Assets

10,858

11,360

10,760

10,610

10,560

Investments/ other

23

177

177

177

177

Current Assets

 

 

46,476

47,117

34,772

38,386

43,527

Stocks

850

1,091

792

927

971

Debtors

39,727

40,998

32,290

35,032

37,331

Cash

5,899

5,028

1,690

2,427

5,225

Other

0

0

0

0

0

Current Liabilities

 

 

(40,986)

(40,181)

(34,108)

(37,416)

(36,316)

Creditors

(40,986)

(40,181)

(34,108)

(37,416)

(36,316)

Short term borrowings

0

0

0

0

0

Long Term Liabilities

 

 

(24,896)

(22,031)

(19,936)

(16,873)

(17,056)

Long term borrowings

(9,886)

(9,927)

(9,927)

(9,927)

(9,927)

Other long term liabilities

(15,010)

(12,104)

(10,009)

(6,946)

(7,129)

Net Assets

 

 

87,596

92,301

89,969

95,272

100,301

CASH FLOW

Operating Cash Flow

 

 

11,684

10,454

2,411

8,608

8,965

Net Interest

(826)

(626)

(922)

(599)

(596)

Tax

(1,906)

(1,805)

32

(1,527)

(2,342)

Capex

(1,361)

(2,169)

(900)

(1,350)

(1,350)

Acquisitions/disposals

(670)

(2,839)

(3,424)

(3,063)

0

Financing/other

(1,938)

(2,096)

(536)

(319)

(175)

Dividends

(1,695)

(1,831)

0

(1,013)

(1,704)

Net Cash Flow

3,288

(912)

(3,338)

737

2,798

Opening net debt/(cash)

 

 

7,348

3,987

4,899

8,237

7,500

HP finance leases initiated

0

0

0

0

0

Other

73

0

0

0

0

Closing net debt/(cash)

 

 

3,987

4,899

8,237

7,500

4,702

Source: Company accounts, Edison Investment Research


General disclaimer and copyright

This report has been commissioned by the MISSION Group and prepared and issued by Edison, in consideration of a fee payable by the MISSION Group. 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

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. 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 the MISSION Group and prepared and issued by Edison, in consideration of a fee payable by the MISSION Group. 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

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. 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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