Currency in GBP
Last close As at 25/03/2023
GBP0.52
▲ −0.50 (−0.95%)
Market capitalisation
GBP61m
Research: TMT
Ebiquity’s trading update shows revenues are in line with our forecasts, but with a much better operating profit performance at £4.7m versus £4.1m. This reflects strong progress made in its newer (higher margin) digital media solutions and prudent cost management, accelerating the timing of modelled margin recovery. It has also translated into faster improvement in the balance sheet, with year-end net debt of £4.8m, against our forecast £8.7m. The group has made a small acquisition in Canada, extending North American capability. The shares have performed very strongly over the last year, yet the rating remains attractive.
Ebiquity |
Margin boost from digital media solutions |
Trading update |
Media |
1 February 2022 |
Share price performance
Business description
Next events
Analyst
Ebiquity is a research client of Edison Investment Research Limited |
Ebiquity’s trading update shows revenues are in line with our forecasts, but with a much better operating profit performance at £4.7m versus £4.1m. This reflects strong progress made in its newer (higher margin) digital media solutions and prudent cost management, accelerating the timing of modelled margin recovery. It has also translated into faster improvement in the balance sheet, with year-end net debt of £4.8m, against our forecast £8.7m. The group has made a small acquisition in Canada, extending North American capability. The shares have performed very strongly over the last year, yet the rating remains attractive.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/19 |
68.1 |
4.7 |
2.9 |
0.0 |
20.4 |
0.0 |
12/20 |
55.9 |
(1.3) |
(1.9) |
0.0 |
N/A |
0.0 |
12/21e |
63.0 |
3.8 |
3.7 |
0.5 |
16.0 |
0.8 |
12/22e |
69.3 |
5.3 |
4.9 |
1.3 |
12.1 |
2.2 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Increased FY21 figures, FY22 maintained
We have raised our FY21 earnings numbers to reflect the trading update, which indicates the digital media solutions have been performing well. With the full-year results on 25 March, we expect Ebiquity to update on the operational KPI metrics (see our September update), which will offer greater granularity, and give more details on products being rolled out. The adjusted operating margin forecast for FY21 was lifted from 5.7% to 6.5% at the interims and is now 7.5%, implying very good cost control and an acceleration of the recovery previously expected to be more weighted to FY22e. We leave our FY22 forecasts unchanged for now, pending publication of the full FY21 results. We anticipate the adjusted operating margin increasing to 8.9% (unchanged) as the mix shifts towards digital solutions.
Front foot from strong cash performance
Good H221 trading has translated into a very strong cash performance, with year-end net debt of £4.8m (being cash of £13.2m and gross debt of £18.0m). This is considerably better than anticipated and reflects tight control of working capital. The group has also announced a small acquisition in Canada of the market’s leading media performance consultancy, with revenues of C$1.1m. While modest, we take this as an indication of greater management confidence.
Valuation: Sizeable discount remains
The share price has trebled from its nadir of 18.4p in February 2021, partly due to the more robust recovery in global advertising markets, but also attributable to much greater confidence in the group’s business model and potential for growth. Despite the strong share price performance, the rating remains at a sizeable discount to marketing service peers. Parity across FY22 P/E, EV/EBITDA and EV/EBIT would suggest a value of 90p, well ahead of the current price.
Exhibit 1: Financial summary
£000s |
2019 |
2020 |
2021e |
2022e |
||
31-December |
IFRS |
IFRS |
IFRS |
IFRS |
||
INCOME STATEMENT |
31-Dec |
31-Dec |
31-Dec |
31-Dec |
||
Revenue |
|
|
68,133 |
55,907 |
63,000 |
69,300 |
Cost of Sales |
(36,212) |
(31,219) |
(33,390) |
(36,729) |
||
Gross Profit |
31,921 |
24,687 |
29,610 |
32,571 |
||
EBITDA |
|
|
8,603 |
1,797 |
6,215 |
7,650 |
Operating Profit (before amort. and except.) |
|
|
5,567 |
(334) |
4,700 |
6,200 |
Amortisation of acquired intangibles |
(1,169) |
(1,122) |
(1,122) |
(1,122) |
||
Highlighted items |
(9,044) |
(3,325) |
(3,153) |
0 |
||
Share-based payments |
(117) |
1,906 |
(150) |
(150) |
||
Reported operating profit |
(4,763) |
(2,875) |
275 |
4,928 |
||
Net Interest |
(898) |
(875) |
(884) |
(900) |
||
Joint ventures & associates (post tax) |
0 |
0 |
0 |
0 |
||
Forex |
0 |
(137) |
0 |
0 |
||
Profit Before Tax (norm) |
|
|
4,669 |
(1,346) |
3,815 |
5,300 |
Profit Before Tax (reported) |
|
|
(5,661) |
(3,887) |
(610) |
4,028 |
Reported tax |
(1,477) |
150 |
(916) |
(1,272) |
||
Profit After Tax (norm) |
2,738 |
(1,372) |
2,900 |
3,364 |
||
Profit After Tax (reported) |
(7,138) |
(3,737) |
(1,525) |
2,756 |
||
Minority interests |
(451) |
(186) |
76 |
(137) |
||
Discontinued operations |
(1,018) |
220 |
0 |
0 |
||
Net income (normalised) |
2,275 |
(1,557) |
2,978 |
3,230 |
||
Net income (reported) |
(8,156) |
(3,703) |
(1,449) |
2,619 |
||
Average Number of Shares Outstanding (m) |
79.5 |
81.6 |
80.6 |
78.6 |
||
EPS - normalised (p) |
|
|
2.9 |
(1.9) |
3.7 |
4.9 |
EPS - normalised continuing diluted (p) |
|
|
2.8 |
(1.9) |
3.7 |
4.9 |
EPS - basic reported (p) |
|
|
(10.8) |
(4.8) |
(1.8) |
3.3 |
Dividend per share (p) |
0.00 |
0.00 |
0.50 |
1.25 |
||
EBITDA Margin (%) |
12.6 |
3.2 |
9.9 |
11.0 |
||
Normalised Operating Margin |
8.2 |
-0.6 |
7.5 |
8.9 |
||
BALANCE SHEET |
||||||
Fixed Assets |
|
|
47,060 |
44,322 |
42,899 |
41,728 |
Intangible Assets |
35,172 |
34,698 |
33,461 |
32,289 |
||
Tangible Assets |
10,902 |
8,199 |
8,013 |
8,014 |
||
Tax, receivables, Investments & other |
986 |
1,425 |
1,425 |
1,425 |
||
Current Assets |
|
|
35,074 |
35,610 |
36,952 |
40,568 |
Stocks |
0 |
0 |
0 |
0 |
||
Debtors |
26,838 |
24,318 |
23,612 |
29,429 |
||
Cash & cash equivalents |
8,236 |
11,121 |
13,200 |
11,000 |
||
Other |
0 |
171 |
140 |
140 |
||
Current Liabilities |
|
|
(21,195) |
(22,189) |
(26,329) |
(27,268) |
Creditors |
(14,659) |
(15,986) |
(17,574) |
(18,513) |
||
Tax and social security |
(4,424) |
(1,953) |
(1,953) |
(1,953) |
||
Short term borrowings (incl. positive loan fees) |
22 |
45 |
45 |
45 |
||
Other incl lease liabilities |
(2,134) |
(4,295) |
(6,847) |
(6,847) |
||
Long Term Liabilities |
|
|
(23,047) |
(26,997) |
(24,293) |
(24,293) |
Long term borrowings |
(13,868) |
(19,675) |
(18,045) |
(18,045) |
||
Other long term liabilities |
(9,179) |
(7,322) |
(6,248) |
(6,248) |
||
Net Assets |
|
|
37,892 |
30,746 |
29,230 |
30,736 |
Minority interests |
1,179 |
442 |
425 |
425 |
||
Shareholders' equity |
|
|
36,713 |
30,304 |
28,805 |
30,311 |
CASH FLOW |
||||||
Op Cash Flow before WC and tax |
8,603 |
1,797 |
6,215 |
7,650 |
||
Working capital |
(702) |
4,171 |
2,248 |
(4,877) |
||
Exceptional & other |
(2,962) |
(3,325) |
(520) |
0 |
||
Tax |
(1,345) |
(2,285) |
(914) |
(1,272) |
||
Operating Cash Flow |
|
|
3,594 |
358 |
7,029 |
1,502 |
Capex |
(3,235) |
(1,316) |
(1,500) |
(1,499) |
||
Acquisitions/disposals |
23,862 |
(2,118) |
(486) |
(460) |
||
Net interest |
(718) |
(550) |
(884) |
(900) |
||
Equity financing |
253 |
0 |
0 |
0 |
||
Dividends |
(1,052) |
(444) |
(450) |
(843) |
||
Other |
0 |
0 |
0 |
0 |
||
Net Cash Flow |
22,704 |
(4,070) |
3,709 |
(2,200) |
||
Opening net debt/(cash) |
|
|
27,486 |
5,610 |
8,509 |
4,800 |
FX |
(204) |
117 |
0 |
0 |
||
Other non-cash movements |
(624) |
1,055 |
0 |
0 |
||
Closing net debt/(cash) |
|
|
5,610 |
8,509 |
4,800 |
7,000 |
Source: Company accounts, Edison Investment Research
|
|
Research: Healthcare
With a new CEO at the helm, BGBIO has completed an internal review and outlined its strategic priorities for bemcentinib. Building on impressive Phase II BGBC003 data presented at both EHA and ASH in 2021, a randomised, placebo-controlled trial for second-line AML is due to start H222. We assume the trial will be registrational, but note this is subject to outcomes from its discussions with regulators. In NSCLC, data from the ongoing Phase II BGBC008 trial are expected during H122 and should provide a better picture of bemcentinib’s potential positioning in the second-line treatment setting. Additionally, the company will now also pursue a first-line NSCLC opportunity, focusing on patients with STK11 mutations, and will initiate a Phase Ib in H122. The COVID-19 opportunity remains and in H122 BGBIO will use the EU-SolidAct platform trial to confirm the initial efficacy signals. We value BGBIO at NOK55.7/share.
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