Last close As at 06/08/2026
—
— 0.00 (0.00%)
Market capitalisation
—
Research: TMT
The Marketing Group’s Q3 results show that it is now properly focused on growing the business, with group agencies worldwide taking on larger pieces of work in collaboration. EBITDA margin to net revenue has grown in each of the last three quarters and we have moved our full year, FY18 and FY19 earnings’ forecasts ahead by c 10%. Net cash at the end of the quarter had increased to €1.7m from €0.9m at end June. This is facilitating investment in new initiatives, including the group’s new blockchain-enabled global media agency, Truth. The rating should start to improve as confidence builds that management can deliver on its strategy.
The Marketing Group |
Q3 update gives reassurance and upgrade |
Q3 results |
Media |
15 November 2017 |
Share price performance
Business description
Next events
Analysts
The Marketing Group is a research client of Edison Investment Research Limited |
|||||||||||||||||||||||||||||||||||||||||||||||
The Marketing Group’s Q3 results show that it is now properly focused on growing the business, with group agencies worldwide taking on larger pieces of work in collaboration. EBITDA margin to net revenue has grown in each of the last three quarters and we have moved our full year, FY18 and FY19 earnings’ forecasts ahead by c 10%. Net cash at the end of the quarter had increased to €1.7m from €0.9m at end June. This is facilitating investment in new initiatives, including the group’s new blockchain-enabled global media agency, Truth. The rating should start to improve as confidence builds that management can deliver on its strategy.
Year end |
Turnover (€m) |
PBT* |
EPS* |
DPS |
P/E |
EV/EBITDA (x) |
Yield |
12/16** |
15.8 |
2.2 |
11.3 |
0.0 |
3.7 |
5.7 |
0.0 |
12/17e |
26.8 |
1.7 |
4.1 |
0.0 |
10.2 |
6.9 |
0.0 |
12/18e |
29.6 |
2.1 |
4.6 |
0.0 |
9.1 |
5.8 |
0.0 |
12/19e |
32.5 |
2.5 |
5.3 |
0.0 |
7.9 |
4.8 |
0.0 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. **Not restated for disposals.
Progress on the ground
Turnover of €7.0m (Q2: €6.3m) contained a one-off element (of undisclosed scale) from media business over the course of the general election in New Zealand, where the National Party is a client. The theory of global teamwork is now being put into practice with collaborative pitches, with account management close to the client and the subsequent implementation work done in the group agency best placed to deliver on the brief, regardless of geographic location. This approach is facilitated by TMG’s internally-developed inter-agency collaboration platform, Temba, launched in August 2017. It should help TMG achieve scalability without needing to replicate resource, driving margin alongside net revenue growth.
Cash for growth, innovation investment
Net cash at end Q317 was €1.7m and our model shows this increasing to €3.3m by the year-end (was €3.2m). This level of funding means that the working capital requirements of growth will be met from cash flow, with some flexibility for further complementary acquisitions. TMG has also launched a new agency, Truth, based out of London but also operating in the US, Singapore, New Zealand and Australia. It is a blockchain-based media planning and buying agency, providing validation all through the process, thereby addressing major concerns over media transparency. It will be led by Mary Keane-Dawson, who joined the group earlier in the year
Valuation: No credit yet for improved outlook
The current valuation has stabilised in a range of €0.40 to €0.50 over the last couple of months but this price does not yet reflect the enhanced growth prospects from the agencies working collaboratively and the associated margin expansion. Smaller marketing services groups currently trade on a current year P/E of 12.2x and on an EV/EBITDA of 8.5x. As TMG starts to build a record for delivering against market expectations, then we would expect the valuation discount to peers to close.
Quarter-on-quarter progress
As described in our Initiation note in September, TMG restated its Q117 numbers to reflect disposals (financial information from FY16 has not been restated and so is excluded from the table below and we have no given year-on-year comparisons). This shows the consecutive progress through the year to date. As with many agency groups, the gross profit (net revenue) line is the better indicator of growth, due to the impact of put through costs on the purchase of media.
We have moved our 2017 full year numbers ahead (see Exhibit 2) but have stayed relatively cautious on our Q4 assumptions, as Q3 had the one-off benefit in New Zealand and we are reluctant to extrapolate. Our estimates for FY18 and for FY19 are lifted by 10%, predicated on net revenue growing by 12% in FY18 and 11% the year after from the existing group network of agencies.
Exhibit 1: Quarterly performance and forecast
€m |
Turnover |
Net revenue |
EBITDA |
EBITDA/net revenue margin |
Q117 |
7.190 |
4.832 |
0.125 |
2.6% |
Q117 restated |
6.217 |
4.094 |
0.298 |
7.3% |
Q217 |
6.330 |
4.315 |
0.473 |
11.0% |
H117 |
12.547 |
8.409 |
0.771 |
9.2% |
Q317 |
7.043 |
4.260 |
0.679 |
15.9% |
Q417e |
7.210 |
4.231 |
0.450 |
10.6% |
FY17e |
26.800 |
16.900 |
1.900 |
11.2% |
FY18e |
29.600 |
18.944 |
2.280 |
12.0% |
FY19e |
32.500 |
20.963 |
2.721 |
13.0% |
Source: Company accounts, Edison Investment Research
It is still very early days for the group and for the management team, who have only been fully in place from Q117. The growth plan which has been outlined, and which was described in more detail in our initiation note, should lead to gross profit moving ahead more strongly than the broader agency peer group. It should also allow for further margin expansion to (and possibly) beyond industry levels. We consider these industry margins to be running currently in the low-to-mid teens against gross revenue, high teens to low 20s against net revenue.
Exhibit 2: Revisions to forecasts
EPS (c) |
PBT (€m) |
EBITDA (€m) |
|||||||
Old |
New |
% chg. |
Old |
New |
% chg. |
Old |
New |
% chg. |
|
2017e |
3.76 |
4.13 |
+10 |
1.55 |
1.70 |
+10 |
1.75 |
1.90 |
+9 |
2018e |
4.19 |
4.61 |
+10 |
1.86 |
2.05 |
+10 |
2.09 |
2.28 |
+9 |
2019e |
4.85 |
5.34 |
+10 |
2.27 |
2.50 |
+10 |
2.49 |
2.72 |
+9 |
Source: Edison Investment Research
Exhibit 3: Financial summary
€000s |
2016 |
2017e |
2018e |
2019e |
||
31-December |
IFRS |
IFRS |
IFRS |
IFRS |
||
INCOME STATEMENT |
||||||
Turnover |
|
|
15,843 |
26,800 |
29,600 |
32,500 |
Cost of Sales |
(5,986) |
(9,900) |
(10,656) |
(11,538) |
||
Net Revenue |
9,857 |
16,900 |
18,944 |
20,963 |
||
EBITDA |
|
|
2,316 |
1,900 |
2,280 |
2,721 |
Operating profit (before amort. and except.) |
|
2,210 |
1,762 |
2,080 |
2,521 |
|
Amortisation of acquired intangibles |
(1) |
0 |
0 |
0 |
||
Exceptionals |
0 |
(43,576) |
0 |
0 |
||
Share-based payments |
0 |
0 |
0 |
0 |
||
Reported operating profit |
2,209 |
(41,814) |
2,080 |
2,521 |
||
Net Interest |
(56) |
(62) |
(30) |
(21) |
||
Joint ventures & associates (post tax) |
0 |
0 |
0 |
0 |
||
Exceptionals |
0 |
0 |
0 |
0 |
||
Profit Before Tax (norm) |
|
|
2,154 |
1,700 |
2,050 |
2,500 |
Profit Before Tax (reported) |
|
|
2,153 |
(41,876) |
2,050 |
2,500 |
Reported tax |
(164) |
(209) |
(430) |
(650) |
||
Profit After Tax (norm) |
1,990 |
1,360 |
1,640 |
1,900 |
||
Profit After Tax (reported) |
1,989 |
(42,085) |
1,619 |
1,850 |
||
Minority interests |
0 |
0 |
0 |
0 |
||
Discontinued operations |
0 |
0 |
0 |
0 |
||
Net income (normalised) |
1,990 |
1,360 |
1,640 |
1,900 |
||
Net income (reported) |
1,989 |
(42,085) |
1,619 |
1,850 |
||
Average Number of Shares Outstanding (m) |
18 |
32 |
35 |
35 |
||
EPS - normalised (c) |
|
|
11.27 |
4.21 |
4.69 |
5.44 |
EPS - normalised fully diluted (c) |
|
|
11.27 |
4.13 |
4.61 |
5.34 |
EPS - basic reported (€) |
|
|
11.26 |
(130.33) |
4.63 |
5.29 |
Dividend (c) |
0.00 |
0.00 |
0.00 |
0.00 |
||
Revenue growth (%) |
N/A |
69.2 |
10.4 |
9.8 |
||
Gross Margin (%) |
62.2 |
63.1 |
64.0 |
64.5 |
||
EBITDA/Gross Profit Margin (%) |
23.5 |
11.2 |
12.0 |
13.0 |
||
Normalised Operating/Gross Profit Margin |
22.4 |
10.4 |
11.0 |
12.0 |
||
BALANCE SHEET |
||||||
Fixed Assets |
|
|
74,184 |
30,772 |
30,772 |
30,772 |
Intangible Assets |
73,598 |
30,199 |
30,199 |
30,199 |
||
Tangible Assets |
540 |
527 |
527 |
527 |
||
Investments & other |
46 |
46 |
46 |
46 |
||
Current Assets |
|
|
9,031 |
9,536 |
15,804 |
18,546 |
Stocks |
379 |
379 |
379 |
379 |
||
Debtors |
6,234 |
6,873 |
11,678 |
12,822 |
||
Cash & cash equivalents |
2,418 |
2,284 |
3,747 |
5,345 |
||
Other |
0 |
0 |
0 |
0 |
||
Current Liabilities |
|
|
(11,447) |
(7,993) |
(10,939) |
(11,831) |
Creditors |
(5,749) |
(4,974) |
(9,923) |
(10,815) |
||
Tax and social security |
(773) |
(773) |
(773) |
(773) |
||
Short term borrowings |
(843) |
(543) |
(243) |
(243) |
||
Other |
(4,082) |
(1,703) |
0 |
0 |
||
Long Term Liabilities |
|
|
(557) |
(557) |
(557) |
(557) |
Long term borrowings |
(163) |
(163) |
(163) |
(163) |
||
Other long term liabilities |
(394) |
(394) |
(394) |
(394) |
||
Net Assets |
|
|
71,211 |
31,758 |
35,080 |
36,930 |
Minority interests |
0 |
0 |
0 |
0 |
||
Shareholders' equity |
|
|
71,211 |
31,758 |
35,080 |
36,930 |
CASH FLOW |
||||||
Operating Cash Flow |
554 |
1,900 |
2,280 |
2,721 |
||
Working capital |
(864) |
(1,414) |
144 |
(252) |
||
Exceptional & other |
0 |
0 |
0 |
0 |
||
Tax |
162 |
(209) |
(430) |
(650) |
||
Net operating cash flow |
|
|
(148) |
277 |
1,993 |
1,819 |
Capex |
(136) |
(125) |
(200) |
(200) |
||
Acquisitions/disposals |
2,410 |
(177) |
0 |
0 |
||
Net interest |
(56) |
(62) |
(30) |
(21) |
||
Equity financing |
0 |
4 |
0 |
0 |
||
Dividends |
0 |
0 |
0 |
0 |
||
Other |
(354) |
0 |
0 |
0 |
||
Net Cash Flow |
1,716 |
(83) |
1,763 |
1,598 |
||
Opening net debt/(cash) |
|
|
0 |
(1,412) |
(1,578) |
(3,341) |
FX |
(306) |
249 |
0 |
0 |
||
Other non-cash movements |
2 |
0 |
0 |
0 |
||
Closing net debt/(cash) |
|
|
(1,412) |
(1,578) |
(3,341) |
(4,939) |
Source: Company accounts, Edison Investment Research
|
|
Research: Industrials
Over the last three years, Leclanché has been transformed into a vertically integrated group. It has begun work on a multi-million contract for one of the world’s largest stationary battery energy storage systems to date, supplying not only the battery modules but also the system integration and engineering, procurement and construction (EPC) work. It has also established a presence in the e-transport sector, for example partnering with Skoda Electric on battery solutions for e-buses. Completion of the ongoing financing round is required to enable the group to deliver against its pipeline totalling over 450MWh of energy storage, scheduled for delivery during FY17, FY18 and FY19.