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Last close As at 26/05/2023
-4.75
▲ 1.25 (26.32%)
Market capitalisation
GBP13m
Research: TMT
Mirriad is making significant progress in building partnerships on the content supply side and with blue-chip advertisers and agencies, particularly in the important North American market. Newly defined KPIs will help clarify further headway here. Technical development continues to focus on offering full programmatic delivery, which is key to Mirriad’s innovative advertising solution becoming totally assimilated into the ecosystem. FY21 results were as flagged in February’s trading update, with year-end net cash of £24.5m. We reinstate illustrative forecasts, remaining cautious on our assumptions of the speed of industry adoption.
Mirriad Advertising |
US momentum accelerating |
FY21 results |
Media |
12 May 2022 |
Share price performance
Business description
Next events
Analyst
Mirriad Advertising is a research client of Edison Investment Research Limited |
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Mirriad is making significant progress in building partnerships on the content supply side and with blue-chip advertisers and agencies, particularly in the important North American market. Newly defined KPIs will help clarify further headway here. Technical development continues to focus on offering full programmatic delivery, which is key to Mirriad’s innovative advertising solution becoming totally assimilated into the ecosystem. FY21 results were as flagged in February’s trading update, with year-end net cash of £24.5m. We reinstate illustrative forecasts, remaining cautious on our assumptions of the speed of industry adoption.
Year end |
Revenue (£m) |
EBITDA |
PBT* |
EPS* |
P/E |
Yield |
12/20 |
2.2 |
(8.6) |
(9.1) |
(4.2) |
N/A |
N/A |
12/21 |
2.0 |
(11.6) |
(12.0) |
(3.9) |
N/A |
N/A |
12/22e |
3.3 |
(15.0) |
(15.2) |
(5.4) |
N/A |
N/A |
12/23e |
7.8 |
(12.9) |
(13.0) |
(4.7) |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles and exceptional items.
US now driving the growth into FY22
FY21’s figures were affected by the change in business model at Tencent in China, moving from a guaranteed payment on an exclusive basis to a more typical commercial arrangement, with the shift coming at a time when advertiser confidence in the Chinese market was depressed by continuing COVID-19 lockdowns. This resulted in revenues in the territory dropping from £1.8m to £1.0m (of which £0.2m came in H221). This masks the growing momentum in the key US market, with £0.3m of revenues in H121 doubling to £0.6m in H221, representing over 70% of group revenues in H221. We have reinstated tentative forecasts, which come with the proviso that there is limited visibility over campaign numbers and timings. With the new KPIs articulating progress on the supply (partnerships, available minutes of inventory) and demand sides (relationships, partnerships and number of advertisers running campaigns), we should be able to track progress in a more meaningful way. We expect North America to lead the way.
Investing in delivering revenue sooner
Mirriad has made a number of fundamental appointments to help deliver growth, recently adding a head of programmatic partnerships (ex-Verizon, Brightroll) to accelerate the integration of Mirriad’s platform into the adtech ecosystem and a head of studio partnerships (ex-Hallmark, Netflix) to develop content supply from producers and networks (see Flash note). This should help Mirriad step up both the volume and scale of deals. The group had £24.5m of net cash at the year-end, which should see it through to FY23e, despite the higher rate of cash absorption.
Valuation: Discounting good revenue growth
With limited visibility, traditional multiples are unhelpful. A reverse DCF suggests the current share price is factoring in FY24–30 revenue CAGR of 38%, assuming EBITDA margins reach 25% from FY27e (WACC: 10%, 2% terminal growth).
US progress offset by China
Within the reported results, the obvious detractor was the performance in China. Here, the group previously had an exclusive arrangement with Tencent (ie Mirriad could not work with other parties) and was paid a good level of minimum guaranteed income in return. That deal was renegotiated in H121 to a more ‘normal’ commercial arrangement, which enables Mirriad to offer relevant contextual opportunities to advertisers, rather than selling show by show, and removes the restrictions imposed by the exclusivity. The timing of the transfer to the new arrangements was unfortunate in that it coincided with reduced advertiser demand, given the reintroduction of lockdowns that undermined advertiser confidence – particularly global luxury brands wanting to address the Chinese market.
Exhibit 1: Half-year by half-year geographic breakdown
H121 |
% ch |
H221 |
% ch |
2021 |
% |
|
UK |
51,121 |
(28) |
93,188 |
218 |
144,309 |
43 |
US |
266,440 |
332 |
617,808 |
145 |
884,248 |
182 |
China and Singapore |
819,727 |
7 |
161,437 |
(84) |
981,164 |
(44) |
Total |
1,137,288 |
27 |
872,433 |
(32) |
2,009,721 |
(8) |
Source: Company accounts
Our modelling assumes a gentle pick-up in revenues from China from the H221 base, despite further lockdowns.
The operating loss widened in FY21 from £9.1m to £12.0m, as employee costs rose from £7.6m to £9.4m and general and administration costs went up from £3.4m to £4.6m. The bulk of this additional spend was in building the technology team, which grew from 42 to 47 people over the year, and the US team, which increased from seven to 12 staff and has since increased further with investment in sales, account management and business development.
The main engine for growth for the group from FY22 is set to be North America (a partnership was announced in February 2022 with Canada’s ‘largest TV and digital media conglomerate’, which we would assume to be Bell Media).
While we are now reinstating forecasts, they are illustrative rather than definitive. Mirriad’s offering is still a new technology and the pace of adoption is unlikely to be linear, with each project separately assembled and sold. With no committed income (post the expiry of the smaller Tencent rollover payments to March 2022), it will be a while before patterns of repeat purchases/recurring income became apparent, at which point forecasting methodology can become more robust.
The additional investment in headcount, as described above, are primarily to support the North American sales operation and will inevitably mean an increase in operating costs, so we have modelled a higher operating loss for FY22 of £15.2m against £12.0m. This suggests the group would still have around £8.5m of cash by the year-end but would need to look for additional funding during FY23.
Adoption, integration and automation
It is key to Mirriad’s success that it builds both the supply and demand sides of the equation in parallel. The more content that has been ingested and analysed, the more inventory suitable for advertising opportunities is identified. The more inventory that is available, the more attractive the proposition should be for advertisers. For the content providers, the advantage is it should not detract from the viewing experience but gives them another revenue stream. For the advertisers, they are accessing a new channel to reach consumers that increases reach, brand recognition and purchase consideration (supported by research from Nielsen) in a brand-safe environment. ‘Content providers’ is also a category that extends well beyond the streamers, encompassing music video, influencer and other content.
The goal is that Mirriad’s in-content advertising should become a line item in a brand’s marketing budgeting. For that to be achieved to the fullest extent, the inventory needs to be made available programmatically. Amazon’s recent announcement that it is beta testing its own version of virtual product placement has, if anything, accelerated interest in Mirriad’s solution and adds a further stamp of commercial credibility.
Exhibit 2: Financial summary
£m |
2019 |
2020 |
2021 |
2022e |
2023e |
||
31-December |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
INCOME STATEMENT |
|||||||
Revenue |
|
|
1.140 |
2.180 |
2.010 |
3.300 |
7.750 |
Cost of Sales |
(0.178) |
(0.244) |
(0.294) |
(0.495) |
(1.163) |
||
Gross Profit |
0.961 |
1.936 |
1.716 |
2.805 |
6.588 |
||
EBITDA |
|
|
(11.505) |
(8.626) |
(11.579) |
(15.000) |
(12.850) |
Operating profit (before amort. and excepts. & SBP) |
(12.174) |
(9.092) |
(12.019) |
(15.200) |
(13.000) |
||
Amortisation of acquired intangibles |
0.000 |
0.000 |
0.000 |
0.000 |
0.000 |
||
Exceptionals |
0.000 |
0.000 |
0.000 |
0.000 |
0.000 |
||
Share-based payments |
(0.360) |
(0.350) |
(0.815) |
(0.800) |
(0.800) |
||
Operating profit |
(12.534) |
(9.442) |
(12.834) |
(16.000) |
(13.800) |
||
Net Interest |
0.023 |
0.004 |
(0.001) |
(0.001) |
(0.001) |
||
Joint ventures & associates (post tax) |
0.000 |
0.000 |
0.000 |
0.000 |
0.000 |
||
Exceptionals |
0.000 |
0.000 |
0.000 |
0.000 |
0.000 |
||
Profit Before Tax (norm) |
|
|
(12.151) |
(9.089) |
(12.020) |
(15.201) |
(13.001) |
Reported tax |
0.056 |
0.032 |
1.048 |
0.000 |
0.000 |
||
Profit After Tax (norm) |
(12.095) |
(9.056) |
(10.972) |
(15.201) |
(13.001) |
||
Minority interests |
0.000 |
0.000 |
0.000 |
0.000 |
0.000 |
||
Discontinued operations |
0.000 |
0.000 |
0.000 |
0.000 |
0.000 |
||
Net income (normalised) |
(12.095) |
(9.056) |
(10.972) |
(15.201) |
(13.001) |
||
Average Number of Shares Outstanding (m) |
150.2 |
215.7 |
279.1 |
279.1 |
279.1 |
||
EPS - normalised (p) |
|
|
(8.1) |
(4.2) |
(3.9) |
(5.4) |
(4.7) |
EPS - normalised fully diluted (p) |
|
|
(8.1) |
(4.2) |
(3.9) |
(5.4) |
(4.7) |
EPS - basic reported (p) |
|
|
(8.3) |
(4.4) |
(4.2) |
(5.7) |
(4.9) |
Dividend (p) |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Revenue growth (%) |
174.0 |
91.3 |
(7.8) |
64.2 |
134.8 |
||
Gross Margin (%) |
84.4 |
88.8 |
85.4 |
85.0 |
85.0 |
||
EBITDA Margin (%) |
N/A |
N/A |
N/A |
N/A |
N/A |
||
Normalised Operating Margin |
N/A |
N/A |
N/A |
N/A |
N/A |
||
BALANCE SHEET |
|||||||
Fixed Assets |
|
|
1.125 |
0.823 |
0.930 |
0.910 |
1.221 |
Intangible Assets |
0.000 |
0.000 |
0.000 |
0.000 |
0.000 |
||
Tangible Assets |
0.913 |
0.637 |
0.767 |
0.642 |
0.592 |
||
Trade & other receivables |
0.212 |
0.186 |
0.163 |
0.268 |
0.628 |
||
Current Assets |
|
|
20.193 |
36.970 |
27.510 |
12.184 |
7.796 |
Stocks |
0.000 |
0.000 |
0.000 |
0.000 |
0.000 |
||
Debtors |
1.025 |
1.476 |
1.892 |
2.532 |
5.945 |
||
Cash & cash equivalents |
19.092 |
35.421 |
24.501 |
8.537 |
0.735 |
||
Other |
0.077 |
0.073 |
1.116 |
1.116 |
1.116 |
||
Current Liabilities |
|
|
(1.696) |
(2.317) |
(3.087) |
(2.933) |
(11.590) |
Creditors |
(1.298) |
(1.914) |
(2.867) |
(2.712) |
(6.370) |
||
Tax and social security |
(0.025) |
(0.013) |
(0.002) |
(0.002) |
(0.002) |
||
Short term borrowings |
0.000 |
0.000 |
0.000 |
0.000 |
(5.000) |
||
Lrease liabilities |
(0.373) |
(0.390) |
(0.218) |
(0.218) |
(0.218) |
||
Long Term Liabilities |
|
|
(0.423) |
(0.204) |
(0.412) |
(0.412) |
(0.412) |
Long term borrowings |
0.000 |
0.000 |
0.000 |
0.000 |
0.000 |
||
Long term lease liabilities |
(0.423) |
(0.204) |
(0.412) |
(0.412) |
(0.412) |
||
Net Assets |
|
|
19.200 |
35.271 |
24.941 |
9.750 |
(2.985) |
Minority interests |
0.000 |
0.000 |
0.000 |
0.000 |
0.000 |
||
Shareholders' equity |
|
|
19.200 |
35.271 |
24.941 |
9.750 |
(2.985) |
CASH FLOW |
|||||||
Operating Cash Flow |
(11.505) |
(8.626) |
(11.579) |
(15.000) |
(12.850) |
||
Working capital |
(0.237) |
0.165 |
0.560 |
(0.794) |
0.244 |
||
Exceptional & other |
0.000 |
0.318 |
0.568 |
0.000 |
0.000 |
||
Tax |
0.248 |
0.082 |
0.026 |
0.000 |
0.000 |
||
Net operating cash flow |
|
|
(11.494) |
(8.061) |
(10.426) |
(15.794) |
(12.606) |
Capex |
(0.062) |
(0.025) |
(0.159) |
(0.075) |
(0.100) |
||
Acquisitions/disposals |
0.000 |
0.000 |
0.000 |
0.000 |
0.000 |
||
Net interest |
0.023 |
0.000 |
0.000 |
0.000 |
0.000 |
||
Equity financing |
15.290 |
24.779 |
0.044 |
0.000 |
0.000 |
||
Dividends |
0.000 |
0.000 |
0.000 |
0.000 |
0.000 |
||
Other |
(0.389) |
(0.363) |
(0.380) |
(0.096) |
(0.096) |
||
Net Cash Flow |
3.367 |
16.330 |
(10.920) |
(15.965) |
(12.802) |
||
Opening net debt/(cash) |
|
|
(15.204) |
(19.092) |
(35.421) |
(24.501) |
(8.537) |
FX |
0.000 |
0.000 |
0.000 |
0.000 |
0.000 |
||
Other non-cash movements |
0.520 |
0.000 |
0.000 |
0.000 |
0.000 |
||
Closing net debt/(cash) |
|
|
(19.092) |
(35.421) |
(24.501) |
(8.537) |
4.265 |
Source: Company accounts, Edison Investment Research
|
|
Research: Consumer
Treatt has witnessed another good performance: H1 revenue grew by an impressive 9%, with growth across five of Treatt’s six categories. Management has upgraded its revenue growth expectations for the year to 15% and sees pre-tax profit being on track to meet current consensus of £21.7m, as the company continues to invest for the future. We upgrade our revenue forecasts in line with guidance, though our profit forecasts remain broadly unchanged. As per previous guidance, H2 is expected to witness both higher revenue growth than H1 and higher margins, thus reverting to a more normal H1/H2 split following two years distorted by the consequences of lockdowns.
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