Friday, October 22 2021
  • H1 operating profit of £ 2million on turnover up 17% to £ 34.1million offsets a loss of £ 1.8million in the first half of 2020.
  • 11 of the 13 agencies make significant improvements year over year.
  • The interim dividend of 0.8p supports an annual forecast of 2.3p.

UK Advertising and Marketing Specialist The Missionary Group (TMG: 78p) reported the strong sequential quarterly recovery in sales and profitability in the first half of the year in a pre-close trading update (‘On a recovery mission “, July 15, 2021), the directors’ point of view on prospects and strategic developments is therefore more relevant at this stage. Taking into account the second half seasonal weighting, the forecast given supports analysts’ forecast of a six-fold increase in pre-tax profit for the full year to £ 7.1million on higher revenues of £ 10million sterling to £ 71.1million underlying earnings per share (EPS) of 6p and an expected dividend per share of 2.3p.

Directors report a particularly strong performance from agencies that operate in sectors that have been more resilient to the effects of the pandemic, including the technology and mobility agency, April Six, which generated revenues over 10%. % in the first half and 25%. growth in North America.

Mission is also benefiting from the rebound in sectors heavily affected by the pandemic. Specialist real estate marketing agency ThinkBDW posted a 27% increase in revenue following a recovery in activity in the UK new home market, while Agency brand Bray Leino grew 42%, customers returning to a more usual situation. Some of the group’s new customers include Redrow, Cazoo, Mecca, Bottlegreen and Porsche GB. In addition, a backlog of delayed events abroad and in the UK is boosting the activity of several agencies such as Bray Leino, which is supporting the prestigious UK pavilion at the upcoming Dubai Expo.

Real estate broker Shore Capital highlights several factors behind the continuation of these trends, the main one being improving the decline in UK ad spend (data and analytics firm WARC predicts annual growth by 18% and 8% in 2021 and 2022). Mission’s strategic focus on delivering effective e-commerce solutions, coupled with a focus on its data and analytical capabilities, is another positive for the group as management seeks to leverage its strong foundation. digital skills from a loyal, top-notch clientele.

It is important to note that Mission is well funded. Taking into account the price supplements of £ 6.6m payable in the second half of the year, the expected end-of-year net debt of £ 9.9m is well within the group’s new bank facility of £ 20m. of pounds sterling and is less than one times the expected adjusted cash flow profit of 11.7 pounds sterling. mr. In addition, free cash flow is expected to triple to £ 9.8million in 2022, which is expected to reduce net debt to £ 5.1million and push the dividend up to 2.5 per annum, next year’s payout being covered more than three times by EPS estimates. from 8.6p.

The farm has produced a total return of 51% since I launched the cover (Alpha Research: ‘Marketing Highly Profitable Growth’, October 11, 2018) and my target of 100p might prove to be conservative given that Mission 2022’s forward price / earnings (PE) ratio of 9 and the company valuation / cash earnings multiple of 5.5 times are half of those of his peers. A potential dividend yield of 3.2 percent adds to the appeal. To buy.

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