The Mission Group — Shaping up for resuming growth

The MISSION Group (AIM: TMG)

Last close As at 04/11/2024

46.00

0.00 (0.00%)

Market capitalisation

GBP42m

More on this equity

Research: TMT

The Mission Group — Shaping up for resuming growth

The MISSION’s H120 results were as indicated at the trading update, with headline pre-tax loss of £2.2m. H220 looks stronger, with new clients and new business and the continuing benefit of a broad agency portfolio across verticals. It is adding central resource to service group agencies efficiently, setting up a digital production studio and using recently acquired Innovationbubble for behavioural consultancy. Careful cash management reduced net debt to £0.9m at end June, with annualised cost savings of £0.7m targeted. Our unchanged PBT and EPS forecasts leave the shares trading below peers.

Fiona Orford-Williams

Written by

Fiona Orford-Williams

Director, TMT

TMT

The MISSION Group

Shaping up for resuming growth

Interim results

Media

23 September 2020

Price

63p

Market cap

£54m

Net debt (£m) at 30 June 2020

0.9

Shares in issue

85.3m

Free float

52.7%

Code

TMG

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

5.0

(11.3)

(25.0)

Rel (local)

8.3

(5.5)

(6.7)

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

Trading update

January 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 H120 results were as indicated at the trading update, with headline pre-tax loss of £2.2m. H220 looks stronger, with new clients and new business and the continuing benefit of a broad agency portfolio across verticals. It is adding central resource to service group agencies efficiently, setting up a digital production studio and using recently acquired Innovationbubble for behavioural consultancy. Careful cash management reduced net debt to £0.9m at end June, with annualised cost savings of £0.7m targeted. Our unchanged PBT and EPS forecasts leave the shares trading below peers.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

12/18

77.6

9.2

8.5

2.1

7.4

3.3

12/19

81.0

10.2

9.0

0.8

7.0

1.3

12/20e

62.7

0.5

0.7

0.0

90.0

N/A

12/21e

76.1

9.0

7.7

1.8

8.2

2.9

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Portfolio benefits

Property and events have obviously been areas most affected by the pandemic, with revenues down 80% at the nadir, but the technology and healthcare segments are performing well, up year-on-year in H120. Longstanding client relationships and the group’s partnership approach have been instrumental in protecting revenues. New assignments and new clients have also been won, with Bray Leino adding two significant client wins: INEOS; and a digital programme in China for Croda Trading. Revenues at April Six, a specialist technology and mobility agency, were +8% over H119, with work for the European Space Agency, Scania Europe and Rimini Street. Healthcare agency, RJW, posted a particularly strong performance, with revenues up 20%. Pathfindr, the group’s asset tracking business, has hit a rich vein with its Safe Distancing Assistant product, attracting over 200 customers to date.

Careful financial management pays

Cash conservation measures, including use of furlough for parts of the business most affected by COVID-19, a shortened working week and voluntary pay reductions all contributed to containing the H1 loss. The balance sheet also benefited from a pause on non-essential capex, use of the Time to Pay scheme (tax and VAT), deferral of the dividend and the delaying of vendor payments. In H120 £1.6m was paid on acquisitions, with a further £0.6m scheduled for H220. A reappraisal of office space will lead to £0.7m of annualised savings. Net debt at the half year was just £0.9m as a result of these measures, but we would expect an unwinding of this in H220. Our year-end projection is for net debt of £8.2m (was £8.3m).

Valuation: Still trading below peers

A degree of visibility is now creeping back into consensus forecasts (albeit highly subjective to assumptions on speed and scale of the recovery). MISSION’s shares trade at a discount to peers on EV/EBIT and P/E averaged over FY19, FY20e and FY21e. Parity indicates a share price of 78.25p, 23% above the current level.

H120: Differing experiences by agency

The broad spread of the agency verticals covers a range of experiences of the commercial consequences of the coronavirus pandemic, which get somewhat lost within the segmental reporting that discloses performance by activity. Detailed descriptions of the underlying business are available in our July initiation report. Agencies such as ThinkBDW, which is a specialist marketer for the property sector, were heavily affected through the Q2 lockdowns, whereas specialist healthcare agency, RJW, was well placed to benefit.

As shown below, overall group operating income (revenue), was 25.7% lower than H119. A 13.2% reduction in operating expenses, through the measures taken as described above, restricted the level of group operating loss to £1.8m, from a profit of £2.6m in the comparative period.

Exhibit 1: Summary H120 income statement

£'000s

H119

H219

FY19

H120

Y-o-y change

Advertising & Digital

31,560

32,950

64,510

22,933

-27.3%

Exhibitions & Learning

2,361

2,865

5,226

1,839

-22.1%

Media Buying

1,880

1,814

3,694

1,475

-21.5%

PR

3,359

4,183

7,542

2,833

-15.7%

Total operating income

39,160

41,812

80,972

29,080

-25.7%

Headline operating expenses

(35,545)

(34,674)

(70,219)

(30,862)

-13.2%

Acquisition adjustments

(925)

(395)

(1,320)

166

Start-up costs

(74)

(357)

(431)

(212)

Loss on investments

0

(109)

(109)

0

Operating (loss) / profit

2,616

6,277

8,893

(1,828)

PBT

2,396

5,898

8,294

(2,270)

Headline, diluted EPS (p)

3.12

5.88

9.00

(1.92)

Source: Company accounts

Positioning to catch the upside

In the interview below, CEO James Clifton, shares what he thinks the coronavirus pandemic has revealed about the group and its clients, as well as the moves the management team has made to protect the business. He also gives more detail on recent initiatives, such as the MISSION Made digital studio resource and what the Innovationbubble acquisition adds. James then looks at whether the industry will be fundamentally changed by these last few months’ experience.

Exhibit 2: Interview with James Clifton, CEO

Source: Edison Investment Research

Exhibit 3: Financial summary

£'000s

2018

2019

2020e

2021e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Turnover

 

 

159,916

171,091

128,107

159,535

Cost of Sales

(82,331)

(90,118)

(65,448)

(83,425)

Revenue

77,585

80,972

62,659

76,110

EBITDA

 

 

11,334

12,225

2,636

10,707

Operating Profit (before amort. and except.)

 

9,919

10,753

1,386

9,557

Intangible Amortisation

(1,286)

(1,980)

(1,004)

(1,004)

Headline Adjustments

(546)

(990)

(450)

(500)

Other

(1)

69

85

90

Operating Profit

8,086

7,852

701

8,817

Net Interest

(735)

(668)

(922)

(599)

Profit Before Tax (norm)

 

 

9,183

10,154

549

9,048

Profit Before Tax (FRS 3)

 

 

7,722

8,294

99

7,633

Tax

(1,710)

(1,868)

32

(1,994)

Profit After Tax (norm)

7,473

8,286

581

7,054

Profit After Tax (FRS 3)

6,012

6,426

131

5,639

Average Number of Shares Outstanding (m)

83.3

84.1

88.2

91.1

EPS - normalised (p)

 

 

8.7

9.5

0.7

7.8

EPS - normalised fully diluted (p)

 

 

8.5

9.0

0.7

7.7

EPS - (IFRS) (p)

 

 

7.1

7.5

0.0

6.1

Dividend per share (p)

2.1

0.8

0.0

1.8

Gross Margin (%)

48.5

47.3

48.9

47.7

EBITDA Margin (%)

7.1

7.1

2.1

6.7

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

6.2

6.3

1.1

6.0

BALANCE SHEET

Fixed Assets

 

 

107,002

107,396

109,241

111,175

Intangible Assets

96,121

95,859

98,304

100,388

Tangible Assets

10,858

11,360

10,760

10,610

Investments/ other

23

177

177

177

Current Assets

 

 

46,476

47,117

34,772

41,567

Stocks

850

1,091

792

1,010

Debtors

39,727

40,998

32,290

38,026

Cash

5,899

5,028

1,690

2,531

Other

0

0

0

0

Current Liabilities

 

 

(40,986)

(40,181)

(34,108)

(39,564)

Creditors

(40,986)

(40,181)

(34,108)

(39,564)

Short term borrowings

0

0

0

0

Long Term Liabilities

 

 

(24,896)

(22,031)

(19,936)

(16,873)

Long term borrowings

(9,886)

(9,927)

(9,927)

(9,927)

Other long-term liabilities

(15,010)

(12,104)

(10,009)

(6,946)

Net Assets

 

 

87,596

92,301

89,969

96,305

CASH FLOW

Operating Cash Flow

 

 

11,684

10,454

2,411

8,699

Net Interest

(826)

(626)

(922)

(599)

Tax

(1,906)

(1,805)

32

(1,994)

Capex

(1,361)

(2,169)

(900)

(1,350)

Acquisitions/disposals

(670)

(2,839)

(3,424)

(3,063)

Financing/other

(1,938)

(2,096)

(536)

(319)

Dividends

(1,695)

(1,831)

0

(532)

Net Cash Flow

3,288

(912)

(3,338)

841

Opening net debt/(cash)

 

 

7,348

3,987

4,899

8,237

HP finance leases initiated

0

0

0

0

Other

73

0

0

0

Closing net debt/(cash)

 

 

3,987

4,899

8,237

7,396

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 2020 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

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 2020 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

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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