The Mission Marketing Group — Update 26 November 2015

The MISSION Group (AIM: TMG)

Last close As at 18/04/2024

46.00

0.00 (0.00%)

Market capitalisation

GBP42m

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Research: TMT

The Mission Marketing Group — Update 26 November 2015

The Mission Marketing Group

Fiona Orford-Williams

Written by

Fiona Orford-Williams

Director, TMT

TMT

The Mission Marketing Group

A new Chapter

Media

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27 November 2015

Price

46.25p

Market cap

£39m

Share price graph

Share details

Code

TMMG

Listing

AIM

Shares in issue

83.6m

Business description

The mission is a network of entrepreneurial marketing communications agencies in the UK, Asia and San Francisco. The group provides national and international clients with marketing, advertising and business communications.

Bull

Organic growth ahead of market.

Growing international offer.

Strong client list.

Bear

Client pressure on pricing/procurement.

Bias to H2 limits visibility.

Downward revisions on global ad spend forecasts.

Analysts

Fiona Orford-Williams

+44 (0)20 3077 5739

Bridie Barrett

+44 (0)20 3077 5757

The Mission Marketing Group is a client of Edison Investment Research Limited

The mission has added the Chapter Agency to its network, consistent with its growth strategy of broadening and deepening its network through both acquisitions and start-ups. Chapter broadens the advertising base, with an award-winning creative team, and adds strong new clients to the roster. New business wins continue to flow in H2 and the group is starting to leverage its international opportunities. The valuation remains at a deep discount to peers – well beyond that attributable to its smaller size.

Comfortable headroom to implement strategy

Chapter is a creative advertising agency, with a recently-acquired digital marketing team and a strong client base across a wide range of consumer brands, including Nissan, Topps Tiles and Virgin Trains. Initial consideration of £1.3m – payable in (internally-generated) cash – is equivalent to 0.7x turnover (FY to March 2014), 3.3x profits. Further payments are dependent on financial performance through to 2018 and are capped at £3.7m, with the first £0.2m to be paid in shares. The current banking facilities of £15m (in term loan and revolving facility) give plenty of headroom, with a year-end market net debt estimate of c £9.7m.

New business; expanding reach

As with most agencies, profits are H2-weighted, as clients use up their marketing budgets ahead of Christmas. There has been a steady stream of new business announced at agency level since September’s interims, including Bray Leino’s win of the B2B account for RAC and Speed Communications picking up brand comms for The North Face. April Six, the group’s tech-focused agency, is building out its international offer, leveraging the group’s infrastructure in Singapore that came with the acquisition of Splash, last autumn. With a fast-growing office in San Francisco, set up in 2013, April Six can now offer specialist tech marketing expertise in its clients’ heartlands, without the risk profile of setting up new territories from scratch.

Valuation: Aggressive discount persists

The house broker’s figures reflect the Chapter deal, on conservative assumptions. Forecast earnings growth for the smaller quoted agency sector is currently at 10.7%, but this may not yet reflect slowing assumptions for UK ad spend. For the mission, the house broker’s earnings forecast is for growth just ahead of this level, yet the market values the group on an FY15e P/E of 8.3x, well below peers on an average of 13.9x. On an FY15e EV/EBITDA, TMMG is trading at 5.2x vs peers at 8.5x, despite its stronger EBITDA margins.

Consensus estimates

Year
end

Revenue
(£m)

PBT
(£m)

EPS
(p)

DPS
(p)

P/E
(x)

Yield
(%)

12/13

51.6

5.0

4.5

1.0

10.3

2.2

12/14

55.0

5.5

5.1

1.1

9.1

2.4

12/15e

60.1

6.4

5.6

1.2

8.3

2.6

12/16e

68.3

7.4

6.6

1.3

7.0

2.8

Source: Company accounts, Thomson Reuters

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Germany

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United Kingdom

New York +1 646 653 7026

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US

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Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

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New Zealand

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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

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