In July, as Roger Parry became the sixth chairman of Media Square in as many years, the company had 43 business units, 20 of which were losing money. Following various mergers, disposals and closures, there were just 12 major units at end-August 2008 and only one of these was making a loss. And this was due mainly to client departures (some of which were encouraged so as to close unprofitable accounts). That's a major reason why sales fell in the latest half-year. Excluding 2007's £12.6m of exceptional costs (mainly goodwill impairment charges), there has been a £1m improvement in operating profits to £1.66m.
So is Media Square a mini-WPP? Mr Parry expects tough times ahead. Indeed he has been called an “uber-bear” in this regard. On the other hand, Media Square has more scope than some competitors to improve performance in a recession. Business unit revenues per head stand at £65,000, which is well below the industry average of £100,000. And current operating margins of six per cent compare to an industry average of 16 per cent.
Like its rivals, Media Square earns a sizeable portion of its income in the run-up to Christmas. So full-year profits should exceed £2m. Broker Collins Stewart forecasts adjusted earnings of 2.5p.
MEDIA SQUARE (MSQ) | ||||
|---|---|---|---|---|
| ORD PRICE: | 18.5p | MARKET VALUE: | £5.96m | |
| TOUCH: | 17-20p | 12-MONTH HIGH: | 96.25p | LOW: 18.5p |
| DIVIDEND YIELD: | NIL | PE RATIO: | NA | |
| NET ASSET VALUE: | 87p | NET DEBT: | 79% | |
| Half-year to 31 August | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Net div per share (p) |
|---|---|---|---|---|
| 2007 | 68.9 | -13.2 | -55.8 | nil |
| 2008 | 65.3 | 0.92 | 1.16 | nil |
| % change | -5 | - | - | - |
Aim: Media | ||||
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