- First-half profits ahead of board expectations.
- Full-year guidance maintained, implying six-fold rise in annual pre-tax profit.
- Multiple client wins.
UK advertising and marketing specialist The Mission Group (TMG:78p) has reported a marked sequential quarter-on-quarter recovery in both revenue and profitability this year, a continuation of the second-half recovery seen in 2020. In the latest six-month trading period, the directors expect to report operating profit of £2m on 8 per cent higher revenue of £31.6m, reversing a £1.8m loss in the same period last year.
Key drivers are strong performances from the group’s technology division in both UK and North America, brand agency Bray Leino, and specialist property marketing Agency ThinkBDW which secured a multi-year £20m digital transformation programme with housebuilder Redrow. New client wins across various sectors include Porsche GB, Novo Nordisk in healthcare, and Bottlegreen and Burts Chips in food and drink.
Net debt of £3.8m was lower than expected even though Mission settled £1.2m of earn-outs on past acquisitions, paid a dividend of £1.4m and repaid £3.1m of deferred HMRC payments. The board’s guidance is in line with house broker Shore Capital’s forecasts which support a six-fold rise in annual pre-tax profit to £7.1m on 15 per cent higher revenue of £71m. On this basis, expect earnings per share (EPS) of 6p and a dividend of 2.3p a share. Moreover, with the UK economy set to deliver decent growth in 2022, Shore expect pre-tax profit to rise to £10.2m on revenue of £75.3m to produce EPS of 8.6p and support a pay-out of 2.5p.
Mission’s share price rallied five per cent to 78p post the trading update, having previously succumbed to profit taking since hitting a high of 92p after my last buy advice at 84p ('Two economic recovery plays', 14 April 2021). The holding has produced a 51 per cent total return since I initiated coverage (Alpha Research: 'Marketing highly profitable growth', 11 October 2018).
Trading on a modest forward 2022 price/earnings (PE) ratio of 9, and offering an attractive prospective dividend yield of 3.2 per cent, the shares continue to provide decent upside to my target price of 110p and are well worth buying ahead of interim results on 22 September 2021. Buy.
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