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Following the recently announced trading update, The MISSION Group is rated well below others in its sector – and that offers some good upside for its shares, writes Mark Watson-Mitchell.
The MISSION (LON:TMG) is a grouping of a number of marketing communications and advertising agencies that were built up and are still managed by ‘creative’ entrepreneurs.
The company’s portfolio comprises integrated, multi-discipline, multi-sector agencies, specialists in specific marketing/communications activities and specialists in particular market sectors, such as branding, advertising and digital, media, events and learning, and public relations.
Formed in 2005, the company funded itself through an IPO in 2006, and it has reported year-on-year growth over the last nine years.
As a group it employs over 1,150 people through its 31 various offices in the UK, Germany, the US, Malaysia, Singapore, Vietnam, China and Hong Kong.
The group has an impressive client list including some of the world’s biggest trading entities, such as Louis Vuitton Moet Hennessy, Pret A Manger, AstraZeneca, Ferrero, Aviva, Petro-Canada, BP, Citibank, Fiat, Redrow, DFS, Halfords, Disney, Barclays, TelefonicaO2, Cummins Inc, Docker, and Fuji Xerox amongst so many others.
It enjoys an admirable ‘client retention factor’ – some 55% of its clients have been with the group for five years or more, 36% for ten years or more and 17% for 20 years or more. (Although the group was formed in 2005 it was built up through acquisitions of agencies that were older than the group itself.)
The company describes itself as ‘the alternative group for ambitious brands. It claims that it is already positioned where its competitors want to be – it is agile, responsive, real, local, empowered, empathetic, passionate, and it is proven.
The group has some 85.3m shares in issue, with Chairman David Morgan being the biggest holder with 7.21%, and co-directors Robert Day, holding 6.04%, and Dylan Bogg, owning 1.77%.
David Morgan knows a thing or two about the advertising world: he set up the Bray Leino agency way back in 1974. Before that he worked for a number of other agencies, including the Haymarket-based Dorland Advertising, which incidentally employed me as a messenger boy in my school holidays. It was either Dorland’s or stockbroking when I left school – it is not hard to guess which I chose.
Larger equity holders include Herald Investment Management (6.77%), Business Growth Fund (5.53%), Polar Capital (5.27%), Lazard Freres Gestion (4.96%), Cavendish Asset (2.14%), Harwood Capital (2.02%), and Discover Capital (1.47%).
Morgan stated in the trading update that 2019 was a year of unprecedented uncertainty. Despite that the results, due out 1 April, will show it was yet another of revenue and profit growth.
Estimates suggest that revenue could have risen nearly 5.6% to £83.2m for last year, with an 8% increase in pre-tax profits at £10.2m, with earnings of 9.4p and a dividend of 2.2p per share.
For this year, £87.4m of revenue could see £11.3m of profits, worth 9.9p in earnings and able to pay a 2.4p dividend per share.
Already the 2021 predictions are for £91.7m of revenues, £12.5m of profits and 10.7p of earnings, with a 2.7p per share dividend.
This group’s shares, which are trading at around the 88.5p level, are wrongly rated and should be a great deal higher.
My end-2020 target price is 125p.