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I recommended shares in UK marketing communications and advertising group Mission Marketing (LSE:TMMG) in February of this year at 19.125p on t1ps.com, the site I set up in my bedroom 12 years ago but left in September. At that stage I identified them as a value, recovery play as the company’s cash generation meant debt concerns continued to look to be overly-discounted in the valuation. As the market has gradually come to further appreciate this, the shares now trade at 30p. Not bad in just 8 months. But what now?
On 19th September the company released its results for the six months ended 30th June 2012. These showed a pre-tax profit of £2.11 million on turnover slightly higher than in the corresponding 2011 period, at £59.88 million, generating a more than 21% increase in earnings per share to 2.17p. This was as despite the prior period including the 2011 Census (the company’s largest ever project), all activities across the group reported underlying year-on-year increases in billings – it particularly noting strong growth in ThinkBDW (its property-specialist agency) and also a first contribution from e-commerce and digital marketing consultancy, Yucca.
At period end, net debt totalled £12.27 million – with the company having committed bank facilities to the end of 2015 (currently £15 million and an additional overdraft facility of £2 million). Net current liabilities totalled £1.71 million and non-current liabilities £10.25 million. Most significantly, it has since announced an acquisition of balloon dog, a multi-channel marketing communications agency with a client base including Aviva, Barclaycard, Pret a Manger, and Rightmove. This has been acquired for an initial £0.61 million (£0.535 million in cash), with a further £0.106 million in cash payable in January and the remainder – the total payable being up to £2.9 million in cash and £0.3 million in shares – contingent on balloon dog achieving profitability targets. To help fund the acquisition there was a £1.2 million placing at 28p per share.
Mission emphasised that “balloon dog has historically been both profitable and cash generative, with turnover of £6.3 million and pre-tax profit of £0.7 million in the year ended 31 December 2011”. It expects it to be immediately earnings enhancing – complementing Mission’s statement in its results announcement that “key client relationships have been strengthened and new business wins from the likes of RBS, Brantano and Aviva are paving the way for us to hit our full year numbers”.
The market cap here is now £23.1 million. Last year the company delivered an adjusted pre-tax profit of £4.21 million and more than £5 million looks achievable this time around. However, I noted in my original recommendation that the debt and UK economy exposure meant this a somewhat speculative play and last month’s results statement noted a “challenging UK environment” and that “difficulties in the sector that have been experienced in recent years have shown no real signs of abating”. These statements chime with my current caution on the UK economy – something I discuss in a new video out today HERE – and sitting on a nice profit here, I’d now be cautious and bank it. Sell.
Tom Winnifrith is the editor and author of The Nifty Fifty a new investment website launched by ADVFN today. For those who miss his style on t1ps.com which he wrote, ran and controlled for the 12 years until this September, you now know where to go: HERE
His first new investment idea will go live on Monday ( i.e. tomorrow). For immediate access to catch that tip and 9 more in the following nine working days plus much more click HERE.
