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Ebiquity’s FY25E marked a year of stabilisation and setting the foundations for future growth. Today’s trading update was broadly in-line with FY25E revenue of £73.4m (£74.5m est), adj EBITDA of £8.1m (£8.4m est) and adj EBIT of £4.6m (£5m est). Meanwhile net debt was significantly ahead of expectations at £13.1m (£18.5m est), driven by extensive working capital collection efforts. Importantly, 4Q25E delivered tangible commercial traction, including three major competitive marketing effectiveness wins worth £10m+ in total over FY26-28E. This is part of the Group’s strategy to focus more on its marketing effectiveness offering given the materially larger addressable market compared with more traditional media performance consultancy. More broadly, Ebiquity finds itself in a coveted position as an independent advisor to brands during a time of flux for the agency market with abundant opportunities arising from the ongoing AI shift and the theme of Holdco’s moving towards being increasingly vertically integrated operating companies. We have released conservative FY26E forecasts which reflect 1% revenue growth to £74.2m and 7% adj EBIT growth to £5m. Ebiquity’s valuation looks compelling trading at just 3.7x FY26E EV/adj EBITDA versus peers at 5.1x.
Ebiquity Plc
Ebiquity delivered resilient 1H25A results with revenue flat YoY at £37.9m but adj EBIT rising 11% to £2.6m, as strong UK & Ireland growth (+14%) and exceptional Contract Compliance performance (+43% globally) offset ongoing North American weakness (-16%). Management's transformation programme is continuing through the deployment of proprietary AI tools to over 75% of staff, and the roll-out of client-facing agentic tools expected in 4Q25E. A focus on profitability has been structurally engrained through the introduction of Staff Cost to Profit Conversion as a central KPI across all regional and client leaders. Whilst the fixed cost base has exaggerated the previously announced slow-down in the Americas, it would not take much for the reverse to be true, and whilst management continue to exercise discipline over costs, even a modest pick-up in activity could see a significant uplift to profitability. The final acquisition contingent consideration has now been settled, and was lower than expected, resulting in an improvement in our FY25E net debt by £1.3m to £18.5m. Ebiquity’s valuation looks compelling trading at just 4.2x FY25E EV/adjusted EBITDA versus peers at 5.7x.
Ebiquity has issued a trading update which highlights that macroeconomic conditions in North America have remained challenging, with client caution persisting for longer than anticipated as a result. We have conservatively updated our FY25E forecasts around the latest guidance with revenue of £74.5m, a 7% reduction from previous forecasts and broadly in line with FY24A. Our adj. EBITDA forecast declines 33% to £8.4m, reflecting YoY growth in operating expenses of c.1%, down from c.3%, due to a continued focus on operating model efficiencies and cost discipline. This feeds through to a 90% reduction in adj. PAT and adj EPS to £0.5m and 0.35p, respectively. The Group’s financial position remains strong, with cash of £8.9m at the end of June, ample covenant headroom and access to £11m of undrawn facilities, providing flexibility to support ongoing initiatives. Ebiquity has delivered solid growth outside the Americas, giving us confidence in the Company’s ability to rebound, as the North American headwinds pass. It is also progressing well with the integration of its Marketing Effectiveness offering to strengthen its strategic go-to-market positioning. Ebiquity continues to trade on a FY25E EV/adj EBITDA discount of 4.9x versus data management peers on 5.4x. We have reduced our price target by 33%, in line with the drop in adj EBITDA, to 52p.
Ebiquity’s trading update reflects a resilient performance in 1H25E with revenue flat YoY at £37.9m (+1% on a constant currency basis). Revenue excluding North America was up 5% YoY (6% CC basis) regionally driven by UK&I and Europe, and particularly strong growth in the Contract Compliance service line. The North American region’s client spending (historically c.20% of total revenues) was impacted by challenging market conditions, but remains a significant growth opportunity as the market recovers and tariff uncertainty recedes following recent trade deal announcements. This recovery will also be aided by the promotion of Michele Harrison to lead an expanded Americas division to drive growth across both North and South America. Adj EBIT was up an impressive 10% YoY to £2.6m, also representing a 0.6pp increase in margin demonstrating the focus on profitability immediately adopted by the new management team. This represents a similar 30%/70% 1H/2H split as last year, underpinned by contractual visibility and opportunity pipeline, with trading remaining in line with full year expectations. Net debt has now reduced for two consecutive halves due to a continual focus on cash collections and stands at £15m (FY24A: £15.6m), with £11m of undrawn facilities at the end of 1H25E. Ebiquity looks remarkably undervalued trading on an FY25E EV/adj EBITDA of just 3.6x versus data management peers on 6.1x, whilst forecast to grow the bottom line at nearly 15% in FY25E.
Ebiquity has released its FY24A results which show a strong recovery in 2H24A with adj EBIT growing nearly 150% HoH, meaning that full year adj EBIT of £7.9m was 4% ahead of our forecasts (due to tight staff cost control) and adj EPS of 3.2p was 13% ahead. The Group has made progress on deeply embedding AI into the business by setting up a dedicated AI Centre of Excellence and launching its first client solution to enable agentic AI to operate within pre-formulated guidelines. Ebiquity has had a positive start to the year, with 1Q25E slightly ahead of management expectations for both revenue and adj EBIT, whilst it remains on track to hit FY25E forecasts. It looks remarkably undervalued trading on an FY25E EV/adj EBITDA of 3.8x versus data management peers on 9.0x, whilst forecast to grow the bottom line at over 10% in FY25E.
Everyone knows the adage “half the money I spend on advertising is wasted; the trouble is I don’t know which half”. However, it turns out only to be true until advertisers engage with Ebiquity; an international media investment analysis authority, which solves that issue by identifying returns on media investments. With the largest proprietary data lake in the industry, it offers unparalleled insight and leads the world in media investment analysis. The full-breadth service offering will allow it to continue global expansion and support a strong upward trend in profitability, helped by higher margin revenue mix from new digital media analysis tools and automation efficiencies in existing parts of the business. This drives c.25% bottom-line growth in FY25E. Despite this, it trades at a discounted FY25E Adj EV/EBITDA multiple of 3.7x versus data management peers on 10.1x, which leads us to initiate with a Buy rating and a 78p target price.
* A corporate client of Hybridan LLP ** Potential means Intention to Float (ITF) has been announced, or it is a rumour ***Arranged by type of listing and date of announcement ****Alphabetically arranged Share prices and market capitalisations taken from the current price on the day of publication Dish of the day Admissions: None Delistings: Adams plc (ADA.L) has delisted from trading on AIM What’s baking in the oven? Transferring markets: 8 November: Zentra Group plc (ZNT.L)* will delist from the Equity Transition Segment of the Main Market on 11 December and admit to the Access Segment of the AQSE Growth Market on the same day. Zentra Group is a UK-based residential developer, development manager and property manager focused on the North of England and on 22 November completed a series of transactions, after having changed the Company's name from One Heritage Group plc on 17 October. Potential** Initial Public Offerings: Rumours about December IPO Canal+: the producer of the Paddington films, confirmed it would separate from Paris-based conglomerate Vivendi and is expected to float in London on the Main Market of the London Stock Exchange on 16 December, according to a newly published prospectus. The demerger is subject to a vote among Vivendi’s shareholders on 9 December and would come alongside the separation of advertising agency Havas and newly-named publishing business Louis Hachette from the group. Canal+ would trade in London using the ticker CAN. It was reported last week that the firm was seeking a valuation of up to Euro8bn (£6.7bn) in its public debut. Canal+ owns StudioCanal, a producer of the Paddington film series. Earlier this year, it agreed to take over South African pay -tv giant MultiChoice to grow its international operations. Our daily digest of news from UK Small Caps If you would like to unsubscribe, please email enquiries@hybridan.com with “unsubscribe me”. Hybridan Chefs research@hybridan.com Banquet Buffet**** Aptamer Group 0.3p £5.8m (APTA.L) The developer of novel Optimer binders to enable innovation in the life sciences industry today provides a technical update on the Group's multiple strategic programmes. This includes the ongoing partnership with Unilever, the development of an Alzheimer's disease diagnostic test with Neuro-Bio, and the collaboration with AstraZeneca. These positive advances reflect the growing commercial and therapeutic potential of Optimer technology across diverse applications, which will offer high potential returns in the mid to long term, in addition to the Group's day-to-day fee for service work. In partnership with Unilever, Aptamer is advancing the development of Optimer binders as active ingredients for deodorant formulations. Recent in-house testing by Aptamer has demonstrated that the Optimer binders remain stable in samples from human skin for over 72 hours, a crucial factor in ensuring efficacy in realworld use. These findings build on earlier studies showing the ability of Optimers to inhibit odour-causing bacterial enzymes, reinforcing their suitability for inclusion in fast-moving consumer goods (FMCG) and moving the project closer to commercial viability. Ebiquity 17.5p £24.0m (EBQ.L) The media investment analysis Company announces a trading update for Y/E December 2024. As anticipated, H2 has been stronger than H1, however, the final months of the financial year are not meeting expectations. Revenue is expected to show a low single-digit decline from that of the 2023 financial year. This has resulted from challenging trading conditions in some regions and from some operational constraints as the volume of business in recent months has become more concentrated. Therefore, tactical cost savings have been made to mitigate the revenue shortfall with the result that the Adjusted EBITDA margin is expected at 10% compared to 15%. Net debt as at 30 June 2024 was £15.3m and with working capital management should reduce. The new CEO is rigorously evaluating resource deployment and scalability with long-term sustainable profit growth and improved forecast reliability are key objectives. GENinCode 4.25p £7.5m (GENI.L) The genetics Company focused on the prevention of cardiovascular disease announces the publication in the International Journal of Cardiology Cardiovascular Risk and Prevention of a clinical research study on the 'Interplay between Lifestyle Factors and Polygenic Risk for Incident Coronary Heart Disease in a Large Multiethnic Cohort. The publication investigated a subset of over 60,000 adult individuals with no history of Coronary Heart Disease (CHD) from the Genetic Epidemiology Resource in Adult Health and Aging (GERA) multi-ethnic cohort at Kaiser Permanente Northern California, USA. The study followed the individuals over an average follow-up of 14 years, using CARDIO inCode-Score (CIC-SCORE) to assess the interplay of polygenic risk with lifestyle on the incidence of Coronary Heart Disease (CHD). Following the March 2024 publication in the American Society of Preventive Cardiology journal, this latest study shows that genetic and lifestyle (smoking, diet, exercise) factors are independently associated with incident CHD and lifestyle and genetic predisposition both influence the risk of incidence of coronary heart disease. The results also showed that individuals with high polygenic risk are likely to derive the most benefit from lifestyle change and/or therapeutic intervention, supporting the inclusion of polygenic risk assessment in lifestyle interventions. For individuals with a high polygenic risk, a favourable lifestyle is associated with a 52% lower rate of CHD compared with an unfavourable lifestyle. This means that identifying individuals with an unfavourable lifestyle and high polygenic risk score and changing their behaviour to adopt a favourable lifestyle following a Mediterranean diet, regular physical exercise and non-smoking would halve their risk of a CHD event including non-fatal AMI, angina and coronary revascularisation procedures (coronary by-pass or percutaneous intervention) or CHD death. This research will be presented at the ESC CardioGenomics 2024 conference on 6 December 2024 in Antwerp, Belgium. Physiomics * 0.725p £1.5m (PYC.L) The mathematical modelling and data science Company supporting the development of new therapeutics and personalised medicine solutions announces it has been awarded a new contract with a long-standing, globally recognised pharmaceutical client. The project, valued at £157k, will leverage Physiomics' expertise in Pharmacokinetic-Pharmacodynamic (PKPD) modelling to inform critical pre-clinical and clinical dosing and scheduling decisions for a novel cancer treatment combination. Delivery of the project is expected to complete within the next 12 months. This new project represents a significant expansion of the ongoing collaboration between Physiomics and its client, marking the first incorporation of an Antibody-Drug Conjugate (ADC) into the company's Virtual Tumour (VT) modelling platform. ADCs are a rapidly advancing class of targeted therapies in oncology, offering enhanced precision by enabling tumour specific delivery of potent cytotoxic payloads. This project positions Physiomics at the forefront of this exciting field of drug development. SDI Group 62p £64.8m (SDI.L) The buy and build group focused on companies which design and manufacture specialist lab equipment, industrial & scientific sensors and industrial & scientific products, announces its interim results for the six months to 31 October 2024. Revenues of £30.9m (H1 FY24: £32.2m) reflecting reduced activity in the life sciences and biomedical markets with Adjusted profit before tax of £3.2m (H1 FY24: £3.7m) and reported profit before tax of £1.7m (H1 FY24: £2.7m). Cash generated from operations increased to £4.7m (H1 FY24: £3.3m). The Group is well placed for the future growth according the management statement in the interims. Software Circle 24p £93.6m (SFT.L) The Company announces its unaudited Interim Results for the period ended 30 September 2024. Revenue increased to £8.9m (H1 2023: £8.2m), adjusted EBITDA increased to £1.5m (H1 2023: £1.0m) and net cash decreased to £2.4m (H1 2023: £6.7m). Software Circle announced on 24 July 2024 the Group's intention to restructure its balance sheet and redeem the remaining £6.7m of bonds at par. To that end, as announced on 25 November 2024, the Company has entered into a new £16.7m funding facility with Shawbrook Bank Limited. They’ve now utilised £6.7m to settle the bonds and have in place an additional drawdown facility of £10m for further acquisitions. This is a key step in enhancing the Group's ability to fund M&A opportunities in the future. Synectics 312p £55.5m (SNX.L) The advanced security and surveillance systems announces that it has been awarded four separate contracts from customers in the gaming sector totalling US$2.7m. The Company will deploy its flagship Synergy software platform into two leading gaming resorts in the Philippines, having signed contracts with two new customers. Synergy was selected for its comprehensive suite of features and tailorable solution, specifically designed for control rooms that require the highest level of surveillance and security. In addition, Synectics has further strengthened its long-standing partnership with PENN Entertainment, Inc. (NASDAQ: PENN) by securing a further two new contracts to deploy Synergy software at two additional casinos in PENN Entertainment's portfolio. This expansion brings the total number of Synergy installations at PENN Entertainment properties to 25. The Contracts are expected to be delivered in the Company's current financial year ending 30 November 2025. Trakm8 Holdings 5p £2.5m (TRAK.L) The global telematics and data insight provider announces its unaudited results for the six months ended 30 September 2024. Revenue decreased to £8.31m (H1 2023: £8.54m), profit before tax decreased to £5k (H1 2023: £13k) and net bank debt increased to £6.66m (H1 2023: £5.57m). Expectation for Insurance and Automotive volumes in FY2026 remains uncertain, but nonetheless should improve on FY2025 performance. TruFin 78.5p £83.2m (TRU.L) The Company announces that following its trading update on 18 November 2024 and due to a recent period of positive exposure for Balatro, the hit console and mobile game published by Playstack Ltd, TruFin now expects its financial performance for the year ending 31 December 2024 to be significantly ahead of previously guided market expectations. Group revenue is now expected to be more than £46m (FY23: £18.1m), representing year-on -year growth in excess of 150%. TruFin also expects EBITDA to be no less than £4.5m (FY23: £(3.5)m) and Adjusted Loss Before Tax to be no more than £(1.5)m (FY23: £(6.6)m). Balatro has been nominated for 5 awards at this year's Game Awards - including 'Game of the Year'. As a result of performance, TruFin's cash position is expected to be stronger than originally expected and the Group remains fully funded to profitability. Water Intelligence 397.5p £69.1m (WATR.L) The multinational provider of precision, minimally-invasive leak detection and remediation solutions for both potable and non-potable water is pleased to provide its Q3 Trading Update for the nine month period ended 30 September . Revenue increased by 10% to $63.5m (Q3 2023: $57.8m), statutory EBITDA rose by 12% to $10.9m (Q3 2023: $9.8m). Cash and equivalents came in at $12.7m and Total Debt was 6m. The results are in-line with market expectations.
EBQ PYC SDI SNX TRAK WATR
H2 has shown a strong recovery but the deluge of work has run into capacity constraints and limited the executable revenue. We did flag this potential risk in our September note noting the unusual activity balance through the year. The revenue variance (c£2.6m), almost entirely feeds through to EBIT (now £7.8m) and EPS falls 27%, but we are hugely encouraged by the activity rebound. We also think this means that 2025 should have a decent start and expect reasonable revenue growth, albeit with a slight FX headwind (based on current rates and our assumptions). Dual running costs related to the platform shift and inflation remain headaches, and we approach cautiously limiting margin recovery in 2025/2026. Based on our revised TP of 54p the stock remains very cheap, and we see value in this data-centric play on marketing efficiency hence we retain a Buy rating.
Nick Waters has stood down as CEO. The business has seen a huge wave of product development, reorganisation and efficiency during Nick’s tenure that has boosted profitability, the quality and potential of the business. Ruben Schreurs, who has been a key member of the team reinvigorating the business, will now take over. Ruben is well incentivised, he holds 7.0% of Ebiquity stock, and has the relevant experience in designing and developing product and driving the efficiency and scaling of a business. We believe he is recognised as a key voice across the industry. We believe the Company is trading through a peak in activity at present (see our last note for details) and are looking for an update in January to confirm a swing into significant positive organic growth during H2. We see this as a catalyst for the stock which is trading on a very low 4.9x EV/EBIT for 2024 and just 3.7x for 2025. EBQ has an attractive and valuable leading position in the media data and consulting market. The future completion of the GMP program, further expansion of the service range, arguably unique data lake and expanded North American operation should propel the business in the future and lift the multiple (PL target 12x EV/EBIT).
H2 is on track to rebound and we expect it to drive the Company to a positive CER revenue growth rate for the full year while reported revenues will be flat given the strength of sterling. Profitability will be impacted as per the last update and reflects revenue/capacity timing, dual running costs for the GMP program and FX translation and transaction impact. We set our 2024e EBIT at £10m which equates to a 12.4% EBIT margin (2023 15.0%) and is within the range we suggested in August. We forecast record EBIT in 2025 which is arguably largely locked in given a high proportion of progress is supported by the annualisation of cost changes. We had our rating/TP under review pending this update and re-start with a 77p TP and high potential Buy rating. EBQ has an attractive and valuable leading position in the media data and consulting market. Management have already substantially improved the business, and we expect the next wave of growth and efficiency to propel the margin, earnings quality and share price.
Ebiquity^ (EBQ, Buy (from Under Review) at 23p) - Interims confirm H2 recovery
Ebiquity^ (EBQ, Under Review at 24p) - Interim results preview
Ebiquity^ (EBQ, Under Review (from Buy) at 27p) - H1 headwinds
Ebiquity has had a tough H1 due to soft client spend. Revenues are expected to be down c7% YoY and in part due to a higher-than-expected FX drag (vs PLe). There has been progress in the key Digital Media Solutions and North American operations. Revenue weakness and high operational gearing reduce the H1 margin to 6%. H2 looks considerably brighter with a high-quality pipeline implying that the Company is highly likely to show healthy revenue growth. The questions are just how much growth and how much this will mitigate the H1 profit impact. Crucial trading in September and October will most likely determine the outcome and the Company expects to be able to guide on this at the interim results stage on 26th September. Assuming a revenue range and high operational gearing suggests that the EBIT range is probably now between £10 and £11m vs our existing £12.6m. We put our forecasts, rating and target price under review pending the results update.
Ebiquity^ (EBQ, Buy at 44p) - Robust results support Buy case
Ebiquity^ (EBQ, Buy at 41p) - Robust full year results
Ebiquity provided a trading update covering the 2023 full year on 12th March so there are no surprises. As per our comment on the trading update it was another strong year with revenue up 7%, EBIT up 31% and the margin rising 280bps to 15.0%, broadly twice its historic level before the current management team. This has been driven by the fundamental change to the business model, introduction of high margin products and increasing automation. The value of the services provided is very high in the context of the $100bn of spend that Ebiquity helps clients with. Looking forward we expect revenue growth to be led by the US and for the groups margins to continue to make progress as the GMP platform adoption program expands, working practices continue to improve and the product mix evolves. The result should be an even higher margin data-centric business with a leading product offer and even stronger market position. Buy. Key results: Revenues rose 6.8% to £80.2 and EBIT 31.1% to £12.0m (margin +280ps to 15.0%). PBT rose 23.2% and DEPS, based on PGe normalised 29% tax assumption, rose 13.2% to 5.2p. Net debt was in-line at £12.0m. Geographic trends: North America led the way with a 33% rise in revenues to £16.8m, which resulted in the margin almost doubling (13.6% vs 2022: 7.2%). Higher margin ValueTrack and DMS (Digital Media Services) helped the strong North American performance. This bodes well for what we expect to be the key growth driver given the size of market and the current modest position Ebiquity has. The UK saw revenues rise 19% to £31.2m with the margin stable (24.6% vs 25.3%). Europe was soft as previously flagged and showed an 11% decline to £23.6m at the revenue level while profitability jumped (32.0% margin vs 23.9%) due to faster GMP adoption. The smallest market, APAC, saw a 10% decline in revenue to £8.7m with the margin stable (18.5% vs 18.9%). The business was impacted by softness in the local agency selection market and a China RMB FX weakness drag. KPIs: Amongst the various we highlight the number of clients buying one or more new digital products rose from 55 to 64 and the number of clients buying two or more services rose from 97 to 101. New wins: In addition to scope of work increases from a number of major clients (GM, Amgen, J&J, Danone, Ferrero, Disney, Beiersdorf, Perfetti and Jaguar Land Rover) Ebiquity also won some notable new clients including Pepsico, Intuit and JP Morgan Chase. Outlook: The Company says the outlook for the advertising industry appears slightly more positive for 2024 “with our own survey of WFA members, as well as other independent studies, indicating some confidence starting to return”. The Company also indicates that 2024 has started as expected but notes some fragility in some markets. This picture looks in line with the stabilisation and gentle improvement we have seen as well as reflective of the less than ideal global macro backdrop. Transformation program - the Company updates as follows: “We are now twelve months into a business transformation program. Our priority has been to transition work onto the GMP platform, enabling us over time to fundamentally change the processes through which our service is delivered. Although the first year has proved both complex and challenging, we are making progress with the platform now handling US$15 billion of media transaction data. In addition, we are carrying out extensive work calibrating a new benchmarking product through testing with several clients in multiple markets and plan a measured rollout through 2024”. The Company appears to be on track with its previously indicated revised completion timeline which will see it executing all the necessary steps in 2025 such that it gains the full £5m benefit in 2026. Valuation: Our 12 month target price, based on 12x 2024e EV/EBIT ticks down slightly to 105p from 107p essentially due to some small cash forecast changes. Forecasts: Our forecasts key assumptions are unchanged. There are some rounding effects of updating the model. The only specific changes we have made are for aborted deals costs (£1m in 2024) and slightly higher transformation costs (an extra £0.5m in each of 2024 and 2025).
Ebiquity’s FY results are in line with the trading update from March. Revenues rose +7% y/y to £80.2m (LibE: £80.2m), with AOP up +31% to £12.0m (£12.0m). Growth was underpinned by Digital Media Solutions revenues (+22% y/y to £7.8m). FCF swung firmly positive (ex Digital Decisions payments) to £4.2m (FY’22: £1.9m outflow) highlighting the cash generative nature of the business. Yet outlook remains mixed: The advertising backdrop looks slightly more positive for 2024, although management remain cautious on client spending quantum and note “fragility” in some markets. Furthermore migration to GMP365 is progressing slower than anticipated meaning that only £1m of £5m guided savings have been delivered to date. This creates downside risk to our forecasts (potentially 10%-15% to AOP). We continue to forecast FCF would still be ~£7m in our model. A 10% FCF yield, rising to >14% in FY25E holds strong appeal.
Ebiquity^ (EBQ, Buy at 41p) - Full year results preview
Ebiquity Plc JTC Plc
Ebiquity^ (EBQ, Buy at 37p) - Reverting on estimates
Ebiquity^ (EBQ, Buy at 37p) - Year end trading update
Ebiquity’s FY update shows strong margin improvement, and a cash position ahead of expectations. Revenues grew +7% y/y (est: +2% u/l) to £80.2m (LibE: £80.8m (like-for-like)), while AOP margins improved 2.8pp to 15%. Net debt was below LibE at £11.9m (LibE: £14.3m), implying stronger H2 FCF than forecast (~£5m; LibE: £2.7m). Management’s outlook guidance points to continued subdued client spend in 2024 (in-line with LibE), although the Group expect to “make further profitable progress” this year. Assuming cash conversion normalises to industry averages, we see scope for FCF to recover to ~£8m, a >14% FCF yield. BUY.
Despite a tough macro environment and inflation headwinds Ebiquity has grown revenues and boosted its margin another 280bps YoY to 15.0%. The margin has doubled in just 2 years and is a long way ahead of the last peak of 9% achieved in 2018 underlining the change in the business. This was achieved on slightly softer revenues than expected, in part due to a higher-than-forecast FX headwind but offset by the strength (we estimate c30% H2 LFL) of North America, an under-penetrated and crucial long-term market for Ebiquity. We estimate Group EBIT grew c30% YoY despite the headwinds and PGe DEPS 16%. 2024 trading looks similar to 2023 and with North America likely to remain strong. We factor in FX headwind, a better North America, the lower 2023 profit base and a slower synergy transformation realisation, but still forecast growth in EBIT. Conditions may be a drag, but Ebiquity is still driving forward its product improvements and operating structure changes and we expect more progress. The valuation is very low and exceptional value for an increasingly high margin high value data-centric business. Trading update for 2023: Revenues have grown c7% to £80.2m. This is a little below PGe £82.0m with a stronger FX headwind on the US$ and Euro than our forecasts had assumed. Cost action management, North American and European profitability improvement and high-margin digital media solution sales has lifted EBIT c30% to £12.0m from £9.3m, albeit slightly behind our £12.5m forecast. Net Debt was better than expected at £11.9m vs PGe £13.1m due to a strong working capital performance. Outlook for 2024: Trading so far is satisfactory and appears similar to 2023 with clients needing help to maximise efficiency of marketing spend. The Company expects further profitable progress in 2024. We flag the momentum in North America. Costs are running higher than expected as (1) the transformation program synergy extraction is running a little slower than expected and (2) inflation related salary and bonus realignments are required to ensure the correct incentivisation is in place. Revenue and profit forecasts: We trim our revenues by 2.2% for FY23, but a more modest 1.4% for 2024 as the North America helps offset the FX drag. At the EBIT level we adjust our forecasts by 4.2% for 2023 and 8.8% for 2024. Our revised DEPS for 2023 and 2024 are 5.4p and 5.5p respectively. See forecast revisions overleaf. Cash and FCF yield: We have reduced our 2023 net debt estimate in-line with the indication from the Company. Even allowing for increased revenue growth (and corresponding working capital growth) we forecast a similar level of net debt for 2024. We still expect net debt to drop rapidly given cash generation (2025 PGe £2m). Valuation: FCF improved markedly in 2023 leaving the stock on a 9.1% FCF yield which should we forecast to improve in 2024 to 9.5%. High FCF generation is typical of media businesses and Ebiquity is no different. We roll forward our 12x EV/EBIT target multiple to 2024 which generates a 107p TP based on our revised forecasts.
The Media Agency space is undergoing seismic change, driven by shifting client demands, supply chain disruption, technology, and increased consumer activism. The risks and uncertainties are well understood and priced in (sector FCF yields >10%; PE: 4-12x), yet the opportunities are being overlooked. New revenue streams, higher margin tech-enabled offerings, automation-driven efficiencies and decelerating wage inflation create an improving backdrop, and opportunity for sector margins to expand by as much as 30% we believe. Loosening brand budgets represent a potential near-term catalyst from H2’24, with early indicators flashing green (strong Meta, Google and Amazon results). The sector looks ready to re-rate - BUY.
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Initial Equity Trading Comments - 18 January 2024
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Shore Capital Media and Digital News Summary
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Initial Equity Trading Comments - 3 January 2024
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Ebiquity^ (EBQ, Buy at 33p) - A conviction BUY for 2024
Initial Equity Trading Comments - 6 October 2023
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Ebiquity^ (EBQ, Buy at 33p) - Short-term pain, long-term gain
PBT rose 8% in H1 supported by revenue growth of 11% and EBIT growth of 23%. The margin has gained another 140bps reaching 14.7% as the continuing increase in automation to drive efficiency and growing higher margin product mix fed through. Macro is soft and impacting the advertising market, but EBQ continues to currently trade resiliently with only modest pressure being felt due to its critical position as a driver of marketing efficiency and provider of high value actionable intelligence. We do make an adjustment to revenues with little impact on 2023 EBIT as efficiency has continued to improve and we forecast 16% EPS growth. For 2024 a mix of inflation and some shift in the timing of the transformation program benefits does reduce our EBIT more significantly, but EPS growth is still strong at 15%. Macro may be tough, but EBQ is well set to continue delivering growth. We reiterate our Buy rating.
Ebiquity^ (EBQ, Buy at 46p) - Robust interim results
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The market capitalization of 806 AIM stocks was £89.3bn as of 20 June 2023. FTSE AIM All Share Index was down 5.55% YTD to 785.2 as of 21 June 2023. There were 32 companies delisted from AIM over the period December 2022-June 2023. Among the top YTD winners, there were Celadon Pharmaceuticals (up 209%, MktCap £95m), Vast Resources (+211% YTD, Mkt Cap of £15m), B90 Holdings (+200%, MktCap £22mn), Verditek (154%, MktCap £6mn), Star Phoenix Group (+162%, MktCap $1.6mn), Inspecs Group (+162%, MktCap £109mn). All winners have seen share price correction over the last month. Since our last report was priced on 29/05/2023, the market performance was rather weak. The largest gains were 13.9% YTD in the Financial and 12.2% in the Consumer Non-Cyclicals sectors. The biggest losses were in Real Estate and Energy. Industrials and Consumer Cyclicals remain the best-performing sectors in FTSE350. Energy remains the cheapest sector based on EV/EBITDA. Market performance was weak under the pressure of rate hikes. The performance of the stocks we picked on 29/05/2023 was mixed – two out of four stocks demonstrated a positive performance. Altitude Group stock was up 2.5% and Southern Energy was up 4.0%, while Touchstone Exploration was flat, and Surface Transforms was down 8.3% compared to a 5.5% downward move of the AIM market index. Our top picks are from the consumer, ad, and gaming sectors. We select companies with robust revenue growth and a sustainable business model. The challenging macro environment brings discrepancies in projections and valuation metrics. However, the slowdown of inflation will improve the tech sector and Ad industry valuation may gradually improve. Our picks list includes Venture Life Group, Keywords Studios, Gaming Realms, and Ebiquity. Companies are subject to AIM stock risks such as financial underperformance or stock dilutions in the future. We believe our top picks have an acceptable risk-return trade-off due to a sustainable product range or business model.
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Ebiquity (EBQ) - Buy at 48p - CMD reinforces BUY stance
2022 growth (organic 9%, total 20%) and margin progress (+470bps to 12.2%) was excellent. Management focus coupled with acquisitions has changed the dynamism of the group and we expect the fruits of this to payback further. The digital media offering has surpassed expectations and should continue to support growth as EBQ sells more of its growing offering to each of its expanding client base. The year has started on-track and we expect the record of the business to continue to grow. We forecast earnings to double between in the next 3 years. EBQ presents the opportunity to invest in a leading fast-improving business that is raising its growth potential and we believe can achieve a 20% margin. BUY.
Ebiquity^ (EBQ, Buy at 49p) - CFO appointment
Ebiquity reported strong FY22 results, with revenue and operating profits increasing in line with expectations. The complexity of the media market provides a supportive backdrop to its offering, designed to help brand owners optimise the efficiency of their marketing spend. The acquisitions of US-based MMi and Swedish-based Media Path in FY22 significantly scale Ebiquity’s potential revenue base, while productisation, efficiency gains, and the transition to a common technology platform give a clear path to improving margins. The company also announced the forthcoming retirement of CFO, Alan Newman, with the search for his successor well underway. The share price remains at a significant discount to peers.
Initial Equity Trading Comments - 12 April 2023
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Today’s full year results are in line with the strong trading update issued in January. Revenues rose 20% (organic basis +9%) and operating profit 98%. The margin rose 470bps to 12.2%. With trading in line and integration and synergy plans on track we expect to maintain our profit estimates. The environment is tough for advertisers, and we expect EBQ services to be in strong demand as clients seek to drive efficiency in their huge marketing budgets. EBQ fast growing digital media products will meet this need in particular. The CFO, Alan Newman, has announced he is retiring, but the Company has confirmed good progress is being made in finding a replacement. EBQ has made enormous strides in product, structure, margin and raising its long-term growth potential. The fruits of this have started to be delivered and we expect the move towards a 20% margin to crystalise over time. The valuation even in a weak equity market is out of kilter with strong fundamentals. BUY
As the global leader in media investment analysis, we believe Ebiquity is extremely well placed to add value to brands across an ever more complex media landscape - capitalising on their desire to scrutinise the quantum, distribution, and efficacy of their spend and performance of their agencies. In this report we highlight the group’s focused strategy and highly experienced management team and describe a range of core opportunities which we expect to fuel strong earnings growth, robust cash generation and create the potential for dividend payments. We estimate a fair value of 110p and see strong potential for sustained share price appreciation, so initiate research coverage with a BUY recommendation.
Ebiquity’s year-end trading update confirms that revenue continued to grow strongly in H222, delivering a 20% improvement for the full year, with underlying organic growth of 9%. Management is guiding to an underlying operating margin of 12%, implying that FY22 operating profit will be just ahead of our £8.9m forecast, notwithstanding the slight undershoot on revenue. This improvement in margin reflects the two transformative acquisitions made in the year, adding operational capability and efficiency, and scaling the US reach, as well as the increase of digital in the revenue mix. The shares are priced at a substantial discount to both peers and the group’s long-term average EV/EBITDA multiple.
EBQ has confirmed 20% total revenue growth of which 9% was organic. At the adjusted operating profit level, the Company has confirmed a 12% margin (circa +450bps YoY), which based upon the implied revenue means the Company has traded in-line with our profit expectations and our 93% EBIT growth estimate. Within the mix the high margin digital media solutions unit has grown very strongly again and beaten expectations. Current trading appears to be stable and in-line with a volatile and complex media market where clients need advice. With the synergies programs on track 2023 looks set to be another very strong year and we forecast another big leap (41%) in EBIT. On just 5x EV/EBITDA the stock is trading at approximately half its near term fair value in our view. While EBQ held up very well in 2022 (essentially flat vs small cap down over 30%), the shares should now make ground given the growing execution record, margin improvement and outlook.
Ebiquity has delivered strong first half results, with 7% organic revenue growth boosted to a 16% gain including acquisitions. An increasing proportion of revenues from the higher-margin digital media solutions and rigorous control of costs in the existing business drove a substantial uplift in underlying operating margins from 7.1% in H121 to 13.3% in H122. Full year results are expected to be in line with market expectations and we have reinstated FY22 and FY23 forecasts including the H122 acquisitions. The shares have outperformed peers and the sector, but the valuation remains at a discount.
The H1 revenue performance was strong, but the real surprise is the margin. While we expect good progress over time and think 20% is a real medium-term possibility we did not expect so much so soon. The H1 margin rose 620bps to 13.3% vs full year PGe 11.6% which includes further existing business efficiency and acquisition benefits. 20% now looks straightforward in a stable environment. Macro is the dominant factor at present; EBQ trading remains healthy, its clients are still spending on marketing and if anything, are likely to seek EBQ help to drive efficiency if conditions weaken and they need to reduce media spend. In a normal climate we would be upgrading on the back of this H1 performance but elect to hold our forecasts given the backdrop and treat the upside risk as a buffer.
Ebiquity has delivered a good performance at the halfway mark. H1 revenues grew 16% YoY (+10% organic) to £37m equating to c47% of PGe full year and H1 EBIT has doubled YoY and equates to c50% of our full year estimate. H2 will see a full period contribution from the acquisitions, some synergies starting to flow and the Digital Media solutions business will ramp up further. The H1 performance provides strong evidence that execution is on track and coupled with cyclical stabilisers (clients need help to become more efficient and effective in a downturn), some very substantial comfort in an uncertain world. The fundamental long-term outlook for Ebiquity is strong and the Company is evolving rapidly under its proven leadership team to maximise both its share of the market and its profitability. The rating is low and we see scope for the shares to double and even quadruple in the medium term.
Ebiquity delivered 2021 results in line with our upgraded expectations. Revenues rose 13% and EBIT turned positive with the margin recovering to 7.5%. The Digital Media Solutions offer was the star with revenues almost quadrupling and delivering a 51% margin. Ebiquity has made two excellent acquisitions that extend geographic scale in key markets, add clients and will provide a platform to lift group profitability and operational gearing. The bottom line is that the PGe 3-year earnings CAGR forecast is 39.7%. Investor confidence was reflected in the oversubscribed placing despite difficult market conditions. This looks warranted given the outlook. BUY.
Ebiquity’s FY21 results showed good growth in revenue, up 13%, and a strong recovery in operating margin to 7.5% (operating loss in FY20). The figures were accompanied by two acquisitions, Media Management (MMi) in the US and MediaPath, a Sweden-based global media consultancy. Ebiquity is paying initial consideration of £6.1m for MMi and £15.5m for MediaPath, funded from cash and proceeds of an intended £15.0m placing at 53p. Management anticipates the acquisitions will be earnings enhancing in FY22, with group prospects boosted by the scaling up in the US and the wider use across the group of MediaPath’s proprietary technology platform. Our forecasts are under review.
Ebiquity’s trading update shows revenues are in line with our forecasts, but with a much better operating profit performance at £4.7m versus £4.1m. This reflects strong progress made in its newer (higher margin) digital media solutions and prudent cost management, accelerating the timing of modelled margin recovery. It has also translated into faster improvement in the balance sheet, with year-end net debt of £4.8m, against our forecast £8.7m. The group has made a small acquisition in Canada, extending North American capability. The shares have performed very strongly over the last year, yet the rating remains attractive.
Ebiquity has confirmed a strong performance for 2021 in its trading update. Revenues are in line with our September upgrade with fast-growing Digital outperforming our expectations. PBT is 13% ahead of our very large 31% September upgrade on the back of faster cost improvements and some extra operational leverage from the digital media products, which are key to long-term margin growth. Cash is also well ahead of expectations. We lift our 12-month TP to 97p and reiterate our Buy rating, noting the additional evidence to support our medium-term view on improved growth and margin potential as a result of new management strategy execution. Looking out to 2023 we see a potential valuation range of 137p to 174p, implying that the shares could triple.
Ebiquity has had a good first half, with a 20% uplift in revenues and a return to operating profit, with an underlying operating margin of 7%. Our expectations for the full year and for FY22e are edged up, although there remain notes of caution around prospects in some sectors in H2. Ebiquity is making good progress with its digital activities and product solutions, which we expect to support the medium-term growth. The share price performance year-to-date has been strong (up 194%), but the valuation remains at a sizeable discount to peers.
First half results show solid evidence of recovery, digital evolution and cross-sell execution. This is more than a bounceback, the organisation is being improved and positioned for continued growth meaning that recovery is only the initial phase. Revenue growth over the medium term driven by digital market products and client optimisation should be leveraged efficiently to drive profits. The shares have doubled so far but that is only the start. Near term they could broadly double again and we highlight scope for a considerably higher valuation as the record grows.
Ebiquity’s period-end trading update indicates a good first half performance, with revenues of £32m, up 19% on the prior period. The group has also posted an operating profit – undisclosed but ahead of the £1.0m delivered in H220. The progress is a result of a mix of factors, including new business wins (notably in digital), with some benefit from work deferred from FY20. We leave our forecasts unchanged for now, noting that any revisions at the interims in September are more likely to be on the upside. The share price performance year-to-date has been strong (up 195%), but the valuation remains at a sizeable discount to peers.
Ebiquity has provided a H1 trading update confirming that recovery is continuing to flow through, bolstering revenue and profitability. This is topped off with client wins and strong new product sales. Given the disclosure the business looks well set to make our full-year expectations with risk firmly to the upside. Ebiquity represents the leading play in independent media investment analysis with a proven management team executing a growth plan that should grow and strengthen the business. The share price has almost doubled since we initiated at 29p in March, yet we still see further substantial near- and medium-term upside. BUY.
As indicated at the pre-close update, trading conditions eased for Ebiquity in H220 as advertisers ventured back into the market after a COVID-19 affected first half. The group also gained new business, some following the withdrawal of Accenture from the media assurance market, with momentum continuing into Q121. Demand for Ebiquity’s services should be amplified by the complexity of the market and advertisers’ need to optimise the return on their spend. We expect the increased emphasis on digital capabilities, encapsulated in new KPIs, should help revenues – and profits – recover, which in turn will likely lead to an improved rating.
Ebiquity’s pre-close trading update indicates recovery as expected in H220, from both a pick-up in demand from existing clients and a good performance in winning new business. The group therefore returned to profit in the second half, leaving it with a small adjusted operating loss for the full year, slightly below our earlier estimate of a small profit. The performance on net debt was better than our modelling, with the group ending the year with net debt of £7.7m (Edison estimate £8.8m). Ebiquity’s share price has not kept pace with those of the UK-based agencies since our November Outlook report, exaggerating the rating differential.
FY20 pre close update
CEO Nick Waters, who took over the role in July, has set out his vision for Ebiquity’s future strategy at a capital markets day (CMD) presentation. It builds on the group’s strong positioning as a genuinely independent adviser to global brands on optimising their marketing ROI. The key to delivering growth momentum and improving earnings quality is clearly in the digital marketing domain, developing embedded products and services to identify and remove wasted spend. No new financial information was disclosed at the CMD and our forecasts are unchanged, but we regard the FY21e to have upside potential, depending on successful implementation.
Ebiquity is set for a stronger H220, after a difficult H1 (£26.8m revenue; down 24% y-o-y) when some clients paused or cancelled their marketing activity due to COVID-19. Most of the H120 £1.4m operating loss should be recouped by the year-end. FY21 prospects are further lifted by new client wins, partly from Accenture’s withdrawal from media audit. Newly installed CEO Nick Waters (ex Dentsu) is developing his vision for Ebiquity as a data-driven media solutions provider, augmented with consultancy services. This will be expounded at a capital markets day on 10 November.
Ebiquity’s FY19 results (delayed by the COVID-19 lockdown) were in line with expectations. The impact of the pandemic on the advertising sector is harsh, but is far from uniform, with some verticals notably more resilient than others. Ebiquity’s leading market position equips it with the data to benchmark and advise. Careful cost management should mitigate some of the COVID-19 related trading difficulties, as reflected in our tentative FY20 forecast, with the balance sheet remaining sound. Management guidance remains withdrawn. The New CEO, Nick Waters, joins on 1 July (see our April flash note).
Ebiquity’s new CEO is to be Nick Waters, joining from Dentsu Aegis on 1 July. His experience both at Dentsu, and previously at Mindshare, should be a good fit, bringing experience of media agencies and working with advertisers. The group is set to issue its formal FY19 results in early May. The COVID-19 update adds further detail to that published last month, with cost saving measures in place. The group had net debt of £6m at end March and has £5m of further headroom in its borrowing facilities. The earnings outlook depends to an extent on advertiser behaviour over the remainder of the year. In the absence of management guidance, our forecasts are currently suspended.
Ebiquity has postponed publication of its final results, in line with the FCA guidance. The trading update indicates the figures are as outlined in February’s period-end update, with year-end net debt at £5.8m. Committed facilities of £24m are in place, of which £14m was drawn down at the year-end. Guidance for FY20 has been withdrawn in light of the COVID-19 pandemic. The group’s clients, both locally and globally, are certain to be reining in their marketing spend, but are going to be keener than ever to ensure what they spend has the best return on investment.
Ebiquity’s pre-close update indicates that trading has been in line with management and market estimates and we are making no changes to our numbers at this point. Post year-end news flow has been constructive (the Digital Decisions acquisition and the buy-in of the Italian minority). A potentially bigger opportunity comes from the news that Accenture is planning to withdraw from media measurement. Ebiquity’s share price has been trading near 10-year lows, putting the valuation at a marked discount to the smaller marcomms companies on an EV/EBITDA and on a P/E basis.
Ebiquity has announced that it has acquired Digital Decisions, strengthening its capabilities in digital media monitoring and consultancy. Digital Decisions is a comparative newcomer, trading for less than three years, during which it has built an impressive client roster. It is headed up (and majority owned) by Ruben Schreurs, who will be staying with the combined group and leading the expansion drive into the US. The initial consideration is €0.7m in cash, with further payments subject to performance criteria through to FY22. Bringing useful additional technical capability, this looks to be a sensible, complementary purchase.
Ebiquity’s interim figures reflect its transitional phase post the £26m AdIntel disposal, with revenues flat against the prior period on continuing business and a broadly stable operating profit margin (pre-unallocated costs). We have trimmed our FY19 and FY20 revenue expectations but maintained our operating profit forecasts. The focus is now on building operating margin through careful cost management, and consolidating and building on the group’s positioning as a trusted advisor to CMOs. The shares are priced at a clear discount to smaller marcomms companies on an EV/EBITDA basis, nearer parity on P/E.
With the disposal of Ad Intel completed, Ebiquity is now focused on building its business as an independent adviser to global advertisers on measuring and optimising their media spend. The recently strengthened management team aims to improve margins from FY18 levels, but the need to adjust overheads to suit the size of the continuing operations will weigh on current year profitability. The unbundling should, however, set up the group for stronger progress thereafter. The balance sheet is significantly stronger, yet the rating is not recognising the improved investment case.
Ebiquity’s year-end trading update indicates FY18 performance across both the continuing and the now-sold Advertising Intelligence businesses in line with management expectations. Given the delay and uncertainty over the disposal on the CMA referral, this is a solid outcome. FY19 will see some effect of overheads taking time to scale down following the AdIntel sale, which offsets underlying profit improvement. The core consulting business has good potential globally and the reinforced management team can now focus its efforts on driving growth and improving returns, aided by a strengthened balance sheet.
Ebiquity has now received full CMA clearance for the disposal of Ad Intel, which will be transformative for the balance sheet (a net inflow of £20m). As might be expected, the process has been disruptive and absorbed management time. The trading update indicates higher investment levels within the rest of the group, which will supress operating profits in FY18e. Some good new business wins lay the ground for better performance in FY19e, but we have withdrawn our forecasts for now until there is greater clarity. Confidence may take a while to rebuild, but the weakness in the share price may provide an opportunity in a group fundamentally well placed to benefit from changes in the global advertising market.
Ebiquity’s interims are as indicated in July’s update, with good performance from the Media and Analytics & Tech segments. The strong new business pipeline underpins improving revenue and profit in H218 and our forecasts are unchanged. Management expects the Phase 2 CMA investigation on the Intel disposal to be concluded by this December. Once the situation is resolved, the shares can be appraised on fundamentals again. The continuing structural shifts in marketing should make for a fertile trading environment for an independent, trusted partner to guide decision-making. The current rating reflects uncertainty, rather than value.
Ebiquity’s H118 trading update indicates a good revenue performance from both the Media and Analytics & Tech segments, together ahead 7% y-o-y on a like-for-like basis. The referral to a Phase 2 CMA investigation of the Intel disposal has led to uncertainty and a 9% fall in Intel revenues, with a consequent impact on profits. Our revised forecasts for FY18 reflect this, but the improving performance of the (larger) balance leaves FY19 estimates unchanged. The share price has drifted 15% since the CMA referral. A full rerating may have to wait for a resolution, but the current discount appears overdone.
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The Competition and Markets Authority (CMA) has ruled that Ebiquity’s (EBQ) proposed divestment of its AdIntel business to Nielsen raises competition issues within the UK market. Ebiquity and Nielsen have been invited to propose solutions to counter the concerns raised by the CMA, otherwise it will go ahead with a more in-depth (phase 2) investigation.
Headwinds in the US affected overall performance in FY17 and we pare back FY18 EPS forecasts by 5%. However, remedial action has been taken, activity in H2 has picked up and we continue to forecast an acceleration in like-for-like revenue growth in FY18. Ebiquity’s (EBQ’s) growth profile should be further improved by the proposed divestment of AdIntel, paving the way for an unwinding of its discount to the peer group. An in-line EV/EBIT rating would point to a value of around 90p.
Ebiquity has announced the proposed disposal of its Advertising Intelligence (AdIntel) business to Nielsen for £26m (a multiple of 1.2x sales and 5.9x operating profits). The AdIntel business is platform-based and made up the bulk of the group’s Market Intelligence segment. The disposal will allow Ebiquity to focus investment and resources in growing its tech-enabled consultancy practices (MVM and MPO), which have historically been faster growing. The pre-close trading update indicates that after a difficult H117 in the US, progress has been made and growth ex-US has been good. Our forecasts are currently being updated.
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H117 results mirror the current media environment with the demand for greater transparency benefiting the contract compliance business but creating some headwinds in the US. While H1 results were mixed, the pipeline is strong and progress has been made on a number of fronts in delivering the Growth Acceleration Plan; the potential uplift this could bring to growth in the next few years is yet to be factored into the share price.
Ebiquity’s FY16 results reflect a continuation of trends seen at H116 and the early stages of the Growth Acceleration Plan. With additional services due to launch in FY17, we retain our forecasts for an acceleration of revenue growth in FY17 and introduce FY18 estimates. The transition to a more sustainable margin translates to a lower EPS figure overall but improves the quality of the earnings base and the sustainability of revenue growth. The c 12x P/E rating is unchallenging versus peers.
Ebiquity’s FY16 trading update points to 9% revenue growth (6% currency) and mid-single digit profit growth in operating and earnings. FY17 has started well with a noticeable pick up in new business activity and improved visibility; we leave our forecasts unchanged. We believe EBQ is in a strong position to execute to the growth acceleration plan presented in September 2016 and consider the 10x FY17 P/E rating unchallenging.
Along with the release of its (in line) interim results, management has presented its new strategy. This will involve the roll-out of the fast-growing MPO services in more markets, and investment in technology enablement across all divisions as well as in organisational processes. Initial investment means a reduction to FY17 EPS forecasts. However, Ebiquity is building on strong foundations and we believe it is in a good positon to execute its plan, which should result in a higher-quality business with a more robust longer-term growth profile.
Ebiquity’s H1 performance is expected to be broadly in line with market expectations, with a larger contribution from the rapidly expanding MPO division. We will update our forecasts at the time of the interims on 28 September when management may also be able to give further insight into the market’s reaction to the much anticipated ANA Media Transparency Report and subsequent recommendations.
Ebiquity has released its audited results for the eight months to its new December year-end. Following this, management has presented relevant unaudited pro forma data for calendar years 2015 (CY15) and 2014 (CY14). This report focuses on this data and provides the basis for our calendar year estimates. CY15 saw solid revenue growth of 10.8% (7.9% on l-f-l 1 ), while underlying operating profit, PBT and diluted EPS all grew substantially, with EPS rising 63.4% to 10.8p (CY14: 6.6p), though this increase was magnified by a strong MVM Q115 versus an uncharacteristic slower start in Q114, which dampened the CY14 results. We maintain our CY16 estimate and initiate a CY17 estimate, which suggests 11.7p diluted EPS up 6.4% on our maintained CY16 11.0p estimate. The board is recommending a 0.4p final dividend for the reported eight-month period.
Ebiquity’s results for the half year to 31 October 2015 (HY Oct 2015) again show good progress. Higher operating margin after lower central costs (offset by a higher tax charge resulting from lower available tax losses) has led to underlying diluted EPS for the six months, increasing by 13% to a reported 3.4p and by 23% to 3.7p on a constant currency basis (HY Oct 2014: 3.0p). Management says that continuing demand for data analytics and performance measurement is driving strong like-for-like growth in both its Media Value Measurement (MVM) and its Marketing Performance Optimization (MPO) segments at high margins, while the Market Intelligent (MI) segment is beginning to show signs of recovery in some markets. If sustained, sterling’s weakness over the past month could reverse the recent currency headwinds to positive and provide added comfort to our maintained FY16 estimate.
When certain investor groups focus on ‘tech’ stocks it is easy to forget that Media forms part of the wider TMT sector. Media (mass communication) companies have a wide range of activities. But as the public consumes media through an ever broader choice of devices and channels, media and technology have become inextricably linked. This can be related to how we consume media, with innovative music streaming platforms from the likes of 7digital (7DIG), to how corporates monitor the efficacy of their marketing dollar with Big Data analytics platforms such as that provided by Ebiquity (EBQ).
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Ebiquity’s FY15 results show good growth, especially on a constant currency basis, with revenue up 11% including 8% organic growth on a like-for-like basis, while normalised diluted EPS grew 14%. On a reported basis, revenue increased 8% and normalised diluted EPS rose 6% to 10.7p. The final months of FY15 were extremely active with a significant volume of new business now reaching closure, providing a high level of visibility for revenue potential for the coming year. Management is recommending a 0.4p maiden dividend and is intending to change the year end to December, which should enable clearer and more timely reporting.
