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 Management guidance remains withdrawn.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).
In an evolving, uncertain environment, advertisers’ requirement to know the efficacy of their spend is even greater. Ebiquity works with 70 of the top 100 global advertisers, giving it unique insight on spending from its pooled data. Notable FY19 client wins include Amazon and Facebook, underlining that even major tech players still need external appraisal despite their extensive internal data. Accenture’s intended withdrawal from media management audit from August is already beneficial, and the impact should be more marked in H220 and FY21. The Digital Decisions acquisition (January Flash note) bolstered the group’s capabilities in digital media monitoring. It has also added further skills in data handling and presentation that are being leveraged across the group, for example in direct data assimilation and client dashboards, which should improve efficiency for clients.
Given that there are so many current uncertainties, our FY20 estimate is highly tentative. We have assumed Media revenues dip 17% on the year, while the softening in Analytics & Tech is less severe at 10%. We have built in a slightly lower operating margin for the former (21.7% down to 20.8%), but a recovery in that for Analytics & Tech from 6.8% to 8.5%, with no drag from Stratigent, and Advanced Analytics benefiting from new client wins and its growing support centre in Spain. Net debt on this basis remains well within facilities and renegotiated covenants for now are on a simple liquidity check. As at end April, the group had £13m of cash and £19m of debt, with further facilities of £5m available.
With so much ongoing change, it is more than usually difficult to draw conclusions on valuation. On a P/E basis, the group is trading at a premium to small marcomms peers (on 8.6x) on the current year reduced earnings, but at a discount of around 10% on EV/EBITDA, where peers are trading at around 6.0x.