MISSION’s wide-ranging activities, efficient ability to work remotely and close, long-standing client relationships has enabled it to weather the COVID-19 crisis in relatively good shape. It has continued to win new business and run assignments throughout. Lower revenues as clients pulled or postponed campaigns mean a H120 loss of c £2.2m, but we expect this to be more than recouped in H220. A mix of entrepreneurialism and collaboration makes the post-COVID-19 outlook attractive, but this is not currently fully reflected in the share price.
Group agencies have a broad spread of clients, giving a good degree of resilience, with the technology- and healthcare-facing agencies doing particularly well. April Six, a technology and mobility agency, has had some excellent new client wins in H1 in Europe and the US. Property has obviously had more severe problems but should now be set for a better H2 as developers look to market more aggressively. Integrated agency, Bray Leino, has won a significant project for INEOS for H220. Pathfindr, one of the group’s incubator companies, has sold over 15k units of its wearable Safe Distancing Assistant for COVID-compliant working, and has a strong order book for H220. James Clifton, appointed CEO in April 2019, has prioritised closer collaboration across group agencies, boosting the visibility of the MISSION brand. This is bearing fruit and, perhaps counterintuitively, has been helped by remote working, which has improved internal and external accessibility. New client, my online therapy, was won having been pitched for as MISSION, using a combination of expertise from across group agencies.
The good new business performance supports management’s assertion that the group should report a profit for the full year, having made a first half loss of around £2.2m. Our model assumes that revenues rebuild through H2 and on into FY21e, allowing margins to recover. Our FY21e PBT estimate of £9.1m sits within management’s guided range of £9-10m but is dependent on the shape of economic recovery post COVID-19. £5m of additional bank facilities have been negotiated, giving plenty of headroom on our modelled scenario.
Improving financial performance helped double the share price to 80p over 2018 and 2019, reaching a high of 108p in February 2020. In common with other small and mid-sized marketing communications stocks, the price came back sharply as the pandemic spread. With some visibility now back in the market, the shares are trading well below levels indicated by a DCF, which derives a value of 110p based on a WACC of 10% and medium-term growth of 6%.
