The Mission has reported FY19 results in line with levels indicated in the year-end update, with an 11% uplift in adjusted PBT and a 5% increase in diluted EPS. The new financial year started well, with a more coherent service offering and the agencies working effectively together to deliver new business on an individual and on a collaborative basis. COVID-19 is having a marked impact across the marketing sector as clients reschedule and adjust their spending plans, but it is too early to judge the financial impact that this will have on Mission’s FY20 results at this stage.
The Mission traded well across all its activities in FY19, with its largest segment, Advertising & Digital (80% of operating income), growing its revenues by 4.4%. All growth was organic. With the appointment of the group’s first CEO, James Clifton, in April 2019, and further new group roles added in business development, there has been noticeable impetus in developing both a more coherent group presence to external parties and greater internal collaboration. Some group agencies have been merged and the simplified group structure is encouraging cross-referrals and joint pitches, some under a Mission branding. COVID-19 is affecting some areas of the Mission’s activities more than others, but the speed of recovery in those areas may also be faster once the economy starts to recover. Much of the business is well suited to remote working. Property marketing and live events are most affected. We will initiate forecasts once the picture becomes clearer.
Year-end net debt of £4.9m (£11.1m including leases) was swelled by higher levels of working capital after a busy close to the year, which we expect to have corrected in the first couple of months of FY20. Outstanding acquisition obligations (£8.9m) are predominantly in cash, with £3.4m due in FY20 (£3.3m in cash). Mission has a committed £20m revolving credit facility (recently extended by £5m). This runs to September 2021, with a one-year extension option. It also has a £3m overdraft facility. Spending plans have been reined in and board salaries voluntarily reduced. A decision will be made on the final dividend closer to the June AGM.
A combination of market volatility and withdrawn market forecasts compounds the difficulties in making prospective peer group comparisons for valuation. Historical multiples are in a wide range, with the more similar agency groups trading on a P/E of 6.7x, a premium of 22% to the Mission. UK agency sector share prices have fallen by an average of 45% year-to-date; the Mission’s price is down 28%.