(MCM) Motivcom

Motivcom – delivering employee benefitsBUY
19/05/2011 Miles Nolan

Motivcom is a leading provider of marketing and business services that specialises in the business-to-employee sector – otherwise known as ‘B2E’. This essentially involves the provision of motivation schemes, employee benefits, sales promotion and event services to over 700 blue-chip clients.

By using its wide range of services its clients can boost customer and staff retention, enhance productivity, drive sales and use Motivcom’s outsourcing services to improve their operating efficiency.

The AIM-listed concern first joined the junior market at 54p back in 2004 when it was known as P&MM Group. It was rebranded as Motivcom less than two years later.

It has proved a big success story, with compound profits growth of 47 per cent a year since 2001, this has been achieved equally by organic and acquisition-led growth. Recent results confirm that trading is good, with another record year in prospect.

The head office is in Milton Keynes, and Motivcom now has six UK offices and recently opened sites in Paris and Dublin, which was due to new business from drugs giant Pfizer.

Motivcom is split into four divisions. In motivation, it provides employee and channel sales incentives. One major success has been the launch of its pre-paid card, ‘Spree’. This is a flexible pre-paid MasterCard, whereby employees can load funds or elect to receive part of their salary on the card, allowing discounts at a number of high street retailers. Last year, load values soared 130 per cent to £85 million – a huge hike from the £5 million achieved in 2008.

In events, this involves the development, management and staging of all aspects of B2B events. This spans product launches and incentive events through to venue finding and press conferences. With clients returning to more sustained spending, there has been a ‘huge bounce back’ in demand, according to director John Sylvester.

The promotions arm provides an extensive range of leisure-based consumer promotion solutions. This offers a wide and flexible variety of products that clients can use to promote their products and services. Through its Filmology division Motivcom also offers cinema and film promotions.

In employee benefits it helps employers reward staff with a wide range of ‘soft’ benefits that provide added value to the employment proposition – a market that is growing in response to employers seeking an ‘added value’ aspect to their employment proposition when wage increases are under significant pressure.

This includes tax-advantageous childcare vouchers and bikes schemes plus a range of other lifestyle discount offers. Last year, Motivcom launched over 80 new client programmes, and is stepping up its efforts to deliver more products digitally.

Part of the plan is to seek out earnings-enhancing acquisitions, and to date Motivcom has concluded eight deals, all of which have delivered a contribution. Aside from the £2.5 million raised on float, it has only returned to market once, which was in 2007 when £3.1 million was secured to part-fund the £15 million purchase of venue-finding and events specialist Zibrant.

This is testimony to the cash-generative nature of the group. Last year, strong cash flow from operations helped its net cash balance soar more than threefold to £6.2 million.

Finance director Sue Hocken argues that vendor expectations are now more realistic, and is running the slide rule over four or five potential targets. Hocken says, ‘We are seeing more sensible opportunities, and for smaller businesses we would hope to pay up to four or five times earnings.’

Motivcom is 56 per cent owned by the board and has a list of good institutions such as BlackRock, Henderson and Octopus. Successful investor Nigel Wray picked up 500,000 shares last year to take his stake to 6.7 per cent.
A new five-year strategic business plan is under way that, if successful, would lead to a doubling of

More work for Motivcom
Created: 12 April 2011 Written by: Jonas Crosland
Motivcom - which organises events and arranges employee motivation schemes for corporate clients - saw spending from existing clients and new business wins boost group operating profit 24 per cent year on year to £4.76m.
Events delivered a particularly strong performance as clients increased their marketing spend. Operating profit there rose 69 per cent to £2.97m, despite increased investment in IT infrastructure. The promotions side, which includes employee benefits and publishing, did record a more modest 7 per cent rise in profits to £1.5m - but the second half of the year witnessed significant growth with over 80 new client programmes launched. Still, the motivation division's performance was more mixed. While its pre-paid Spree card pushed up load values by 130 per cent to over £85m, the core business - providing motivation and incentive programmes - suffered from the low-margin nature of new business wins, and divisional operating profits fell 46 per cent to £0.44m.
Group finances remain in good shape, though, with strict cash management and solid cash flow boosting the cash pile from £1.8m to £6.2m. Numis Securities has upgraded its forecasts for 2011 and expects adjusted pre-tax profit of £4.8m, giving EPS of 12p (from £4.7m and 11.5p in 2010).
MOTIVCOM (MCM)
ORD PRICE: 138p MARKET VALUE: £40m
TOUCH: 135-140p 12-MONTH HIGH: 140p LOW: 81p
DIVIDEND YIELD: 2.3% PE RATIO: 13
NET ASSET VALUE: 71p* NET CASH: £6.2m
Year to 31 Dec Turnover (£m) Pre-tax profit (£m) Earnings per share (p) Dividend per share (p)
2006 76.7 2.70 7.57 1.25
2007 85.7 3.31 8.90 2.00
2008 110 2.09 5.02 2.30
2009 102 3.06 7.65 2.50
2010 115 4.39 10.7 3.20
% change +13 +43 +40 +28
Ex-div: 13 Apr
Payment: 22 Jun
*Includes intangible assets of £21m, or 73p a share
Guide to the terms used in IC results tables.
More analysis of company results
IC VIEW:
GoodValue
Sensibly, management is cautious about how client expenditure may be affected by the economic climate - but further progress this year is still expected. So, trading on a not particularly expensive 12 times expected earnings, the shares look long-term good value.
Last IC view: High enough, 90p, 25 Sep 2008

Wed 19th January 2011: Soco fuelled by £1.8bn bid hope

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Small Companies News Flash - from Julian Tolley, Head of Research, HB Markets
On Tuesday, our analyst's recommendations included BUYs for 32Red, Motivcom, NWF Group and Westminster Group; HOLDs for Communisis, Image Scan Holdings and Optos; along with a SELL recommendation for Mirada. A full round-up of today’s recommendations can be found on our website via the link below.

I have briefly been running the rule over Motivcom and would be interested if someone who knows the company better than I do could comment on my initial thoughts:

On the surface, the figures look quite encouraging and the year ended 31 Dec 2007 was a strong year.

Operating Profit up 23%
Profit before tax up 22%
Gross Profit up 21%

Earnings per share increased by 18% to 8.90p

Dividend for the year was 2p compared to 1.25p in 2006 - so up 60%

The company is also growing through acquisition - not always a positive factor - but all seems OK so far in this respect.

The group claims to be the UKs largest provider of meetings, incentives, conferences and events.

Over 5 years, the group's operating profit has grown at 31% compound year on year.

Motivcom's client base looks impressive with over 600 corporate clients including ca. a third of the FTSE companies.

The Chairman's statement is, unsurprisingly, upbeat and there are claims that the robust business models provide protection from a market downturn and that such poor market conditions could actually be of benefit to the company. I must say that I am slightly sceptical of this.

Looking at shareholdings in the company, over 60% of the company is held by members of the board.

Looking for downsides to this company as an investment, I have to admit that I am struggling at this point.
I do note that the company recently bought back 6.4% of it's shares to be held in treasury either for cancellation or to satisfy employee share option obligations amongst other reasons. Kenmitch won't like this but at least the shares are close to recent lows.

In fact, the share price performance is another downside although this could obviously prove to be a significant benefit for intending investors.
Last summer to autumn, the share price was in the 150 - 155p range but has heavily fallen along with many areas of the market since then.
It is currently trading off 72 - 75p having recently found support at and bounced back from around 60p.

You could not yet recommend this share as a BUY from a chart perspective but it seems to me that it is very undervalued by the market.
With a yield that is approaching 3% and is more than 4 times covered by earnings and forecasts for the next two years of earnings growth at 30 and 25% respectively, the current PEG is 0.6 falling to 0.2

If these figures are reasonable, then the share looks to be very attractive at current levels.

One final point.
You should never invest in a company for shareholder benefits but I do note that if you hold 1000 shares you are entitled to benefit from the company's reward program.
I haven't checked this out in any detail, but if it is the same as a program I am aware of (as is implied by the relationship with enticerewards) then you may be able to buy vouchers for use in many high street stores at up to 10% discount.

So, if you get 5% off at Sainsbury and spend say, 100 pounds a week on groceries and petrol, that's 260 pounds in a year. John Lewis would be 10%, Argos 7% etc.
A 1000 share investment would cost ca. 750 pounds. Please do your own research on this but if that is correct then a 1000 share investment might end up costing you nothing over a year.

See the companies website at:

http://www.motivcom.com/

and look under Investor Relations/Shareholder Privileges.

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