i think the results were as expected. the lower eps includes 'the kitchen sink' (i.e. one-off restructuring costs, bank fees for renegotiation of debt and amortisation); the higher eps is a 'best case' scenario.
2010 was undoubtedly a good year for TMMG but i think the share sales this morning reflect disappointment on a couple of points.....
1 - there was little mention of 'a great start' to 2011
2 - debt is still high at £18.5m
however i think the underlying story still remains and the shares are undervalued on a 2/3 year view. my reasons are:
1 - cash flow. the company is capable to generate 2m a year so even at the current size the debt will reduce by 4m over the next 2 years giving ebitda to debt ratio of 2.5 times:
ebitda of 5.6
cap ex (0.7)
free cash flow = 2m
2 - profitability. ongoing eps are likely to be 3.3p giving P/E of < 5t
ebitda of 5.6
deprec of 0.7
interest of 1.6
tax of 1.3
profit after tax = 2.0m (with 60m shares = 3.3p)
3 - team work. the new ceo has obviously pulled the business together and some statements in the results give comfort that this will continue. the senior managers are very incentivised with shares they own.
4 - loan repayment. the interest rate on this is high at 7% over LIBOR and due to be repaid in 2013 s at that point a reduction of 3 or 4% is likely which would save up to 0.5m a year (this adds 0.8p to eps). even allowing for interest rates to be 2% hgher in 2013 this still adds 0.4p to eps.
5 - rns. the statement was not as confident as i was hoping but reading through it again the big aspect that is missing i think is a summary of 2011 trading. however anytime the futrue is referred to in the statement it is in a positive context esp. with relation to CASH flow. thus i think the relevant point is what is missing from the statement. with a glass half full approach the statement is accruate and does not contain anything worrying but the directors did not go out of their way to talk up their prospects. this is unusual but i think deliberate to keep something in the bag for later.
i am buying at these levels (17p) with a 2/3 year view of 35p.
at 17p - RNS this morning says results will be released on 31st March. This is 2 weeks earlier than previously so i think positive in several respects:
1 - it means their accounting is in better shape results out
2 - it means that business is simpler to understand than in past
3 - they have a desire to improve investor relations
4 - it is easier to bring good news forward - here's hoping!
with earnings of over 3p fcst any news on lower debt and some stability in trading could see the second leg of re-rating.
last RNS stated profits to be above expectations which leaves open the chance of more good news when Finals released in 4 weks time.
IMHO the following points make this one of my top ten opportunities:
new internal mgt are now in charge of the company and i think there is now evidence that very positive and significant changes are happening which could lead to signifiant upside
- EBITDA = c.6m+. MC at 17p = c. £12m
- eps fcst to be 3.3p and then 4.3p.
- but no divi yield fcst as the company concentrates on debt reduction
- industry news says that the market place is tough as companies are still cautious with their marketing budgets. This should not cause undue worry unless the UK economy does get significantly worse. The upside in the share price is not that the company gets more business but that its current level of profitability is recognised
- chart has broken out of a 3 year severe downward trend - the price was 150p 3 years ago - maybe there will be a prolonged base formed before any upward mvt but the potential is c.50p
- looking at downsides the business is exposed to clients and/or people leaving but this is an industry risk and no evidence of this being a particular issue at TMMG. debt has been paid off in the last 12 months which leaves (in simple terms) t/o of c.90. even allowing a sharp UK downturn and this fallling to 80m is able to achieve 5% operating margins that would be op prof of 4m compared to a MV of 12m which seems too low a rating.
- when new mgt came in the company had a rights issue that broke the back of previous acquisition debt. the great news from the rights issue was that the drectors and the senior mgt team all bought in heavily. directors has subsequentially topped up significantly too and now top mgt prob own c. 30% of the business.
- interesting the last RNS focuses on saying that they will continue on managing the strong CASH flow and monitoring costs. this is a great statement and signal for me - it implies that CASH flow is still good and that any future RNS has potential to surprise, and it implies that they are managing the profitabiliyt of the business - so regardless of the level of turnover they will manage to achieve a decent level of profitability. This reduces the risk for me and also i think is a very positive about the mgt - they are not focused on becoming bigger for the sake of it but want to run the company on the basis of generating sharehlder value (which includes themselves)
- Ive only followed the company for a couple of years, and overall it seems significantly undervalued because the level of profits would seem sustainable at least, debt is no longer a problem and futute CASH flow will be strong.
- it is one of my top ten holding and although i think it could reach 50p over a couple of years i expect to stop selling at 25-30p.
Yes - people seem to have a lot of respect for Mr Morgan. I don't know the people or business first hand (which is clearly the best way if possible - as you say above board - just knowing first hand that people are competent is good). What clinched it for me though was the extent to which the directors are sinking their own money into the firm. It shows great confidence in what they are doing - and will focus their minds - both very good things. Even before I topped up in November they had a lot invested - but as you will know - the big buys in November at around 7p happened - and that gave me more confidence to buy - so I bought 2 more times since.
Just because they have invested a lot themselves gives no guarantee - but it is a good sign. One of the other shares I hold is Aga Rangemaster - and the tiny director shareholding seems like a bad sign to me (for e.g. I suspect they would have dealt with the pension situation more aggressively by now if they had a lot of shares - rather than taking the easier option).
The only reason I bought them was because I knew quite a few of the directors at Bray Leino - I would quickly add they have not and would not provide me with any information. When TMMG was formed part of the group contained some rotten apples and the share price dived as you will be well aware.
I heard that David Morgan had taken over the running of the company so I'm thinking I can't go to far wrong by investing a few bob!
First by 22 October then topped up on 18 November and 21 December (so bought just below 10p at cheapest and 14p at most expensive). I'm quite bullish about the company (dont know whether I am right to be though - just from what I have read etc).
that would make some sense; except that the prices move in different directions than each other some days. You must be right though - but vvv weird to be moving in opposite directions. Makes my portfolio movements very random.
Hi, this is probably a stupid question, but I use the FT portfolio manager and have bought Mission shares twice - and one time I entered the share using the LSE code and the other time with the PLU code. So each day I now see what the movement is on each - and, bizarrely, sometimes it may be up say5% on one of them while down 4% on the other etc. The difference today is not as large as normal but is still more than 6% - and the prices as I say often move in opposite directions.
Mission Marketing Group Plc
Mission Marketing Group Plc
Isnt this a bit weird? Choosing which exchange to use could mean a more than 15% difference on some days!!
I guess like many I see this as a recovery opportunity.
One thing that I can say about Robson Brown, having visited their website, is that the quality of the content is extremely unimpressive and, dare I say it, written very poorly. The website details a number of case studies, and if these short write-ups provide an insight into RB's quality of work, then I would suggest that there should be no surprise that they went into administration. At the very least a design/comms/PR agency should be able to demonstrate strong writing and content skills. Hence, the removal of the management team could be a very good thing.
There is a website called thedrum.co.uk, which focuses on news in the UK ad world.
There are quite a few articles about Robson Brown, who have had an appalling year....taken over in Feb 2010, begining of Dec appear to have lost biggest client, Dreams (bed retailer), then forced into admin.
One article, dated 14th Dec, suggests TMMG has acquired 'what remains of the client list'. Presumably, they have acquired an office, some staff but seemingly not the top management, who were attempting their own MBO. Whilst that is fine as far as costs go, presumably it is those chaps who were responsible for winning the clients.
The main point though, as you have written, it does indicate a turning point.
Does the acquisition of Robson Brown indicate that TMMG is moving from the fire-fighting stage towards expansion and a return to profitability ? We don't know exactly what was acquired - how many of the existing clients and staff
(if any) - nor do we know what price was paid. But it does look like a step towards recovery.
Yup, I think I'm bright enough to get the drift.
But actually it's very encouraging news that the directors are buying. The Finance Director has a reputation of being very shrewd. I don't know if he was part of this summer's 'concert party' or not, but the price they paid then was 13p, so topping up at 7.5p will average their buying price down.
I could not understand yesterday's sharp fall in the sp. It was impossible to work out whether it was a buy or sell, and I assumed that it had something to do with yesterday's RNS. The rumours have it that TMMG is progressing well with its re-organisation under David Morgan, that the debt problem is being successfullu tackled and that turnover is holding up. On that basis, I topped up yesterday at the ridiculously low price of 7.7p. The problem with this share is that the mm's bounce the sp around from 7.5 to 10.5p on the smallest of transactions.
I think the basics are good - David Morgan has a superb track record and is determined to turn the company round. I also think he will be willing to sell to a trade buyer. As I've posted here before, I think TMMG will eventually be taken out for around 30p a share.
Good to see significant commitment by Executive Director, Robert Day and Finance Director in acquiring further 911,743 and 133,334 respectively at 7.5p to add to their holdings. Surely an indication of confidence in future of tmmg.
Agree roughly with you Brocks. However, I am a bit disappointed by these results who did not bring any new information.
From a company who has been disappointing consistently since one year,
I can understand that some people are losing patience and hence the low PE.
We are half way through the H2 and the comments about H2 remain really vague. We also have no indication about what is being done to enhance falling margins. I will also be curious to see if David Morgan and Co are going to top up at these levels which are below the 13p paid in June.
All this to say that there is potential at the Mission ( especially with the recent small cap rally) but investors will ask for more tangible improvement in H2 before paying more for the share.
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