Overview
Mission Marketing Group PLC (TMMG) is a London, United Kingdom-headquartered technology-embraced marketing communications and advertising company which comprises of 16 marketing agencies. The group operates in the United Kingdom, Asia, and the United States and is engaged in delivering digital, brand, marketing, advertising and full-service communications. The group has two divisions: Sector Specialist Agencies, which assists with marketing ideas aimed at highly specialist audiences, and Integrated Agencies, which delivers campaigns across every platform. The operations are differentiated in four operating segments: Advertising & Digital, Media Buying, Exhibitions & Learning and Public Relations. James Clifton is the Group Chief Executive.

Recent Developments
On 9th April 2019, the company named James Clifton as the Group Chief Executive and he will take on the newly created role with immediate effect.

Key Financial Highlights (FY 2018, in £m)

(Source: Company Filings)

The total revenue grew by 13% to £78.8 million, while revenue from continuing operations, which exclude the results of BroadCare, also rose by 13% to £77.6 million. The growth in revenue was driven by strong performance in the core business and from the acquisition of Krow Communications. Headline operating profit improved by 21% to £9.9 million, reflecting improved staff cost ratios and the benefits accruing from the Shared Services initiative. Better operating profit resulted in an improvement in the operating margin from 11.7% in 2017 to 12.6% in 2018. Headline profit before tax rose by 22% to £9.5 million, while reported profit for the year was £9.2 million. Headline EPS increased by 21% to 8.90 pence and the board recommended a final dividend of 1.4 pence per share. The total dividend for the year surged by 24% to 2.1 pence per share.
Valuation Methodology

Method: EV/Sales Multiple Approach (NTM)


Share Price Commentary
 
Daily Chart as at May-23-19, before the market closed (Source: Thomson Reuters)

On 23^rd May 2019, at the time of writing (before the market closed, at GMT 12:05 pm), TMMG shares were trading at GBX 83.88, down by 1.31 per cent against the previous day closing price. Stock's 52 weeks High and Low is GBX 87/GBX 45. The company's stock beta was 1.00, reflecting the same directional movement of stock with the index. The outstanding market capitalisation was around £72.75 million with a dividend yield of 2.47 per cent.

Conclusion
The group has constantly demonstrated its ability to grow businesses and to achieve consistently high margins. However, the complex and ever-changing marketing environment where the company operates in poses a serious threat to the company, requiring continuous evolution of its business. A widespread and dramatic economic downturn has the most significant potential impact on the financial position. In such a situation, marketing expenditure is expected to be cut by companies, having a potential effect on volumes and profitability. Although the group is not expected to be directly impacted by the UK’s decision in 2016 to leave the EU, it has affected the overall business environment, which could induce a reduction in discretionary expenditure like marketing. In view of the currently heightened levels of both economic and political uncertainty, the company has revised its limits for net bank debt leverage and total debt leverage to 1.5x and 2.0x respectively, reducing each of its debt-related KPI targets by 0.5x. The company’s target to increase the operating profit margin to 14% has been delayed now, following the sale of BroadCare which has consistently achieved high-profit margins. Based on the risks faced by the company, and supported by valuation done using the above method, we have given a “SELL” recommendation at the closing price of GBX 85.00 (as on 22nd May 2019) based on 0.73x NTM EV/Sales (approx.) on FY19E sales (approx.).
 
*The sell recommendation is valid for the current price as covered in the report (as on May-23-19)
*All forecasted figures and peers have been taken from Thomson Reuters.

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