07/01/2008
Online marketing specialist TMN looks a more solid bet as it makes moves to consolidate its fast-growing sector and expand into Europe, most recently splashing out £8m on Dutch peer Tapps.
It has been a busy few weeks for TMN, after making a £9.8m all-share offer for UK rival Internet Business Group in December. Amsterdam-based Tapps is being bought for an initial cash sum of £3.9m, funded by existing cash and an extended facility with its bank, and £1.8m worth of new shares.
Tapps has a strong reputation in the Netherlands and brings a 7m-strong base of internet users and a blue-chip client base. Having lifted sales by two-thirds to €4m (£2.98m) and pre-tax profits by 176% to €800,000 in the 2006 calendar year, Tapps is expected to augment group earnings in its first full year.
TMN’s chief executive Mark Smith anticipates the merger providing many synergies and hopes to extend the reach of the group’s fastest-growing division, online market research, onto the continent. ‘TAPPS has built an excellent reputation in the Netherlands and is the ideal partner to support TMN's expansion into the European market, both for email marketing and online market research,’ he says.
Recent interim results from TMN showed good momentum in the existing business and house broker Investec forecasts sales of £23.4m, pre-tax profits of £4.6m and earnings of 5.9p for the full year. Although shares issued as consideration for Tapps and IBG will be dilutive, both are profitable and experiencing organic growth, like TMN. Thus the present market valuation for TMN, which has a good history of integrating its purchases, looks undeservedly low.
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| Market cap: | £21.59m |
| PE Forecast: | 7.2 |
| Share price: | 42.25p |
| AIM | £9.76m |
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