Companies: MSQ   

Marketing services counter Media Square beat City forecasts with record profits for the 16 months to the end of February.

Media Square shifted its year-end from October to February following November’s transformational acquisition of MSG from Huntsworth, a deal taking the previously UK-centric group into new business areas, markets and geographical territories.

Chief executive Jeremy Middleton unveiled a four-fold surge in underlying operating profits to £6.4m – compared with the year to October 2004 – from a 500% plus leap in sales to £126m. Profits at the pre-tax line, before acquisition related charges, tumbled in at £5.4m and underlying earnings sparked up 35% to 1.63p. Middleton also reported a cash conversion of three times operating profits and net debt of only £18.5m.

In the wake of the MSG deal, Media Square now sports 2,500 customers across seven countries and since the start of the current year, has won new business with the likes of L’Oreal and Mitsubishi. Cross selling is at play, with Media Square boasting more than 20 large clients to which two or more group companies provide services. Middleton also reserved special praise for online business twentysix, which he claims is one of the ‘best resourced and largest’ online advertising, marketing and advertising technology businesses in the UK.

For the current year, Middleton says he will focus on improving the quality of the group’s revenues. ‘We are making 10%, but we should be in the mid-teens’, he explained. Analysts envisage revenues of £110m, pre-tax profits of £11m and earnings of 2.48p, placing the shares on a modest prospective p/e of 9.4.

That looks exceptionally good value, given that Media Square has grown revenues more than ten-fold over the past three and a half years, and is now one of the UK’s biggest and most revered marketing service counters.

Media Square	AIM	£4.35m	13.50p	-1.00p
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