The Mission Marketing Group
HOLDDespite downturn-driven difficulties in advertising, marketing communications innovator TMMG refuses to be bowed.
In a pre-close update, containing a surprising number of positives given the severe downturn, TMMG flagged up 29% sales growth for 2008 (results are out in April). However, the like-for-like performance, stripping out acquisitions, was only ‘slightly’ ahead of 2007. Encouragingly, the digital business, offering clients superior, measurable investment returns, delivered especially good growth.
Running with low costs and focused on cash, TMMG, whose agencies include Bray Leino, Fuse Digital and Big Communications, incurred second-half restructuring costs that, combined with tougher trading, meant 2008 pre-tax profits came in at ‘around £7.4m’. Although still creditable, this result was slightly behind the £7.7m market forecast.
Nevertheless, new business levels have remained robust, with recent wins including the Office for National Statistics and the Co-Op offsetting lost business from a major client in the crisis-hit car industry. Moreover, 2009 trading has begun well, but given economic uncertainties, the company says it will look to reschedule certain debt, thereby strengthening the balance sheet for 2009 and beyond.
Based on downgraded December 2009 earnings of 16.3p, TMMG is now trading on a budget prospective price-to-earnings ratio of 2.5, suggesting any bad news is more than in the price already. Therefore, if you own shares, don’t sell at current levels, since TMMG should command a dramatic rerating in more benevolent economic climes. Hold.
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Market cap: £13.56m
PE Forecast: 2.5
Share price: 41p
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