27/11/2008
‘We’re in the right space and we’re riding the wave,’ says Ben Langdon, CEO of digital direct marketing specialist DMG, recommended as a strong buy here at 76.5p in the summer.
Debuting on AIM in 2006, the acquisitive company has quickly become the third-largest digital marketing agency in the UK and is reaping the benefits of its strategic focus on ‘digital and data’, as advertisers increasingly channel marketing spend online and away from traditional media.
In the midst of the worst economic backdrop seen for decades, this astute positioning enabled DMG to deliver very strong half-time results to September. ‘Normalised’ pre-tax profits grew by 35% to �3.37m – the organic growth rate, excluding acquisitions made in 2007, was encouraging at 17% – on turnover up 20% at �26.5m.
DMG also managed to reduce net debt by the best part of 60% to �1.82m, during a period in which cross-referral sales increased and new blue-chip clients, among them Mothercare, Danone and Regus Group, were added to the roster.
Approaching the second half ‘in a spirit of cautious optimism’, DMG should continue delivering throughout recession and, given its balance sheet strength, is strongly positioned to play a role in sector consolidation, with deals bringing greater scale most likely.
For the full year to March, analysts are looking for a rise in pre-tax profits from �6.3m to �8.1m and in earnings to 8.7p (2008: 7.3p). On those estimates, DMG trades at just eight times earnings and remains exceptionally good value. Buy/hold.
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James Crux
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| AIM | �46.83m |
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