Marketing Group PLC (ST:TMGR) has published its first results, with FY16 revenues of €15.8m and EBITDA of €2.3m. As the bulk of subsidiaries were not in place until Q416, these figures capture little of the investment story. For Q416, revenues were €7.2m and EBITDA margin reached 17% (25% adjusted). Group strategy is to grow portfolio businesses organically, boosted by the network effect, and to make further earnings-accretive acquisitions using equity, retaining individual brands and their founders’ entrepreneurial spirit. With no market forecasts as yet, forward-looking valuation metrics are not usable and the historic P/E of 14.9x is on part-year earnings.
Building an international portfolio
The Marketing Group (TMG) listed on NASDAQ First North in June 2016 at €1.00, raising €1.25m. Since then, there has been a rapid spate of acquisitions for paper. Target companies must have expertise and industry recognition in their specialist marketing disciplines, be profitable and debt-free. By end 2016, TMG had 17 subsidiaries (from four at launch), with 30 offices in eight countries. Singapore was the largest contributor to FY16 revenues (39%), followed by Australia/ New Zealand (32%), North America (15%) and UK/ Europe (14%). FY16 financials reflect acquisition timing, although all 17 contributed in Q416. For this quarter, revenue was €7.2m, with adjusted EBITDA (excluding compliance costs and assuming a full Q416 from a company bought part way through) of €1.8m – an adjusted margin of 25%. There is net cash of €1.4m on the balance sheet (cash & cash equivalents of €2.4m), with net assets of €2.56 per share. This mainly represents goodwill in the acquired businesses (inherently unlikely to have any substantial assets).
Experienced executive team now in place
From its initial management team (with dual roles at Unity Group), TMG now has a full executive team in position, all UK-based. They are CEO Adam Graham (chair of British Interactive Marketing Association, ex-Omnicom, WPP (LON:WPP)), appointed November 2016; and, announced today, Mike McElhatton, CFO (ex-Havas); and industry veteran Don Elgie (founder of Creston) as non-executive chairman.
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