22 September 2021

THE MISSION GROUP plc

("MISSION", "the Group") 

INTERIM RESULTS FOR THE SIX MONTHS TO 30 JUNE 2021

Sequential recovery towards 2019 pre-COVID normality continues to accelerate

The MISSION Group plc (AIM: TMG), creator of Work That Counts comprising a network of 15 Agencies delivering real, sustainable growth for its Clients, today announces interim results for the six months ended 30 June 2021 ("the period" or "H1").

FINANCIAL HIGHLIGHTS

*Headline results are calculated before acquisition adjustments, start-up costs and exceptional restructuring costs.

BUSINESS HIGHLIGHTS

OUTLOOK

Commenting on the results, David Morgan, Chairman of The MISSION Group plc, said:

"I am so encouraged by the response from the management team and the Agencies over what has been a truly challenging eighteen months. The business is firmly back on an upward curve and in great shape across all measures I am, therefore, supremely confident that it will go from strength to strength under the guidance of Julian, James and Giles.

"For me stepping down is far from manumission. It's been a great journey and I truly believe that the best is still to come."

ENQUIRIES:  

NOTES TO EDITORS

MISSION is a collective of Creative and MarTech Agencies led by entrepreneurs who encourage an independent spirit. Employing 1,000 people across 27 locations and 3 continents, the Group successfully combines its diverse expertise to produce Work That Counts for our Clients, whatever their ambitions. Creating real standout, sharing real innovation and delivering real business growth for some of the world's biggest brands. www.themission.co.uk

OVERVIEW

We are pleased to be able to report financial results for the first half of 2021 that are ahead of the Board's original expectations. Despite the impact of a prolonged third lockdown in the first half of 2021 which had an inevitable impact on the pace of economic recovery, MISSION has continued to see a marked sequential quarter on quarter recovery in both revenue and profitability. This has resulted in revenues for the period of £34.1m (2020: £29.1m) and a headline operating profit of £2.0m (2020: loss of £1.8m).

Out of thirteen MISSION Agencies, eleven delivered a significant H1 year on year improvement in performance (excludes Pathfindr as it is not an Agency and Innovation Bubble as it was acquired in June 2020). We have continued to see particularly strong performances from our Agencies that operate in sectors more resilient to the effects of the pandemic, including our specialist technology and mobility Agency, April Six, which delivered a 10% increase in revenue, achieving growth both in the UK and North America markets. In particular, April Six trading in North America for the first half year climbed 25% ahead of the equivalent, pre-pandemic period in 2019.

As the period progressed we also started to benefit from the rebound in sectors that were significantly impacted by the pandemic. Our specialist property marketing Agency ThinkBDW delivered a 27% increase in revenue following a resurgence in activity, reflecting the rebounding UK new homes market, while brand Agency Bray Leino achieved an impressive 42% growth in revenue as Clients returned to a more business as usual footing.

The progressive removal of most Covid-19 restrictions in the UK & US and the return to more 'normal' life is giving our Clients more confidence to plan for events. This return to a more confident outlook, combined with a backlog of delayed international and nationwide events, has led to increased activity for a number of our Agencies including Bray Leino Events which is supporting on a number of forthcoming projects including the prestigious UK Pavilion at the upcoming Dubai Expo.

New business opportunities have continued to present themselves across the Group with new Client wins throughout the period including Porsche GB, Redrow PLC, Novo Nordisk, Mecca, Cazoo, Bottlegreen and Burts Chips.

MISSION continues to benefit from the strategic investments we made last year to support our Agencies through our centralised function, such as the acquisition of Innovation Bubble, which provides expert research and advice to our Clients both directly and through our Agencies. So far in 2021 we have also completed the rollout of MISSION Made, a 24/7 digital production studio, innovation hub and evolving e-commerce capability, supporting our Agencies. We remain focussed on exploring further organic and acquisitive growth opportunities to further leverage our compelling infrastructure.

The Group has just completed a brand 'refresh' with the goal of better reflecting MISSION's vision to be the preferred creative partner for real business growth. Following a consultative process, we will use the descriptor, creator of 'Work That Counts', to demonstrate that everything we do is designed to make the difference our Clients are looking for and why they consider us to be a long term creative partner that consistently delivers real growth.

As we take steps to continue this momentum and further drive growth over the next six months, we have identified three strategic areas that we intend to focus on. The first is developing our data and analytics offer, which is a major growth area in the world of marketing and advertising. We have recently appointed a new data and analytics lead and, in order to further strengthen MISSION's profile in the space, we will soon be launching the 'MISSION BRAND BONDING INDEX.' This will be a free to use online platform using comprehensive data and a bespoke algorithm to benchmark 100 global brands, and will act as a new business prospecting tool for the Group.

The second strategic area of focus is enhancing our creative and customer experience (CX) capability. We have identified an opportunity to leverage the power of our existing CX consultancy, Ethology, and psychological insights and behavioural solutions consultancy, Innovation Bubble, with meaningful creative talent, which allows us to have continued breadth and depth of expertise and services to fit today's customer challenges.

The third strategic opportunity for the Group is around delivering effective ecommerce solutions. As well as focusing on creating an enhanced data and analytics capability for ecommerce with an external partner, we are further building our capability within MISSION Made to support all Agencies in delivering effective ecommerce websites for Clients.

Finally, I am pleased to say the next few months will see more MISSION employees continue to return to our offices, with many Agencies trialling hybrid ways of working. All our offices are open and occupied with every care taken to ensure workspaces remain safe, and we will evolve and adapt until we find the optimum balance.

FINANCIAL PERFORMANCE

Last year when the pandemic hit, we took swift and proactive measures to mitigate the financial impact of COVID-19. This and the progress the business made towards the end of last year meant that the Group began 2021 in good financial health. Despite a longer and tougher UK lockdown than expected at the start of 2021, trading for the first half year began well and was ahead of the Board's expectations.

BILLINGS AND REVENUE

Turnover ("billings") for the six months ended 30 June 2021 increased by 20% to £69.5m (2020: £58.1m) while operating income ("revenue") increased by 17% to £34.1m (2020: £29.1m).

Importantly, the pattern of sequential recovery of revenue, against the equivalent periods in 2019, continues to demonstrate that the business is quickly returning to 'normality'. This is a recovery that is expected to gain further momentum through the second half of the year as lockdown restrictions continue to ease and economies re-open across the world.

PROFIT, MARGINS AND EARNINGS PER SHARE

The increased revenues, combined with firm cost control exerted throughout the pandemic alongside a continued commitment to sharing infrastructure through the MISSION Made and Shared Services initiatives, have delivered improved earnings and margins compared to the first half of 2020.

Headline operating profits increased by £3.8m to £2.0m (2020: loss of £1.8m). Headline operating margins also increased strongly to 5.9% (2020: negative 6.1%).

Financing costs reduced to £0.3m (2020: £0.5m), reflecting both a lower average level of debt in the period and a reduction in interest rates payable on the debt, meaning that headline profit before tax increased to £1.8m (2020: loss of £2.2m).

Adjustments to headline profits in 2021, at £0.4m, were higher than the prior year (2020: £0.0m) due to £0.5m profit on the remeasurement of contingent acquisition consideration in 2020 (nil in 2021). After these adjustments, reported profit before tax was £1.4m (2020: loss of £2.3m).

The Group estimates an effective tax rate on headline profits before tax of 20% (2020: 20%), resulting in an increase in headline earnings to £1.4m for the six months (2020: loss of £1.8m) and reported profit after tax of £1.1m (2020: loss of £1.8m). Fully diluted EPS increased to 1.34 pence (2020: loss of 1.89 pence), while headline diluted EPS increased to 1.68 pence (2020: loss of 1.92 pence).

BALANCE SHEET AND CASH FLOW

The key balance sheet ratio measured and monitored by the Board is the ratio of debt to headline EBITDA ("leverage ratio"). The Group started the year in a strong financial position with a net bank debt leverage ratio of 0.6 and closed the half year at 0.7. The Board also monitors the ratio of total debt, including remaining acquisition obligations, to EBITDA and this ratio has decreased to 1.8 (31 December 2020: 4.3).

That strong opening position to 2021 benefited from COVID-related payment deferrals, all of which were settled in the first half of the year. A total of £3.1m was paid in regard to the Government's tax deferral schemes along with the 2019 final dividend of £1.4m.

Furthermore, a total of £1.2m of acquisition obligations from prior years were settled in the first half of the year, all of which was in cash (2020: £1.6m of which £1.5m was in cash). After adjustments to estimated future contingent consideration payments the total estimated acquisition liability at 30 June 2021 totalled £7.3m (30 June 2020: £6.8m). Of this £6.6m is due for payment in the second half of 2021 with £6.3m of this being cash.

Consequently, the Group's net bank debt on 30 June 2021 of £3.9m compares well with the positions on 30 June 2020 (£0.9m) and 31 December 2020 (£1.2m), particularly when these deferred settlements totalling £4.5m are taken into account.

Finally, and to underline the Group's financial health, a new three year, £20m Revolving Credit Facility has been agreed with our longstanding bankers NatWest. This arrangement also has an "accordion option" to increase the facility by up to £5m.

DIVIDEND

The Board has taken confidence from the strong trading performance in H1 as well as the wider economic recovery so is declaring an interim dividend of 0.80 pence (2020: nil).  This represents a 4% increase over the 2019 equivalent. This will be payable on 3 December 2021 to all shareholders on the register on 5 November 2021. The ex-dividend date is 4 November 2021.

BOARD 

Today's results will be the last announced under David Morgan as Executive Chairman of the Group, who is due to retire on 30 September 2021 following the Group's announcement on 15 June 2021.

David will be replaced by Julian Hanson-Smith as Non-Executive Chairman, who has served as a Non-Executive Director of MISSION since 2015, as part of a seamless transition that has been planned for some time.

OUTLOOK

The Group has a long, pre-pandemic track record of delivering a considerable majority of its profit in the second half year. The Board fully expects this to be the case again this year and for the performance delivered in the second half to be underpinned by the further benefits expected from the removal of lockdowns as well as the general return to a 'business as usual' economy. The sequential recovery continues.

Condensed Consolidated Income Statement for the six months ended 30 June 2021

Condensed Consolidated Statement of Comprehensive Income for the six months ended 30 June 2021