27 September 2022

THE MISSION GROUP plc

("MISSION", "the Group") 

INTERIM RESULTS FOR THE SIX MONTHS TO 30 JUNE 2022

Resilient growth despite challenging trading environment

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 2022 ("the period" or "H1").

FINANCIAL HIGHLIGHTS

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

BUSINESS HIGHLIGHTS

OUTLOOK

Commenting on the results, Julian Hanson-Smith, Chair of The MISSION Group plc, said:

"This resilient performance builds on the momentum achieved in 2021. Our agencies in every geography have continued to build on opportunities available to them, supported by Mission's strong balance sheet which underpins our long-term growth plans. The economic uncertainties provide challenge and opportunity in equal measure, with Clients expecting total commitment and smart thinking from their agencies.  Mission is well placed to provide these qualities."

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

The increased global macroeconomic and geo-political uncertainty coupled with rising inflation and the cost-of-living crisis that have dominated this year, are creating challenges from which no sector and few businesses are immune. However, despite this backdrop, the Group is pleased to have continued to build on the strong momentum achieved in H1 delivering robust financial results for the first half of 2022 that are in line with the Board's expectations and demonstrate growth across both revenue and profitability. This has resulted in revenues for the period of £37.5m (2021: £34.1m), a headline operating profit of £2.2m (2021: £2.0m) and a reported profit before tax of £1.5m (2021: £1.4m).

The strategic changes implemented across the business in recent years have placed us in good stead to manage the current industry headwinds. The decentralised and entrepreneurial nature of our agency model continues to be an important driver behind this resilience. Whilst rising costs are forcing Clients to focus on budgets and efficiencies, we have seen good underlying trading from our Agencies, reflecting our increasing exposure to more robust sectors and geographies. This is further underpinned by the benefits of the investments we have made in dynamic areas of our markets to expand our capabilities and services.

As a business, our own careful control of costs has remained a priority. Talent costs are one of the key variables for us and whilst wage inflation, coupled with the contraction in the employment market is clearly a challenge for the whole industry, we were quick to recognise the potential impact this would have in the current year and have managed this well, investing ahead to improve our people proposition in a competitive market. More broadly, strong cash flow and careful balance sheet management have seen us reduce total debt (net bank debt plus acquisition obligations) to £9.6m, its lowest level since 2014.

Performance and progress

We continued to see good performances from all our Agencies within the Advertising and Digital segment, with the majority delivering year on year growth on the same period in the prior year.

Our exposure to higher growth B2B sectors such as Technology and Healthcare has underpinned this resilient performance and we have seen particularly good growth in North America through April Six (our specialist technology and mobility Agency) as revenues increased by 31% on the equivalent period last year.

We continue to see a sustained recovery from our Agencies which were exposed to some of the hardest hit sectors during the pandemic. ThinkBDW (property) continues to benefit from a recovery in its markets whilst Bray Leino Events (Events) has experienced significantly increased activity year on year, resulting in revenue growth of 69% versus 2021.

As part of our focus on ensuring all our Agencies are best positioned to support Client demand, in April we took the decision to merge Story and Chapter to create Story Group. Already sister Agencies in culture, heart and spirit, the merger unites them to offer better scale, geographic reach, broader sector experience and further enhance their collective reputation.

Whilst the new business landscape remains challenging, opportunities have continued to present themselves across the Group with Client wins throughout the period including Westmill Foods, BAM clothing, McCarthy Stone and Croda. The growing strength of the MISSION Group capability was also integral to our appointment to new Client Taiwanese electrical group Phihong who will be working with three of our Agencies as part of a new Group mandate.

We are also making good progress in clarifying our growth ambitions for Pathfindr, our Industrial IoT solutions business which provides customers with real-time insights into their assets and processes. Whilst supply chain logistics challenges and wider economic uncertainty have had some impact on the pace of installation, progress continues to be made with a number of trials to explore new routes to market and new product lines. Conversations regarding several potential partnerships are also progressing.

Work That Counts^TM

2021 saw the Group introduce a new descriptor with the goal of better reflecting MISSION's vision to be the preferred creative partner for real business growth. Alongside that commitment we continue to explore strategic areas of opportunity to expand our capabilities to support our customers including data and analytics, creative and customer experience (including eCommerce solutions) and performance media.

We are pleased with the momentum we are making in these areas. We continue to see the benefit of the investments made in the prior year and during the period were also pleased to announce the launch of krow.x- the creative CX agency and the acquisition of Livity, a youth focussed creative consultancy. We have also further expanded our centralised capability MISSION Made, with the launch of our new 24/7 digital support hub in Vietnam.

FINANCIAL PERFORMANCE

Billings and Revenue

Turnover ("billings") for the six months ended 30 June 2022 increased by 17% to £81.2m (2021: £69.5m) while operating income ("revenue") increased by 10% to £37.5m (2021: £34.1m).

Profit, Margins and Earnings Per Share

The increased revenues, combined with firm cost control alongside a continued commitment to sharing infrastructure through the MISSION Made and Shared Services initiatives, have delivered improved earnings compared to the first half of 2021.

Headline operating profits increased by 10% to £2.2m (H1 2021: £2.0m). Headline operating margins held at 5.9% (H1 2021: 5.9%).

Financing costs increased to £0.4m (H1 2021: £0.3m), reflecting both a higher average level of debt in the period and an increase in interest rates payable on the debt. Headline profit before tax increased to £1.9m (H1 2021: £1.8m).

Adjustments to headline profits in the first half of 2022, at £0.3m, were slightly less than the prior year comparable period (H1 2021: £0.4m). After these adjustments, reported profit before tax was £1.5m (H1 2021: £1.4m).

The Group estimates an effective tax rate on headline profits before tax of 22% (H1 2021: 20%), resulting in an increase in headline earnings to £1.5m for the six months (H1 2021: £1.4m) and reported profit after tax of £1.2m (H1 2021: £1.1m). Fully diluted EPS increased to 1.37 pence (H1 2021: 1.34 pence), while headline diluted EPS increased to 1.70 pence (H1 2021: 1.68 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 x1.2 and closed the half year at x0.8 (30 June 2021: x0.7). The Board also monitors the ratio of total debt, including remaining acquisition obligations, to EBITDA and this ratio has decreased to x1.0 (30 June 2021: x1.8, 31 December 2021: x1.5).

Furthermore, a total of £0.8m of acquisition obligations from prior years were settled in the first half of the year, all of which was in cash (30 June 2021: £1.2m of which £1.2m also in cash). After adjustments to estimated future contingent consideration payments the total estimated acquisition liability at 30 June 2022 totalled £2.5m (30 June 2021: £7.3m). Of this none is due for payment in the second half of 2022.

Trade and other receivables increased markedly against last year to £51.6m (30 June 2021: £36.3m) primarily because of an unusually high level of Client prepayments. Trade and other payables also increased by a similar quantum to £52.0m (30 June 2021: £35.9m) the majority of which reflects the deferral of revenue that results from these prepayments. The net change to working capital is therefore relatively low.

Consequently, the Group's net bank debt on 30 June 2022 of £7.1m compares well with the positions on 30 June 2021 (£3.9m) and 31 December 2021 (£10.3m). Total debt (being net bank debt plus acquisition obligations) of £9.6m (30 June 2021: £11.2m) now stand at its lowest level since 2014.

Dividend

As a reflection of this robust performance in the first half of the year, the Directors have declared an interim dividend of 0.83 pence per ordinary share (H1 2021: 0.80 pence), representing a 4% increase on the prior year. This will be payable on 2 December 2022 to all shareholders on the register on 4 November 2022. The ex-dividend date is 3 November 2022.

BOARD

Following significant changes to the structure of the Board in 2021 we are delighted to confirm today the appointment of Non-Executive Director Mark Lund, who joins the Board as Non-Executive Director and Deputy Chair with immediate effect. Mark has spent over 25 years leading and founding marketing and advertising organisations, as an entrepreneur and executive and his experience will be invaluable as we continue to make progress against our long-term ambitions.

At the same time, Andy Nash has informed the Board of his intention to step down. Mark Lund will assume his role as Chair of the Board's Audit and Risk Committee. On behalf of everyone at MISSION the Board would like to thank Andy for his significant contribution to the Group.

MAKING POSITIVE CHANGE

Over the course of the period, we are pleased to have made further progress against our Environmental, Social and Governance (ESG) commitments, outlined in our manifesto 'Making Positive Change'. An important priority has been the clarification of our Environmental journey, which has seen us benchmark and set our emissions reduction targets in line with the Paris Climate Agreement and validate these targets via the Science-Based Targets initiative (SBTi) Net-Zero Standard. We have targeted a 21% reduction in our Emissions by 2024 with an aim to achieve ISO 14001 status for the majority of our Agencies in 2023. We will be working with a number of identified partners to ensure a faster transition in line with these goals and to improve our measurement and reporting.

OUTLOOK

As in previous years, we expect the majority of Group profit to be generated in the second half of the year. Whilst we remain mindful of the current macro-economic uncertainty and are closely monitoring its impact on our markets, trading in the second half of the year to date has continued to track in line with the Board's expectations.

Condensed Consolidated Income Statement for the six months ended 30 June 2022

Condensed Consolidated Statement of Comprehensive Income for the six months ended 30 June 2022