Company Announcements

24 September 2024

THE MISSION GROUP plc

("MISSION", "the Group") 

INTERIM RESULTS FOR THE SIX MONTHS TO 30 JUNE 2024

Resilient organic revenue growth despite challenging trading environment

New business momentum underpins full year outlook, with trading in line with revenue and headline operating profit expectations

MISSION Group plc (AIM: TMG), creator of Work That Counts^TM, comprising a group of digital marketing and communications Agencies, is pleased to announce its interim results for the six months ended 30 June 2024 ("the period" or "H1").

FINANCIAL HIGHLIGHTS

*Headline results are calculated before start-up costs, acquisition adjustments, goodwill and business impairment, bank refinancing, equity placing and restructuring costs.

** Continuing activities in 2023 exclude the results of the Group's 80% interest in Pathfindr which was sold in December 2023.

*** Total debt includes net bank debt and outstanding acquisitions obligations and any outstanding HMRC Time To Pay creditors.

BUSINESS HIGHLIGHTS

OUTLOOK

David Morgan, MISSION's Non-Executive Chair, commented: "Despite an unpredictable trading environment in the first half of the year, the Group has remained firmly focussed on the delivery of profit targets, deleveraging and strengthening the balance sheet.

"The creativity of our Agencies demonstrates our commitment to delivering work that underpins real business growth and in July we were pleased to update the market, reporting positive ongoing momentum across the Group as we entered the second half of the year. These latest strategic new Client wins announced today reflect the growing strength of MISSION's capabilities and underpin our confidence in the long-term outlook. I'm particularly pleased to announce our new office in Saudi Arabia to support our new Clients in the country, which also positions us well for wider opportunities in the region.

"We look forward to announcing further new Client wins in due course."

ENQUIRIES:    

Cat Davis - Group Marketing Director 

E: cdavis@themission.co.uk 

The MISSION Group PLC                                                                      Via Houston

Simon Bridges / Andrew Potts / Harry Rees 

E: missiongroup@cgf.com  

Canaccord Genuity Limited (Nominated Adviser and Broker)           020 7523 8000

Kate Hoare / Alexander Clelland / India Spencer 

E: mission@houston.co.uk 

Houston PR                                                                                          0204 529 0549

NOTES TO EDITORS  

The MISSION Group Plc. is The Brand Performance Group.  

Delivering measurable, results-driven campaigns as the preferred creative partner for real business growth. We offer top-tier agencies, strategic specialisms and global reach delivering outstanding performance for brands. We call it Work That Counts™ www.themission.co.uk 

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse (Amendment) (EU Exit) Regulations 2019. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

OVERVIEW

MISSION has continued to make good progress in the first half of 2024 against our key priorities. Whilst the wider trading environment has remained unpredictable, with ongoing macro-economic uncertainty and the early timing of the UK general election continuing to manifest general client caution throughout the period, our entrepreneurial Agencies have remained focussed on our plans to drive value creation for all our stakeholders.

Across the Group we have continued to leverage the investments made in previous years to enhance and evolve MISSION's service offering and capabilities. This underpinned success on several significant new business mandates in the first half of the year and has generated encouraging new business momentum as we enter H2.

The Group is encouraged to report like for like revenue growth of 2 percent to £42.2m (2023: £41.4m) for the period. Headline operating profit of £2.6m (2023: £2.0m reported, £2.5m from continuing operations), was driven by revenue growth across the majority of Group segments, particularly the Property and Sports & Entertainment segments, as well as profitable recovery in the Technology and Mobility segment from last year's slowdown in the US market.

Headline reported profit before tax of £1.3m (2023: £1.0m reported, £1.6m from continuing operations) reflects the impact of both higher debt levels when compared to last year (increase in interest of £0.2m) and also the full period impact of notional interest charges against new property leases (£0.1m).

Value Restoration Plan

Significant progress has been made on the Group's Value Restoration Plan ("VRP") announced on 17 January, 2024. The cost reduction elements of the Value Restoration Plan ("VRP") of £3.6m have been successfully implemented and the benefits are being realised across the year. These included £2m from headcount reductions as reported at the full year 2023 results, supplemented by further savings of £1.6m of central expenditure savings including staff costs, property and recruitment charges. The planned operating efficiency elements of the VRP of £1.2m are also tracking to expectations for delivery by the end of 2024. The H1 2024 cost savings benefit from the VRP has been c£1.6m, with the balance expected to benefit H2.

On 28 March 2024, the Group was pleased to announce the successful refinancing of its previous debt facility with long-standing lender NatWest. The new NatWest debt facility is a £20m Revolving Credit Facility, and a £9m overdraft facility. On 1 July 2024, following continued disciplined cash management, the Group and NatWest agreed to reduce the overdraft facility limit to £7m. Alongside the refinancing the Group also continues to progress discussions regarding options to deleverage its balance sheet. A further update will be provided when appropriate.

Net bank debt stood at £19.6m as of 30 June 2024 (30 June 2023: £14.9m) versus £15.4m on 31 December 2023. The increase in net debt reflects the settlement of the HMRC Time To Pay debt of £4.3m as at 31 December 2023 which was fully repaid in the period. It is important to note that given the second half weighting of the Group's profits and a number of one-off expenses incurred in the first half year relating to refinancing and defending the unsolicited approach from Brave Bison, the Group would expect to see a reduction in the net debt position in the second half of the financial year.

Total debt has been reduced by £1.1m over the period to stand at £24.0m on 30 June 2024 (30 June 2023: £20.0m) in comparison with £25.1m on 31 December 2023. This reduction has been achieved alongside the settlement of £1.1m of outstanding acquisition obligations from prior years in the first half of the year of which £0.6m were in cash) and the settlement of the £4.3m Time To Pay creditor.

Performance and progress

MISSION has reported like for like revenue growth of 2%, guided by strong performances across most Group segments, particularly in our Property and Sports & Entertainment segments. As previously mentioned, the Group has benefited from the continued recovery of the Technology and Mobility segment, with profits improving by £0.4m on H1 2023.  This partially offset the lacklustre performance of the Group's Consumer & Lifestyle and Business & Corporate segments for the period, where profitability was impacted by the restrictions on Government spending in May and June as a result of the earlier than expected timing of the UK general election. Our Health & Wellness segment experienced a slower pick up in trading than forecast and there was the timing impact of a contract in our Sports & Entertainment segment that was secured after the end of H1.

Additional Client wins secured across the business throughout the period include Okta, Popeyes, FatFace, GoHenry, Mastercard, BNP Paribas, England Cricket Board, Guinness Homes, Fonterra and McCarthy Stone.

Since the period end, the Group has secured a number of notable new business wins with the robust new business pipeline for H2 demonstrating encouraging momentum despite broader macro-economic uncertainty and a challenging trading environment.

Alongside a series of new high-quality Client wins with major US Technology firms, the Group has been awarded a prestigious and significant Events assignment for the UK Pavilion at EXPO2025 in Osaka, Japan. This is a full operational services contract that will commence in 2024 and comprises of over 130 individual events, retail and hospitality that will be led by Bray Leino Events.

MISSION's global sports Agency, Influence Sports & Media, part of Mongoose, has also won a significant new Client in Saudi Arabia and will open an office in Jeddah later this year to support the client and to leverage its expertise to capitalise on opportunities across the region. Mongoose has also been appointed as Global Sponsorship sales Agency for Formula E and brokered Southampton F.C.'s shirt sponsorship with P&O Cruises.

Rejection of unsolicited, conditional proposal from Brave Bison plc

On 29 April 2024, the Board of MISSION received an unsolicited conditional proposal regarding a possible offer by Brave Bison for the Group. This proposal, together with a subsequent revised proposal, was unanimously rejected following consultation with its financial adviser and certain shareholders. Brave Bison confirmed on 9 June 2024 that it did not intend to make an offer.

MISSION believes this was an opportunistic approach that significantly undervalued the Group and its prospects, as well as being dilutive to its shareholders and resulted in exceptional costs which ultimately further impacted profitability and debt reduction. As previously announced, the Board of MISSION is open to proposals that it believes would enhance shareholder value and deliver benefits to MISSION's shareholders. The Board of MISSION did not consider the proposals to meet those criteria. The Board of MISSION remains confident in the Group's standalone prospects.

MISSION's focus remains firmly on deleveraging, restoring balance sheet strength and delivering performance that achieves our profit targets, demonstrates the creativity of our Agencies, and shows our commitment to delivering work that underpins real business growth.

FINANCIAL PERFORMANCE

Billings and Revenue

Turnover ("billings") for the six months ended 30 June 2024 increased by 2% to £94.4m (2023: £92.9m) while operating income ("revenue") increased by 1% to £42.2m (2023: £41.8m).

Profit, Margins and Earnings Per Share

The increased revenues demonstrate good progress. Firm, but future-focussed cost control alongside a continued commitment to sharing infrastructure through the MISSION Made and Shared Services initiatives, has enabled the Group to deliver an operating profit that is ahead of the prior year comparison.

Headline operating profits increased by 4% to £2.6m (H1 2023: £2.0m reported, £2.5m from continuing operations). Headline operating margins increased to 6.2% (H1 2023: 4.7%, 6.1% from continuing operations). Continuing activities in 2023 exclude the results of the Group's 80% interest in Pathfindr which was sold in December 2023.  

Financing costs increased to £1.5m (H1 2023: £1.0m), reflecting both a higher average level of debt in the period and also the full period impact of interest on new property leases. Financing costs for H2 are expected to remain at similar levels to H1 reflecting the net debt position and the effect of the accounting treatment of new property leases. Headline profit before tax increased to £1.3m (H1 2023: £1.0m).

Adjustments to headline profits before tax in the first half of 2024, at £1.2m, were higher than the prior year comparable period (H1 2023: £0.9m). After these adjustments, reported profit before tax was £0.0m (H1 2023: £0.1m).

The Group estimates an effective tax rate on headline profits before tax of 25% (H1 2023: 24%), resulting in an increase in headline earnings to £0.9m for the six months (H1 2023: £0.8m) and reported profit after tax of £0.0m (H1 2023: £0.0m). Fully diluted EPS decreased to a loss of 0.1 pence (H1 2023: 0.0 pence), while headline diluted EPS increased to 1.0 pence (H1 2023: 0.8 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 closed the half year at 2.7x (30 June 2023: 1.7x, 31 December 2023: 2.0x). Whilst higher than prior comparators, the ratio offers significant headroom against the facility limit of 3.5x for the period.

The Board also monitors the ratio of total debt, including remaining acquisition obligations, to EBITDA and this ratio has increased to 3.2x (30 June 2023: 2.2x, 31 December 2023: 2.7x). Again, there is significant headroom against the facility limit of 4.0x for the period.

The headroom afforded by the covenant tests for the period ensures that the Group will avoid the highest level of interest rates for the period.

The Group spent £nil on acquisitions during the period (2023 £0.3m) and a total of £1.1m of acquisition obligations from prior years were settled in the first half of the year of which £0.6m were in cash (30 June 2023: £0.4m all of which were cash). After adjustments to estimated future contingent consideration payments the total estimated acquisition liability at 30 June 2024 totalled £4.4m (30 June 2023: £5.1m). Of this £0.2m is due for payment in the second half of 2024.

Capital expenditures have been strictly controlled and as such spend of £0.3m is reduced on H1 2023 (£2.0m).

Trade and other receivables increased marginally against last year to £54.3m (30 June 2023: £53.7m), while trade and other payables decreased slightly to £51.2m (30 June 2023: £52.2m). These movements, alongside an increase in stock of £0.5m and increased lease payables of £0.7m have driven the increase in net working capital in comparison to June 2023.

Consequently, the Group's net bank debt on 30 June 2024 of £19.6m has increased against the positions on both 30 June 2023 (£14.9m) and 31 December 2023 (£15.4m). However, the increase in net debt since the start of the new financial year ultimately reflects the settlement of the HMRC Time To Pay creditor which stood at £4.3m as at 31 December 2023 and has now been fully repaid.

As a result, total debt (being net bank debt plus outstanding acquisition obligations) closed at £24.0m (30 June 2023: £20.0m), down from £25.1m on 31 December 2023.

Dividend

The Board has made the decision to pause dividend payments alongside other major capital allocations until balance sheet strength is restored and net debt is reduced (2023: 0 pence per share). The Board will keep this decision under regular review.

OUTLOOK

MISSION has a significant second-half weighting with respect to profitability. Post period-end developments underpin confidence for full year outlook and include significant additional Client wins. Revenue growth is anticipated across all the Group's sectors with monthly run rates from the Technology and Mobility segment being monitored carefully and continuing to improve. The Board remains cautiously optimistic that the Group is on track to deliver against full year revenue and headline operating profit expectations but is mindful of the continued unpredictable trading environment.