Free share tips posted weekly! This week’s free share tip is The Mission Group (TMG).

Shares in AIM-listed marketing business The Mission Group have slipped back and are now back at a level which is only slightly above the price they were at the start of 2021.  Bears may point to the lack of any catalyst for a move upwards, other than continued recovery from the Covid-19 pandemic, but the announcement of an acquisition last month was accompanied by news that trading in the second half had been as anticipated and this provides reassurance.  Based on likely performance for the current year and an improvement in 2022, the shares present an opportunity for significant capital growth.

On 20 October the acquisition of Soul, a full-service customer engagement agency based in London, was announced.  Soul works with psychologists to help businesses better understand human nature and human behaviour.  It advises its clients, leading brands such as Genting, John Lewis Finance, Michael Kors and SSE, on the decision making of their customers.  Soul will become part of the Brand Strategy, Creative & Content division.

Interim results for the six month period ended 30 June 2021 showed a strong improvement on the same period a year earlier.  Turnover increased by 20% to £69.5m (2020: £58.1m) and operating income increased by 17% to £34.1m (2020: £29.1m).  Headline operating profit improved by £3.8m to £2.0m (2020: £1.8m loss) and headline profit before tax was £1.8m versus a £2.2m loss.  After adjustments, reported profit before tax was £1.4m (2020: £2.3m loss).  Fully diluted earnings per share were 1.34p (2020: loss per share of 1.89p).  An interim dividend of 0.8p per share was declared (2020: nil).  Net bank debt as at 30 June 2021 was £3.9m.

The pattern of what the company has referred to as ‘sequential recovery’ of revenue versus the equivalent periods in 2019 has shown that the business is returning to normality.  The recovery should have gained further momentum through the second half of the year.  At the time of the interim results announcement in September the company noted that it has a long track record of delivering the majority of its profit in the second half year.  This is expected to be the case again this year.  Performance in the second half should be supported by benefits expected from the removal of lockdowns as well as the general return to a ‘business as usual’ economy.

The shares trade on a relatively modest multiple of likely earnings in the short to medium term and looking further ahead there is no reason why sustained growth in both revenue and profits should not be delivered.  Acquisitions are likely to enhance the business as a whole and we believe that there is potential for ongoing capital growth from what appears to be an attractive entry point.  We rate the shares as a SPECULATIVE BUY.

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