REG - Mission Group PLC - TRADING UPDATE AND REVISED OUTLOOK FOR 2023

MissionAnnouncement

23/10/2023 07:15

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RNS Number : 8837Q  Mission Group PLC (The)  23 October 2023

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

 

23 October 2023

 

THE MISSION GROUP plc

 

("MISSION", "the Group")

 

TRADING UPDATE AND REVISED OUTLOOK FOR 2023

 

MISSION Group plc (AIM: TMG), creator of Work That Counts(TM), comprising
a group of digital marketing and communications Agencies, wishes to provide
an update on current trading and the Group's outlook for the remainder of the
2023 financial year to 31 December 2023 ("FY2023").

 

At the time of MISSION's interim results announcement on 26 September 2023,
the Group stated that:

 ·             As in previous years, the Group expects the majority of its profit to be
               generated in the second half of the year.
 ·             Despite the continued, heightened level of global macro-economic uncertainty,
               the Group currently remains on track to deliver against the Board's
               expectations.

 

Trading Update

 

Whilst performance in the first half of 2023 was broadly in line with the
Board's expectations and achieved despite considerable industry-wide
headwinds, recent trading has rapidly become more challenging than previously
anticipated.

 

This has been especially marked in the Consumer & Lifestyle, Property, and
Technology & Mobility business units, where client wins have been more
than offset by losses and several clients choosing to defer or significantly
reduce spending.  The Board now believes these more challenging trading
conditions will continue for the remainder of the year and is taking a
materially more cautious view on H2 2023 and therefore the FY2023 outturn.

 

In light of this information, the Board has commenced a detailed operational
review including an immediate reassessment of financial expectations and
resource allocation. The review will take into account the reduction or
rephasing of revenues in the impacted business units, and has begun to
identify certain changes to operating costs that will benefit in part FY2023,
and FY2024. These initial cost reductions are expected to be fully implemented
by year end.  In addition, this review is expecting to identify a wider range
of efficiencies and business improvements which, over time, should lead to
more cost savings.  An update on this review will be provided with the FY2023
trading statement early in 2024.

 

Whilst full year revenue growth is expected to be between 8%-9%, including the
impact of 2023 acquisitions, the Board now believes that the outturn for
FY2023 will be materially below market expectations (see Note 1). FY2023
headline profits before tax are not expected to be more than £3.1m (see Note
2).   This includes costs of £1.2m relating to a business that is expected
to be classified as discontinued at year end. Earnings before Interest,
Taxation, Depreciation and Amortisation (EBITDA) are expected to be not more
than £9.0m on the same basis.

 

Financial Position

 

As a result of the reduced trading performance, the payment of the final
FY2022 dividend, and in particular the rapid reduction in pre-payments from
certain clients, the Group's net debt as at 20 October 2023 was approximately
£25.5m compared to £14.9m as at 30 June 2023.

 

The Group's committed bank facilities comprise a revolving credit facility of
£20.0m, with an option to increase the facility by £5.0m, which expires on 5
April 2025. Interest on the facility is based on SONIA (sterling overnight
index average) plus a margin of between 1.50% and 2.25% depending on the
Group's debt leverage ratio, payable in cash on loan rollover dates.

 

In addition to its committed facilities, the Group has available an overdraft
facility of up to £6.0m with interest payable by reference to National
Westminster Bank plc (Natwest) Base Rate plus 2.25%. Instead of increasing the
revolving credit facility by £5.0m, the Group has agreed with Natwest that
the overdraft limit of £6.0m will be increased to £10.0m, until further
notice and subject to regular review.

 

Net debt is expected to be approximately £24.0m as at 31 December 2023 after
a working capital outflow due to the forecast increase in turnover in Q4,
resulting in an increase in trade debtors which is not expected to convert
into cash until early 2024.

 

The Group continues to be in compliance with its banking covenants but is now
expecting the net debt / Adjusted EBITDA covenant in Q4 to be above current
covenant limits at 31 December 2023.  The Group is in constructive dialogue
with Natwest regarding a covenant waiver.

 

The increase in the level of net debt has meant that the interest cost for the
year is now expected to be higher than previous forecasts, at approximately
£2.40m.

 

Dividend

 

Given the trading outlook and the Group's commitment to reducing its net debt
position as soon as possible, the Board has decided that it is in the best
interests of shareholders to cancel the interim dividend of 0.87 pence per
share (approximately £0.79m) that was due to go ex dividend on 2 November
2023 and be paid to shareholders on 1 December 2023.

 

The Board will review any final FY2023 dividend considering trading conditions
and the Group's cash position around the time of its final results release for
the period ending 31 December 2023.

 

Non-Core Disposals

 

The Board has for some months been planning a potential disposal of certain of
its non-core businesses as part of MISSION's strategy. These plans are ongoing
and may complete in FY2023, but there can be no guarantee that they will
progress to a completed transaction.

 

 

 

 

 

 

Outlook

 

The Board is extremely disappointed by the recent adverse change in current
trading, and the outlook for the remainder of FY2023.

 

Notwithstanding these short-term trading challenges, the Board believes that
MISSION's strategy of deliberate investment in its people and capabilities,
when combined with operating cost reductions, leaves the Group well positioned
as markets improve.  The Board will provide an update on FY2024 prospects in
early 2024.

 

Notes:

 

1.     The Group considers market expectations for FY 2023 to be to
adjusted profits before tax of £7.9m.

2.     Headline results are calculated before start-up costs, acquisition
adjustments, goodwill and business impairment and restructuring costs.

 

 

ENQUIRIES

 

 James Clifton, Chief Executive Officer

 Giles Lee, Chief Financial Officer                        07730 490384

 The MISSION Group plc                                     020 7462 1415

 Simon Bridges/Andrew Potts/Harry Rees
 Canaccord Genuity Limited (Nominated Adviser and Broker)  020 7523 8000

 Kate Hoare / Alexander Clelland / India Spencer
 HOUSTON (Financial PR and Investor Relations)             0204 529 0549

 

 

NOTES TO EDITORS

 

MISSION is a collective of digital marketing and communications Agencies
employing over 1,000 people across 29 locations and 3 continents. The Group
successfully combines its diverse expertise to produce Work That Counts
TM for Clients, whatever their ambitions. Creating real standout, sharing
real innovation and delivering real growth for some of the world's biggest
brands. www.themission.co.uk
(https://eur03.safelinks.protection.outlook.com/?url=http%3A%2F%2Fwww.themission.co.uk%2F&data=04%7C01%7C%7C2e2f37c792c7415afaad08d947a9c473%7Cb7e4783d67604ed5b0c156d405b9349b%7C0%7C1%7C637619616734507818%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C2000&sdata=5duO%2FyhgYrmP5I17h1eW4mAaM4%2BhySTEObFl5Dz5R%2Fs%3D&reserved=0)

 

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