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Ebiquity sloughs off its old skin

In modern parlance, Ebiquity is making a pivot towards becoming the "world's leading tech-enabled marketing and media analytics consultancy"
Media junkie
Funds from the disposal will provide resources for the marketing and media analytics agency’s Growth Acceleration Plan

Marketing and media analytics specialist Ebiquity PLC (LON:EBQ) is evolving into an agency much more focused on high growth areas.

In February 2018, it announced its intention to sell off AdIntel, which comprises 90% of its Market Intelligence (MI) division, to Nielsen Holdings for £26mln in cash.

READ: Ebiquity's proposed sale of its advertising intelligence business gets the thumbs-up from Numis

The money will certainly come in handy, with Ebiquity revealing that the cash would substantially reduce the group’s debt position from 2.1 times annual underlying earnings (EBITDA) as at the end of 2017, to a level roughly equivalent to annual EBITDA on a pro forma basis.

Perhaps more importantly, it means the company can now focus more intently on its Media Value Measurement (MVM) and Marketing Performance Optimisation (MPO) divisions, which historically have shown faster rates of growth than MI.

The deal also frees up resources for the marketing and media analytics agency’s Growth Acceleration Plan (GAP). The group intends to continue ploughing money into proprietary technology and data analytics capabilities across the remainder of the business.

New platforms provide a boost

Ebiquity launched its Total View Attribution service in 2017 and the company hopes it will make a difference going forward.

It enables businesses to improve the return on investment of their multi-channel marketing activity and guide investment strategy development.

In other words, it measures how big a bang it gets for its buck (or how big a punch it gets for its pound).

The service uses Ebiquity’s proprietary technology and expertise to accurately measure and analyse the returns generated through advertisers' marketing and media investments across all channels both on and offline.

There is also the Ebiquity Media Transparency Score, which was launched in July.

The company describes it as an “innovative” measurement and evaluation tool to help advertisers benchmark performance on an annual basis and improve media effectiveness.

It is housed in the firm’s Media Value Measurement division and was developed in response to the growing need for advertisers to better understand and manage the increasingly complex digital “media ecosystem”.

The service comprises a questionnaire, which advertisers will complete on an annual basis, producing an absolute and relative value which can then be used as a benchmark metric for performance.

Remedial action has been taken to address US issues

In a pre-close trading statement, the company said revenues grew 4.9%, or 1.5% on a constant currency (CC) basis, to £87.6mln in 2017.

Given that most of the Market Intelligence division is about to be sold, it is pertinent to see what the growth would have been like without the AdIntel business, and, handily, Ebiquity provided this information, saying revenue growth was 7.0% or 3.3% on a CC basis.

As expected, revenue growth was faster in the second half of the year than in the first; CC revenue growth in the second half of the year (excluding the MI division) was 7.3% year-on-year.

The group had previously flagged up disappointing performance in the first half of 2017 in the US from the MVM and MPO businesses, and the market was disappointed to learn the trends continued in the second half.

Management, however, said new leadership is now in place for the US business units in order to facilitate a sustained turnaround with the appointment of a US-based global chief operating officer.

Numis remains a fan of the stock

Analysts at Numis like the group’s Growth Acceleration Plan, which was unveiled in 2016, and said the plan has already delivered on a number of milestones, such as the Strategic Media Consultancy, [the] roll-out of effectiveness practices, digital product development and talent review programme.”

The current year should be the peak year of the GAP investment programme, Numis noted.

Numis is also keen on the disposal of the AdIntel business, saying the strategic rationale for the sale is “compelling”.

For 2017, Numis is forecasting profit before tax and earnings per share of £10.8mln and 9.7p respectively.

Forecasts for fiscal 2018 were for profit before tax of £10.2mln and earnings per share of 8.8p, although obviously the sale of AdIntel – if it goes through – will have an impact on those numbers.

Numis indicated that on a pro forma basis its 2018 profit before tax forecast would move to £7.0mln and its earnings per share estimate to 5.9p.

“Although initially dilutive, in our view the disposal provides a platform for the group to generate sector-leading growth which can be supported by focussed investment,” Numis said, as it stuck with its ‘buy’ recommendation and 145p target price.


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