The Mission Group Regulatory News (TMG)

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 CountsTM, 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:

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

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