Mission Group Public (LSE:TMG) — Investor Presentation

0:01 Good afternoon and welcome to THE MISSION GROUP PLC Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time by the Q and A tab situated in the right hand corner of your screen. Just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company will review all questions submitted today and publish responses where it is appropriate to do so. I would now like to play a short introductory video that showcases THE MISSION GROUP's approach and some of their work.

2:45 Before we begin, I'd like to select the following poll. I'd now like to hand you over to CEO, James Clifton. Good afternoon. Good afternoon, Alexandra. Thank you very much, for that introduction and for playing the video. That's just a smattering of our work and, obviously, some of the clients that we work with as a marketing communications group. First, I just wanna thank you all for taking the time on a wet and windy Friday, lunchtime for for actually wanting to learn more about the company and more about our company. I'm James Clifton. I'm the group CEO. Accompanying me on this webinar is Giles Lee, our group finance director, but he will introduce himself as we get into the presentation. I know it's a bit of a strange one, this one, because, obviously, we are sharing this week our 2022 results, but we will be unfamiliar to a a number of you. So it's kind of like a presentation in two parts.

3:40 I'll talk about the business highlights for '22, then I'll come on and talk about the strategy that's gonna take us forward. So this chart, by way of an introduction, flows into that strategy. But just really, I suppose, to give you the headlines. We are a group. We do specialize in marketing communications. We have around about 1,100 employees across three continents. That said, we are largely UK centric. North America and out into Asia are important markets for us, but the majority of our revenue is derived in The UK. We are a collection of agencies, and that word is quite purposeful in that they are very, autonomous. They're empowered. Each of these businesses will have a business plan approved by Giles and myself, their own go to market strategy, their own new business targets.

4:26 And we really break them down into three areas. So on the right hand side, you will have what we call specialists, generalists, and then discipline specialists as well. So I will bring all of this, hopefully, to life as we get into But just by way of an example, Populate specialize in social media. They don't work across a broad range of marketing tools and tactics. Unlike CRO, that would be a generalist agency, both in terms of clients that they work with, whether that's in retail or financial services, but also in terms of discipline, whether that's advertising, email, social communications again. The third type of business we have really align themselves to particular industries. April 6 work in technology and mobility pretty much exclusively, and then THINK BDW work in new homes.

5:18 So property development is and they are the market leaders in The UK in that particular piece. So just to serve, I suppose, of tease and give you a flavor of the types of business we have in the group, but, hopefully, this will come to life as I walk through the presentation. As I say, I'm the group CEO. We have a streamlined PLC board, so there are three nonexec directors. Mark comes from the industry. He had his own agency. He was also lead client with the COI before running McCann's, if some are familiar with that, on a pan European basis. Julian comes from a finance background and is our non exec chair and looks after the governance side of our business, whereas Eliza is actually a doctor in contemporary values. So it brings a very different voice to our board discussions. I'm very well supported by Dylan on the creative side, Fiona from an operations perspective, and Giles who looks after the financial and commercial remit of the group.

6:13 As I mentioned, this is the agenda. I will go through the headlines and some of the context behind those results for '22 before we'll go a little bit deeper into the twenty three to '25 plan. Now I will preface that the audience for that would be a client prospect. So you're not necessarily the intended audience for the stimulus that I'm gonna share with you in the presentation, but I think it's really important because it's how we will commune communicate our group strategy as I say to our prospects. And in that, you can understand the benefit of the group and how we're trying to position the group. Giles will then go through more of the traditional 2022 financial performance. So that's p and l, cash flow, balance sheets, the like before, obviously, we will open up to, your questions, hopefully. So '22 for us, was a good year.

7:01 Headline, revenue was up 10% on '21. The industry consensus around growth was, sort of 6%, and then if you're doing really well, 8%. So we do think that we outperformed, a lot of our peers delivering a revenue of 10% up on the previous year. The reason we call out a strong h two is for those of you who who've dug a little bit deeper into the company, we know that we do have a bias. From a revenue perspective, last year, it was sort of roughly 45% in the first half of the year, 55% in the second half of the year. So we did need to have that strong second half performance, and we did. Our h two performance, again, was 10% up on the previous year. Because of the entrepreneurial nature of our group and indeed how we have built up the group, the group was first IPO ed in 2005 and has done a number of acquisitions, along that period, my own agency being one of them.

7:58 That lends itself to really best in class client retention because it's all about relationships in our business. So of our total revenues, 47% actually came from clients that we've had for more than five years. And then again, of the total, 29% from ten years or more. And that's because they've got that long standing relationship, not only with the agency, but a number of the partners within that agency who have stayed with the group post, the acquisition of their business. Traveling down to profit now. Headline operating profit was up 8%. Our margins are stable, around about 11%, but for many well publicized reasons, with regards to an increase in cost, would account for that. But I will come on to that in a little bit more detail because there's a little bit of a a nuance to that. But margin's stable at 11%, which clearly, as some of you, will know as you've read ahead, our strategy over the next three years is to try and improve that margin performance.

8:59 With regards to the year, it's always strange, obviously, when you're deep into the next and working to deliver your numbers for 2023 to kind of remind yourself what happened in '22. But it wasn't the year that was advertised. I mean, obviously, we entered into the the year with a lot of hope and opportunity, which quickly sort of abated by wars, social and political unrest. In our industry, in that marketing communications and advertising industry, that had a bit of a strange dynamic because what it meant was whilst the volume of new business opportunity was up 11%, nobody significant really reviewed their business because they had other issues, whether that was their own trading in retail because of, obviously, that that inflationary challenges were coming out of the governmental changes or for various different reasons. But the value of that new business was down 35%.

9:51 So people were scrambling around for some of the smaller pieces. Interestingly, that dynamic seems to have shifted already this year where there are a number of well publicized reviews in the market, most notably John Lewis, Waitrose, and Sainsbury's. But despite that backdrop, we performed well. So we delivered annualized over 13,000,000 of new business in '22 from a wide range of, prospects that have now become clients. So BMW, that's their dealer network in Japan. Disney plus actually is launching that service to a wider, audience out in Singapore and across various other Asian markets. SES, the well known furniture retailer, comes on stream at the back end of the year, so we'll benefit from the full year effect of that.

10:37 So challenging new business last year, but we did well. However, knowing that that new business value might not be there, we, as we do every year, and you will know this when you hopefully, listen and talk to us again, we obsess about organic client growth and our current clients as referenced by that client retention, statistics that we're rightly proud of. But on our left here, you can see our top 10 clients and nine out of the 10 grew and some grew very significantly in '22. The one that didn't grow fell back by £50,000, so one could argue not massively material. Disappointing to see a negative percentage there, of course. But in real terms, we added £7,000,000 worth of revenue just from our top 10 clients. Property, I mentioned ThinkBDW as our property marketing specialist. And, a weird quirk of our particular industry is despite the well publicized challenges in the second half of last year continuing to this year with regards to property prices and the softening of the property market.

11:41 That's kind of good news for us because when the market's buoyant, they sort of sell themselves. And when markets get tougher, your need for that agency support increases. And that's certainly the case with regards to property for us. The other one to point out, is highlighted by the sector, is health care. We do have health care businesses. I will come back to this in a second, but they do fall into two camps. So one, which is more of the niche services, whether that's market access pricing or to the health care professionals. And then the other is OTC, which we would treat more as a consumer sort of piece. So that niche area grew again significantly through RJW and Solaris, our two pure play, health care agencies. With regards to a mix, if we look at it more in a traditional way, again, reflecting the growth in technology is where media and The US comes in, and that is on the back of that technology growth that we saw last year.

12:39 Events, it was great to see events bounce back. Twenty one was still sort of hybrid, and certainly predominantly virtual, whereas last year, much more physical events. We actually a lot of the events program for the department for international trade, both locally and, obviously, internationally, just promote The UK as a destination for trade, and that grew significantly last year. Again, when we look at geography, you will see there the statistics that I referenced at the top in terms of UK generated revenues. US, a good market and a growing market for us, not only on the back of technology, but also other b to b clients that were operating in that region. Asia, we did a bit of a course correct with Asia last year, just to refine the strategy and overhaul the team that we've got there because Asia for us has always been where, introducing, basically, the West to the East. We don't do any local business in China whilst we have an office in Shanghai. That is for international businesses to enter that market.

13:41 Similarly, we have a presence in Singapore, Malaysia, and a digital and technical capability out of Vietnam. The need for the redress last year was obviously the impact that that market had with regards to COVID and a slight rebalancing from our own side, just sort of getting it right, really, in terms of management team stripping out some costs. So, again, as we look forward to 2023, that should, return to growth, and that's certainly what we're anticipating. With regards to that challenge that I sort of referenced at the start, like every single industry, and I'm sure every company that you've been discussing and talking to, in this period, costs have gone up, and and we are no different. Our biggest cost is, because we're a service business, is our staff, is our talent. And on one hand, we've done really well because our revenue per head tracking about £75,000 per head is the same as it was before the pandemic twenty nineteen.

14:38 What's happened though is from 2018 to 2019, our staff cost to revenue ratio has gone from 65 to 69. So that's where we've felt those talent and inflation pressures, and that's why we've got this strategy, which we've refined to offer higher margin services to our clients. And we've introduced a couple of centralized platforms so that we can just drive up recoverability, both of which will offset the absolute cost, the absolute increase, sorry, in staff cost.

15:10 ESG, we are not, as you can imagine, heavy, culprits, users, whatever the phrase of the day is with regards to ESG because we are not in manufacturing. We are a service business. However, we are very committed to it. It is important not only to us, but to our investors and also increasingly to our clients and certainly their procurement teams. So we have to make sure that not only do we have the correct policies written and in place, but we're also tracking and measuring our progress against this, you know, what is a critical agenda point. We do adopt science based targets. We work with partners for different areas of the e, the s, or the g, the e being green element, the s being creative access, and we are proud to publish those results.

15:57 This is just a snapshot. We also have released this week a full ESG report, which is downloadable via our website. Should, obviously, this be of great importance to you. But it is something where we have an environmental champion in all of our businesses working together as a collective, to drive down and meet our science based targets, which we obviously publicize and measure against. So moving forward as to how that shapes our thinking for '23, I've just included a couple of charts to sort of scene set because you can see that from, you know, 2020 coming out of the back of the pandemic to where we hope that we're going to be and certainly where we believe we can be by the end of twenty twenty five, that's 47% compound annual growth rate, which is, again, something something that we would be proud to deliver and we think is very strong.

16:50 We are gonna do that, though, because we've pretty much done our investment. We've got everything that we need. We think that we can get that growth organically. It doesn't forecast or anticipate any significant m and a activity. It's all about consolidating and realizing that and presenting coherent strategy, which is what this then talks about and communicates. Just to understand where that strategy came from, I'd share one slide on just some of our beliefs. And I'm conscious this will be very small type for you, and I don't intend to present every point. I just wanna raise a couple of sort of themes out of there, and that is going going forward as a group, as I say, each individual agency has its own set of credentials, its own go to market strategy. But when we're representing ourselves as our group to clients that want more than one of our agencies, and this is much more common, now, which is great because it's a proof point of the strategy.

17:45 It's about selling your specialism. It's about selling your capability. How you can help them because of your expertise in their sector, not look what I have. Oh, I've got a great agency. You should meet them. No. It's actually I'm very compelling in technology in that sector. I have a deep understanding of it as evidenced by these results, and let me show you the work. That's the narrative of our strategy, and that's really important because that is how clients buy.

18:13 Also, with regards to the changes in our industry, which are happening at pace, a lot of talk at the minute about AI, about automation. But when you break it down, automation has been around for a while, both in a b to b and in a consumer context. You only have to look at the way that you consume your own media, whether that's obviously digitally via email or in more traditional sort of terms, just to sort of understand how clever these devices are at understanding your needs, your journeys, and getting messages, which whilst we're not quite at the the nirvana of one to one, are certainly much more targeted based upon your buying behaviors or your interests. But you've gotta compensate that with creativity. Our USP is our creative product. The way that we generate that insight and then actually we're able to act upon that insight to do something that bonds with people, that has empathy, that amplifies the awareness of the brands, that encourages an interaction.

19:09 And importantly for us, drive through to interest and sale because that's where we thrive. We are and you'll see this when I show you our mission as well and our vision, we are a revenue generating agency. We do not derive our pleasure from multiple awards, vacuous awards ceremonies. We derive our pleasure from sitting in front of our clients at our quarterly review and looking at the sales performance and how the return on the marketing spend has impacted their bottom line. That's really where we sit as a group. So what we have here is our go to market strategy. And as I say, I apologize. You're not the necessarily the intended audience, so a bit of this might be less inclined to you. But I think it's really important to understand it because this is what we are going to consistently and repeatedly tell to those prospects, over the next, certainly twenty four, thirty six months.

20:07 This is our vision to be the preferred creative partner for real business growth. Again, hopefully, self explanatory, but the focus there really on that real business growth aligned to their business targets. As I say, the best accolade that we can have is when a client says, no. I'm not reviewing my agency because they're my revenue generating partner. We've had that before. We want that again. That's where we sit. We deliver that by producing work that counts. This is something which is our mantra. It sits across all of our businesses. So even if they have their own unique proposition, it ladders up to this, which basically means we are accountable. Also, it means that we have the data. We have all of the analytics and the tools to measure the work that we're doing.

20:52 So everything we do is designed to get to work that makes a difference. How we do that is through our agencies. Our agencies are our trading entity, are our trading vehicle. More often, in terms of, likelihood, the mission comes to play when we want to sort of select from a group of our agencies, and a client wants a solution which comes from various disciplines or maybe it cuts across sectors as well. And, certainly, we can do that. But nine times out of 10, our agencies are our trading vehicle. They're then supported by these centralized capabilities that we've created in mission advantage and mission commercial, and that really allows them to widen, deepen the client relationships. But I will expand on those those in a minute as well because it's really important that I communicate those effectively.

21:45 These are the agencies, the agencies that I've sort of touched on, and this is how we position ourselves. So we are expert in five sectors, technology and mobility, health and wellness, business and corporate, consumer and lifestyle, sports and entertainment. And you will get a copy of these slides because, again, I'm gonna go through at pace just simply to land the construct. Because if you were a client prospect, we would would start with technology and mobility, why that industry sector is important, so therefore, why we are in it, why we have chosen to be specialists in this area. In this case, 4,400,000,000,000, value of media by the end of two twenty twenty three. We then have those five compelling reasons to believe.

22:31 And, again, not gonna go through each one of them, but just to sort of pull out the first one there so that you can see the language. Because, again, it's not about creativity. It's not about those sorts of things. It's about how we've made a difference. So the first one would say, we know

22:46 our audiences better than anyone. We delivered over 2,000,000,000 in sales qualified opportunities to our clients 2022 alone. So, again, you can see very bold statements that we then back up with the case studies. On the right, we have the clients that we're very proud to partner so that this prospect that we would be talking to knows they're in good company. And as I say, this construct follows through each of those sectors. So health and wellness, again, we would have the five reasons to believe about how we can perform, how we understand this sector, and the clients that we work with. We do the same for business and corporate.

23:25 We would then do the same for consumer and lifestyle. And then, of course, the same construct for sports and entertainment. And, And, again, just to give you another example as I flick to the page here for sports and entertainment, the first one says, a specialist sports and entertainment agency founded by the marketing leaders that established the like of Formula One, the WTA, and ATB Tours, and London Fashion Week as global sponsorship platforms. So very credible experience to help client prospects who work in that sector and, as I sort of say, hopefully, want work that counts from their marketing spend. We then introduce these two centralized platforms, and mission advantage is unique.

24:12 If each of our individual agencies had everything that they needed that their clients would demand, it would be very thin, underutilized, and difficult for them to manage. So by shifting that cost into a central entity, the agency thinks it's great because they've moved from a fixed cost to a variable.

24:34 We as a group have the opportunity to sell that capability 19 times across 19 businesses to 650 clients rather via one vehicle onto their client base. So we can really increase the recoverability of that time. But the agency likes it because they can still offer all of those services. They would never turn an opportunity away because we have everything we need. The final thing which you think is unique to encourage that is we we manage that, the cost of delivering this actually at cost. So we don't make profit centrally because we want the agencies to set the charge out rate and keep that profit. So for example, if agency a, let's say, April 6, receives the internal charge for a front end developer of £60 from MISSION MADE, if they are then able to charge their client £80,

25:30 they keep £20, and they've done well. That's that's a good return for them. However, GROUP might feel that they could charge £90. And, again, that's fine because they set the charge out rate, and they are making more profit from that. So it's all around giving the agencies not only the tools, but that freedom to make decisions at the coalface. But we've centralized it, so we're getting all of our efficiencies in economies of scale. Just to walk around what is contained with admission advantage, you've got people. So that's everything to do with people services, recruitment, training, developments, and the like. Again, an example, if Giles is looking to hire an account manager, he will brief the people team. Three to four weeks later, he will have a number of interviews already automatically scheduled in his diary, and then he chooses and moves forward. So once we started this, we saved around £800,000 in recruitment cost because we do all of our recruitment directly.

26:27 Mission made is that digital production capability both here in The UK, out in Vietnam, and also India. And that is once we've got to a point where the creative is set, the strategy is set, and we're kind of in build mode, we're making assets, That's really where that comes into play. Dancing round, mission reward is promotional marketing. We are big in cinema tickets, and those types of promotions you saw, hopefully, the show real, the monopoly piece. The mechanic there again was cinema tickets, which is delivered by MISSION GROUP PLC.

26:58 And then MISSION HUBZ is a new one for this year, which, again, as we've come and talked to you at the the half year, I'll expand a bit upon, but it's how we can get international reach working with partner agencies and affiliates who also want to buy into the MISSION ADVANTAGE platform. The last one to talk about is MISSION Labs, and I go into a bit more detail on that because it's where you might have noticed some of our recent acquisitions or start ups sit. So Mesolabs is a good old fashioned data agency. So understanding data, deriving the insight from the data, mapping out organization's data journey, whether it's just simply housing it or feeding it in, developing algorithms, and the like. Turbine is a growth media, so that's all of, as I say, the future in a media world, digital media, and joining it up and working with all the latest tech platforms to make sure, that there's a joined up strategy.

27:53 And then innovation bubble is behavioral science. So it's a team of psychologists, using psychological tools to uncover subconscious bias and actually inform insight to give our clients competitive advantage. Now it wouldn't be introduced via our agencies as innovation bubble, turbine, or Mesolabs. It's just gonna be introduced as MISSION Labs and, again, a platform that all of our agencies, can utilize and can adopt. But this is more of the insight piece, that value add piece, higher margin piece, going again to what I said at the start, how we're gonna improve that margin over the next few years will be delivered by Mission Labs.

28:35 Just to sort of finish up this section before I go and hand over to Charles, there's a couple of points in terms of where our revenue comes from, but also how we have streamlined the back office, and that is Mission Commercial. So Mission Commercial, probably more traditionally, you would know it as a shared service. It's everything that we need via our agencies to deliver. So accounting services, facilities management, IT systems. We have centralized all of that, and this is where, again, another opportunity, it can take more scale. If we increase the revenue via the agencies, we do not believe that we would need to significantly increase the cost of that infrastructure. And, again, that is margin enhancing. For '22, these were the splits, and where the growth came.

29:23 And as you can see, and as you would expect, good growth in technology, good growth across the board apart from business and corporate, and that's where our Asia operation, splashed So that sort of accounts for that slight dip in growth versus the other sectors. But I assume of most interest and importance for you is where we are going to get the growth both this year and going forward. And the standout ones are, of course, sports and entertainment and advantage for the reasons that I've cited because sorry. Fat fingers there. I do apologize. Because of the full year effect of both influence and populate in sports entertainment and bedding that down, and then we've got Meso Labs and Turbine coming through in that mission advantage. Because whilst they work through all of our agencies, they do have their own direct clients. When you buy any business, it will have its client roster that is part of the attraction. So there are direct revenues happening as well as the indirect revenues, via our agency brands.

30:22 As I say, all five sectors we anticipate growth, consumer and lifestyle, on the back of the s c s SCS winning CRO, we should see that good growth coming through there, and a rise in new business opportunities this year. Health is a small sector for us in terms of 5%, you know, pure revenue coming from those health agencies. But, again, we anticipate good growth. We also anticipate growth from tech and mobility, but slightly slower than last year just because of the industry corrections that are happening on for a number of those client organizations. And all of that leads me to summarize the guidance that we've given with regards to 2025. So a 100,000,000 revenue is the target. Obviously, if we can do any of these sooner, we certainly will and be very pleased to do so.

31:10 An up margin of 13%, which will travel to an operating profit of 13,000,000, which on a profit basis is 14% compound annual growth versus 2022. So, again, we think a very strong performance. Worth Worth noting, we are anticipating, and I repeat myself, it's really important that that will be organic growth. So no large scale or material m and a sits in that figure. If that were to happen, because we are always open to a meeting and opportunities, we wouldn't close ourselves off to that, then obviously that guidance would change. The strategy for delivering that is obviously, as I say, scale, revenue outstripping the cost because we have the infrastructure. But we will continue as we grow into this strategy, as we grow into talking and focusing on those industries and those sectors, whether there's any further simplification that can be had to drive direct OPEC OpEx benefit.

32:04 So, Giles, do you just wanna walk through to complete the picture? And then I think we'll be on time to answer any questions that people have just with regards to 2022 financials? Yes. Absolutely. Hello, everybody. I'm Giles Lee, CFO of the group. I am going to take you through the numbers. I will endeavor to whip through it at a reasonable pace. Also, Michael, some of you are shareholders, some of you are not. I will just take a minute to maybe explain why we focus on certain lines. So looking at the profit and loss account, James has obviously already talked to the good news there, I. E, revenue, operating income, as it's called in a classical p and l, up 10%. You'll notice I haven't talked about billings. Billings are actually up 20%. You may say, well, why are not talking about that? That is because the business really is driven by operating income.

32:58 The stuff above that, billings is media spend, event spend, things like that. They really just pass through the business, and we don't necessarily apply a lot of value to the level of pass through. So we focus and have done for a long time on on our revenue growth. As James says, that's dropped through to a strong operating profit performance at a headline level, maintaining our margins through careful cost control. And that at a at a headline level drops through to 4% growth on headline profit before tax straight into earnings per share and straight into dividend growth too. In the year, we registered quite a large number of adjustments, and that reflects we don't do this every year, by the way.

33:47 This reflects, if you like, that change in phase from the earlier part of the strategies, the strategic section we are now in. And that meant that we started some stuff and we stopped some stuff. And, specifically, the sort of things we we stopped doing or took a view on were the splash operation, which is in Asia. As James says, we restructured it particularly in light of COVID and and what's going on in the region and took a view on the impairment there. That's obviously a noncash adjustment. Similarly, materially noncash is investment in Pathfinder. Pathfinder, for those of you who do follow the business, continues to operate, and it has good prospects and actually trades relatively well. It's just that when you take a view from an accounting perspective on whether something is core or not and whether or not it's a probable outcome or a possible outcome, I my personal opinion was it's more possible than probable, and so we've kind of just be cautious going into this new strategic phase. On the other side, starting things up. So as James has said, we've invested quite significantly, particularly around that advantage wheel and beyond in things like turbine performance marketing in in the data provision for the group and also in kind of joining up our health care offer. Those things, we we pull it out of the main p and l because, you know, we could buy those things. We prefer to try and do it ourselves, and it's more effective in a number of different ways. And so we don't want to

35:17 penalize the businesses, if you like, for having a go. And so in moderation, we take those bits and pieces out of the p and l, and that's not different to anybody else in the sector, to be fair. M and a costs. Now this can sort of swing about a bit year on year. That's because sometimes we have to amend what we should we've estimated might be payable in earn outs, either up or down depending on the performance of the business. Last year, we registered a quite significant credit there because one of the businesses earn outs came in lower than we thought it would. This year, that number was was higher. But the real reason why we've got a higher number this year is because we're having acquired three or four businesses in the year. We incur professional fees against those businesses to the tune of 3 or £400,000.

36:05 Our normal run rate there, including any IFRS 16 adjustments, is around £500,000 a year. 2022, we had no further restructures. We did have a small one in 2021. And so, as I say, quite a large set of adjustments for 2022. It's not the sort of thing I would expect to be seeing in '23 or '24. Now the balance sheet excuse me. The main it's a simple balance sheet that we operate in the sector. We're it'll be like this. Fundamentally, the things to look at, I think, is working capital, which I'll talk about in a second, and our net and total debt levels. The first thing, net bank debt closed at just over 11,000,000 for 2022.

36:50 That's very comfortable in comparison with our banking facility. So we operate a 20,000,000 facility with NatWest. We have an opportunity to increase that through an accordion option of to another 5,000,000, and we operate, obviously, a overdraft around that as well. The so that that debt bank debt level, as I say, 11,000,000, relatively comfortable, particularly given that we've made all our investments materially through the use of debt rather than equity to find something in a good position there. The earn out obligations, they can sometimes appear worrisome. I've put them off a table up to the right there just to so just to show that £4,000,000 worth of earnout obligations at the end of twenty twenty two actually stacks up pretty well against recent and, you know, longer term history of the group and also just sort of show how that will shelve shelve off over the next three or four years to nothing.

37:47 Again, for absolute clarity of that our obligation is entirely contingent on the performance of the businesses we've acquired. If they don't perform very well and they won't earn very much money, we've assumed a middle ground here. And, also, if needs be, we can choose to to settle some of that obligation up to 40% in Missions shares rather than cash. But for now, treating it as entire cash obligation, you can see that trip drifting through. So bank debt leverage, total debt leverage ratios, comfortable at 1.2 x, 1.6 x. The graph to the right sort of shows our covenant levels, so you can see we're well clear of those and continue to trade comfortably. The following chart, which I will not spend a lot of time on just looking at the clock, is our in month cash in year, sorry, cash movement. And what that is really designed to demonstrate to you is the big green chunk, which is how cash generative the operation is at an operating level.

38:52 So we we convert significant amounts of operating profit to operating cash flow. Clearly, that has to fund dividend and lease payments in particular. But this year, it also funded a number of sort of smaller atypical outgoings, particularly around m and a, as we've talked about, higher than normal CapEx costs. We'd normally run at about a million pounds of CapEx a year, maybe slightly more, million, million and a half. And, obviously, as I've said before, startup costs are a little higher as well than normal. But the business always benefits from strong operating cash conversion as you can see on the chart on the right there. And so, you know, that's something that we're comfortable with. And this final cash flow chart in a more classic format just shows that every line item that you would measure, whether it's normalized operating cash flow, working capital itself, where this year we improved working capital days from fifteen to nine days and got a significant inflow as a result, particularly against last year, whether it's the cash that that then drives from operating activities, all of those numbers well ahead of where they were in the equivalent period of 2021.

40:04 And that enabled us to pay for, if you like, the turnaround not turnaround, the sort of changes that the the rephasing, the restrategizing we've done into increased net debt. Important to register that we do pay a dividend and a healthy one, I believe, that as well. We we currently offer a want to continue with the progressive dividend strategy, 2.7 times cover against our headline EPS, and we will continue to do that. That is what the consensus guidance is as we progress. So my last slide here, which is a little different to the one that's on the website and, obviously, you know, we must all do our own research. But I just sort of wanted to take a a step back, really. I think, you know, to to us, we feel the mission is is undervalued at 55p a share, particularly right now.

41:06 If if you look at it from a PE price earnings perspective, it's trading at eight x. You look at the sector, that's near fifteen, sixteen times, and and that ignores the potential that we've talked about before. So significantly undervalued against the set. On On top of that, the dividend yield is strong. We've talked about all the coverage. The yield at the moment on the basis of 55¢ share price is 4.5%. That's pretty good. We're comfortably geared having made all that investment. Still have good headroom versus the facility and our covenant ratios. Can I've sort of explained that the business is cash generative. It's not capital intensive, neither is the sector. And so it will continue to throw off cash, particularly now that investment phase is over.

41:52 In terms of the the visibility, predictability, delivery of revenues, we have a strong track record there evidenced by continually delivering strong second halves in particular. And James has talked to that almost half of operating income comes from clients that we've had for over five years and almost a third from clients we've had for over ten years. That is, I suspect, unsurpassed across the group, across the set. And finally, that's all that's all what we are currently doing. We then layer on top of that. But as we drive revenue scale, it drives improved utilization and efficiency across the operating expenditure base. That will improve margin. That will drive EPS growth even further. That will drive operating cash flow through the business, drive the dividend per share up, and drive the net debt down.

42:45 So we feel that we're really well set going into the next stage of this. James, I'll hand back over to you. Or maybe we hand back over to the questions. Sorry. Yeah. No. Great. Yeah. Thanks, Charles. Yeah. No. I think yeah. That's us done. So hopefully that well, so I know we've cut a lot of ground, a lot of information, but hopefully that gives you some verbal overlay to what you might have read about the group, but a bit more insight. But as I say, more than happy to take the questions. Alessandro, back to you. James, Giles, thank you very much for your presentation. Ladies and gentlemen, please do continue to submit your questions just by using the Q and A tab, which is situated on the top right hand corner of your screen. We have received a number of questions from investors, both pre submitted and live. I And want to start off the Q and A session with this one here which reads as follows. You state that 2023 has started in line with management expectations.

43:33 Please could you provide your expected revenue, operating operating income and headline operating profit for year 2023? I Yeah. Of course. Yeah. Oh, sorry. Yep. Yeah. Yeah. I mean, I've I've yeah. No. It's fine. I can happily say that, you know, the guidance is in the market for 2023 is operating income revenue of about 84,000,000, and that will drive on some somewhat improved margins, operating profit of around $9.69700000 of operating profit, 9,000,000 issued profit before tax, and hopefully reducing the debt somewhat in the year as well. Perfect. If we if I may add, Hassan, just to sort of add on to that because it might answer some of the questions coming up as well. The journey to the 100,000,000 by 2025, which translates to a PBT, see, slightly different, but going for the secondary figure of 13,000,000, is relatively linear. So as Giles said, 84,000,000 in '23 this year, 90,000,000 next year, up to a 100,000,000. So good good steps progression.

44:38 But, yeah, we feel is very doable. I mean, with regards to, I know, one of the other questions, the ease of which the revenue driving, we feel confident about. It's just always for any business to work a bit harder to get that margin improvement, to get back up to the 13, percent. But that's what we're committed to doing, and we can see the pathway to do it with this strategy. Perfect. Thanks very much. The next question here reads as follows. Are you expanding into new geographies and markets through cross selling? Yeah. I'll take this one. Yes. Absolutely. We our international expansion and our international growth and the strategy behind it will not change in that we go where our clients want us to do want us to go, sorry, rather than, world's domination and putting sort of flags in the map. So, we grew out in North America and purposely on the West Coast because of our tech capability, and we had a number of client opportunities.

45:37 And we continue to see that, and we will continue to look at those opportunities. So yes. But it's careful, and it's considered, and we won't go anywhere where we're not entering that market already with revenues identified. Perfect. Thanks very much. Got a question here from Morgan who asks, have you seen a slowdown in your end markets? Are your clients being more prudent in the current macro backdrop? Yeah. Really good question. No. He says touching a large piece of wood and, early on in the year. But, so far, no. I mean, as you can imagine, we are a bit like a graphic equalizer. So not all sectors will rise at the same time, but conversely, not all sectors will fall at the same time. And it really is within a particular agency kind of on a given day what specialism they're working in where you really get under the skin of it.

46:27 But at at a macro view, at a group level, no. There's it's it's it's not slowed down. It's still, you know, I think, like everybody, it's still, you've gotta work hard. You've gotta be good, but there's opportunity there, and we're certainly seeing the opportunity. There has been a rise in in those those new business opportunities this year. There's a bit more value in the marketplace in the first quarter in terms of new business that we're pursuing, which is great to see. And, again, I sort of go back to, you know, some of the things that are well publicized in the broadcast media actually benefit in the marketing space because when sort of markets get tougher, then they do rely upon agencies to promote them better in in those sort of troubled times. Perfect. Another question here from Morgan. Regarding the slide showing 2022 context where we see the global pitch volume and value, do you expect 2023 to see higher volume but lower value or something else? Lower volumes and lower value?

47:28 Oh, yeah. Good question. I'm not big on predictions in the industry, but I think from our perspective, the best way to sort of view this is and and this is gonna sound very unflashing, but it is true, is we are are kinda cockroaches. So it doesn't have to be a big opportunity for us to turn it into a big opportunity. You know, we've worked with one particular client now for fifteen years, and the first project was for £20,000. And in one given year, we build over 2,000,000 because we can grow up from that understanding of their organization. So we're not just focused on large value new business, which is why we perform quite well on some of the lower value stuff. With regards to the industry as a whole, giving a prediction, I think you've already seen on the back of John Lewis, Waitrose, as I mentioned, say Sainsbury's and the like, that there will be a higher value of new business in the marketplace this year.

48:23 I also think there'll be a lot of volume because clients are reviewing disciplines rather than just full accounts. So I would like a new social agency. I would like an influencer agency. That accounts for two pitches rather than maybe the one that is is done in previous years where they were just looking for a new PR agency because PR agencies would claim to both do social and influence as well. So that breakdown to the next tier of specialism will also show an increase in, I think, volume. So probably to answer Morgan's question, I'd say both, yeah, volume and value. Perfect. James, Giles, thank you very much. I think you've addressed those questions from invest you can from investors. And, of course, the company will read all the questions submitted today, and we'll publish those responses on the investor meet company platform.

49:11 But just before redirecting investors to provide you with their feedback, which I know is particularly important to the company, James, could I just ask you for a few closing comments? Yes. Of course. And just so well, again, just how I opened, really, just to say thank you. I mean, I know you don't have to take the time, certainly from your lunch hour on a Friday. We really do appreciate it. We do think, as Giles has said in the in the slide, hopefully, it's still visible to you, that we think we've got a compelling investor case. We do have some great talent across the group. We are long established, and you just have to look at our track record of delivery to have confidence that we would deliver by the end of twenty twenty five, and we would love you to be part of that journey with us. So thanks again. James, Giles, thank you. Thanks once again for updating investors today. Could I please ask investors not to close this session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations?

50:08 This will only take a few moments to complete, but I'm sure will greatly valued by the company. On behalf of the management team of THE MISSION GROUP PLC, we'd like to thank you for attending today's presentation, and good afternoon to you all.