Mission Group Public (LSE:TMG) — Interim Results

0:02 Good afternoon, ladies and gentlemen. Welcome to the MISSION GROUP PLC Interim Results Investor Presentation. Situated on the right hand corner of your screen. Just simply type in your questions at any time and press send. The company may not be in a position to answer every question received during the meeting itself. However, the company can review all questions submitted today and publish responses where it's appropriate to do so. We've just submitted a poll, and we, I'm sure, the company will be most grateful for your participation. Before I hand over to the management team,

0:34 we would just like to play a short highlight video for the first half. I'd now like to hand over to James Clifton, CEO. Good afternoon.

1:54 Very much, Mark, and thank you all for taking the time to find out a more about THE MISSION GROUP and for giving us some of your valuable time this afternoon. What we intend to do is actually go through a relatively sort of standard. So I will go through just a reprise of the group strategy, and given we're a creative communications group, highlights of very sort of, like, quick sort of high level overview of some of the creative work that we've done in the first six months up until the end of June. My colleague, will then go through the financial review, and I'll introduce him in a second, and then I'll come back and talk through a business update and then a general outlook. We'll aim to talk for around about thirty five minutes, hopefully getting lots of time, for questions, which I know will come through as we're as we're presenting. So, yes, to introductions. So my name is James Clifton. I'm the group CEO. I was appointed the first group CEO in the spring of twenty nineteen, so I have been fortunate enough to steer us through various different global events, not least a pandemic.

2:52 But I've done that with my colleague at my side, Giles Lee, who is our group finance officer. And as I say, Giles will take us through the financial aspects as we get to those. But in terms of the group and how the group goes to market, I a very important point to note is what we say at the top here is the preferred creative partner for real business growth. Now that manifests itself for us in this phrase work that counts, but it's really important, and it is quite distinctive because it does mean that we align ourselves to our clients' long term business success. That is why we're really proud, and you'll see this in some of the analyst notes and some of the other communications that come out of the group, around the client retention scores that we have because you don't retain clients for the length of time that we have if you're not really contributing to their business success. So we do align ourselves very much to, as I say, and I'm gonna sort of overreg it here, but that business performance, not just the marketing returns that you might get in brand awareness scores, various different trackers. It's in the sales. It's actually in, as I say, how we have affected their top line growth.

3:56 Now we do work across six verticals from left to right. I won't go through them because you can read them here, but we break them out as verticals because it means that we have a depth of understanding in that particular sector. So with regards to technology and mobility, our insight, our creative, and our strategic work for those types of clients is we like to think best in class. Now as the mission, we do trade through various brands. Again, you will have seen in some of the communications and some of the background that you've read on the group that there are 19 agencies in the group, and there are. But when we look at the lead agencies, so the dominant ones in those particular verticals, there are six. So April 6, to to to again focus on technology and mobility, is a lead player in that sector globally and is world renowned with regards to its understanding of technology solutions and selling them on behalf of our clients.

4:50 Similarly, ThinkBDW, which I'll come on to later in the presentation, is a market leader in property marketing. Everything to do with property marketing, whether that's the digital transformation right the way through to interior designing show homes. So as you can see, whilst we have multiple agencies, they are broken down either into verticals or into the horizontal platforms that we have. Mission advantage is something that I think, again, is unique, but it gives us a real opportunity to grab a greater share of a client spend through selling what sometimes are niche or actually very specialist services through those agency brands. But we'll expand on that a little bit later. But for those, who are intrigued now, it does include things like our approach to AI, data analytics, performance media, and the like.

5:41 And then the final piece is Mission Commercial. Mission Commercial, some of you will know from other companies, is a shared services initiative. We came at this quite early on, so we've been doing this for the last four years, and that's really about making sure that we have a centralized and standard and efficient approach to all the things regarding facilities, IT, recruitment, and the like. Accounting services is obviously a large part of that. So, hopefully, that gives you a very quick top line overview of how the group goes to market and through which brands. But as I say, when we go through some of the initiatives and also when Giles talks about how we've performed by those particular verticals, it will come to life a little bit more through the numbers. With regards to the product, I'll go through this quite quickly. But, again, just to give you a sense of the type of work that we do, this was a piece for Volkswagen commercial vehicles, a large client of one of our agencies, and this was around communicating that it's better to buy a used VW van or commercial vehicle than the competitors despite the fact that it is probably relatively well known that they are a little bit more expensive than others you could buy. So this has been using billboards and press as well as digital media.

6:56 We've done a piece of work in the first half of the year for Olbas. We do do quite a lot of pharma, but it concentrates more on the OTC side of the health care sort of industry. We do have a couple of niche players, but this is one piece that sits in that space. And, And, again, something and some work that

7:11 you might well have seen, which is using stop go animation as was the work that's been breaking over the summer for Thatchers. This, again, was a broadcast piece, but driven through very much into, as we're saying at the top, effectiveness. So you can look at some of the work that's been, referenced there from system one just in terms of the effectiveness of the advertising. And then that, as we track it back through, this is only just broken, couple of months old, into sales and the and the impact that we've had on sales.

7:41 SCS is a client that's new to us this year, and this is a repositioning piece, again, to drive sale, but to do so by removing their reliance on price led messaging. As people might might know, know, SCS is a brand. Historically, it's all been about sales, sales, sales. We're now on sale, perennially on sale. But this is about giving it a brand thought and sort of talking about the role of the sofa and the furniture that they sell in the home and how it creates a home. And then lastly, a piece which is and I include this because it's a unashamed plug for you all to get involved, but this Friday is the Macmillan coffee morning. We've worked with Macmillan for a year or two now, but we pitched them one for their largest piece of activity, which is the coffee morning. And as you can see here, this is a good demonstration of the breadth of work that we do as a group.

8:32 So, yes, there's a TV ad in there. It's more of a direct response television ad, but there's also outdoor, a lot of digital transformation, but then also into paper based communications as well. So now I've gone through that quite quickly. I think we have just, making a tune This September, bake like lives depend on it. Host a Macmillan coffee morning and help us do whatever it takes to help people living with cancer. Let's do it any way we can.

9:02 Let's do it for dad. Are you okay? And for Hannah. Let's do coffee morning. Sign up for your free fundraising kit today. Let's do coffee. Search Macmillan coffee morning now. Great. Thanks, Mark. You managed to pull out the video. I I wasn't aware that you were able to that. Your technological skills are a lot better than mine. But that just gives you a, and finishes the overview of the group and some of the work that we've done. But I'll hand over to Giles now who'll go through some of the numbers for the first six months. Yes. Thanks, James. So I will skip straight to the p and l, and I'll I'll go through some of those bullet points on the previous page as we kinda go down the page. So for those of you who aren't new to mission or indeed the sector, we focus mostly here on what we call revenue here, gross profit and old money, operating income sometimes.

9:55 We don't look so much at billings or sales because there's a a large amount of pass through cost in the business. And so revenue really is a very good indicator for us of how we are doing. Now for the first half this year, we have grown revenue by around 11%, up from GBP 37,500,000 last year, this time last year to GBP 41,000,000, 42,000,000 for the last six months. Of that, around 6% of that is organic growth. So obviously, therefore, come from core and existing business. As you go through there, so we've added about £4,500,000 to the revenue line. When you go down to headline operating profit or EBIT, we are there or thereabouts on where we were last year, just slightly below. And I will explain in a minute how that margin dynamic has happened because as you can see, the operating margins for last year around 6%, this year dropped about 5%.

10:49 I'm going to take some time when we go through that segmental analysis just to explain the dynamic very quickly. Further down the p and l, interest rates, our interest rates and the level of debt we are carrying has gone up in the first half of this year compared to the first half of last year, and that clearly puts a burden on interest charges that we take to the p and l. Then further down the page, we have adjustments, which are accounting policy adjustments, generally speaking, including the start up costs for a business called Turbine, which we would have talked to you about the last time we spoke. And and then go through the the rest of the usual stuff through the p and l to the bottom. And also on the right hand side there, just demonstrating that sort of commitment to progressive dividend strategy that kind of underpins our confidence in the future trading of the of the company.

11:40 Let us look at the segmental analysis. So this is the first time as a group we presented the presented the business like this, and as James said, in accordance with the the segments, the sectors of the business, those circles that James took us through earlier. On the first

12:01 first thing to look at is you can kind of see there the various sizes of the different sectors and segments and what they therefore will mean to us. The second thing to point out, we just go on to the next slide, is I pulled out some specific points I think is useful for us to look at. So first and foremost, have a diverse portfolio, and that's what underpins kind of the robust performance we have, the resilient trading that we've been able to show through through the first half year. So we're not reliant on any particular sector, which is different to a lot of the businesses in our immediate marketplace industry. We have why we are much more diverse. The risk is spread. I will talk in a minute about tech and mobility because US tech in particular is an area that's received a reasonable amount of presses as some of our competitors come onto the marketplace, and we're and we're not immune from some of that as well. I'll talk about that in a sec. What I do want to point out first, though, is in a lot of those other sectors, segments, whether it be business and corporate, health and wellness, property, sports and entertainment, we're showing margin growth, strong margin or profit growth, and in most of those, strong margin growth as well, particularly as our property business and the events business, we that sits within business and corporate recover further.

13:20 So some good you know, lots of good signs there. The

13:25 if you were to take the margin growth and strip out what's happened in tech and mobility, actually, the margin growth for the first half year would be one and a half percent up, not 1% down. So what has happened within the tech mobility sector has had some impact on us. The before I just flip on to the next chart, there's it's important to note that actually our revenue in the first half on tech and mobility has is largely unchanged. It's down very slightly, but it's largely unchanged. Where the the impact on margin has come from more is is on the carrying cost. And I'll try and explain that very, very quickly in a second. The on the next slide, you've got our position on The US tech sector in the first piece. I'll I'll let you know, read that at your leisure. That will, I'm sure, tie in with with others in the space. The the second part of this, is important. What we done about it? So in the first instance, we've kind of downsized the business in The States somewhat to reflect that reduced revenue run rate, but with half an eye on recovery as well, so we're not caught cold.

14:29 The second thing is we have revamped the offer, and we focus more on activity based marketing, which enables us to produce or offer a much, I guess, more efficient, more effective use of client spend, and that is an area of the sector that's particularly attractive at the moment and is driving a lot of our new business efforts in the region. I would just show you on the next slide what I mean about why that that operating margin has weakened so dramatically in the second half in the first half of this period and why I don't think that's gonna be a long lasting thing. So what you can see there is as the as the year has progressed last year, the the blue line, revenue is driving up through the year to be particularly high in the second half of twenty twenty two.

15:22 Operating costs, which is this already orange line beneath that, as you'd imagine, kind of growing to match that. Now when you then get the shock of a sudden reduction in in budgets, clearly, it's quite hard to reduce the operating expenditure at the same pace, and so you do kind of get a bit of margin lag. We've also had half a mind on, as I say, on what's gonna happen in the second half year. And as James is gonna describe in a bit, we know we've got some confidence that there's new business coming through and new and existing clients as well driving revenues back into the sector. And so keeping some OpEx in play to ensure that when that recovery comes, we're well placed to deliver it and the margin increments that come from it. Okay. So slight change of pace. Now we put this in because we're a people business, and it's an important metric.

16:13 You know, the vast majority of our operating costs across the whole of the group are staff costs. And historically, certainly coming out of COVID, there was quite high degrees of churn, not, you know, across the sector as well as ourselves. And this is just to sort of show that that churn staff turnover is reduced markedly in recent times and is now well below industry levels. And also, clearly, an exposure for us potentially is always wage inflation, particularly in the current times. And I'm kinda happy to report our wage inflation for the first half year is around 4% year on year. To the balance sheet, we have a simple balance sheet in the scheme of things. You know, we're not a capital intensive business. The primary levers, if you like, are generally working capital and acquisition spend.

17:04 This year or certainly this first half year, we've we've seen a particular dynamic which has impacted our cash flow in the first half of that. It also related to US tech, where we've seen quite dramatic reduction in the amount of client prepayments are lodged with us at the half year for for campaigns to be driven through the second half year. And that that's reduced our cash balance on or increased our net debt by around £6,000,000 in the first half year. It doesn't tend to have much of a overhang through the full year, but it's a sort of in year phenomenon that historically we experienced that has kind of washed through now. That has a direct impact on the net debt. We've been acquisitive in the last twelve months. As you'll know, we've acquired Influence. We've acquired Metso, Populate.

17:54 They all join the balance sheet, if you like, as intangible assets and earn out obligations to some degree. But that's feel concludes that stage of the investment program that we had in front of us two two or three years ago. So couple those together, and also we have recently refitted a London office, and there's three relatively large pieces of cash outflow there, two of which were planned and one of which was not, that driven our net debt up somewhat. So our leverage ratios are higher than they have been recently, but we believe now, for the reasons I've just explained, that this is pretty much a peak point for us in terms of net bank debt. That comes through doubly so in the cash flow, so I won't labor on too much here.

18:41 You can see that EBITDA is broadly similar to this time last year. Interest payments will be higher. Tax payments are also somewhat higher. For those of you interested in the detail, we pay a higher level of tax in The US than we do here. And and, clearly, the amount of tax we're paying in second half of last year is quite high. That's all of it into this year. A bit of a blip. Down the page, I've talked about working capital, which is the client prepayments point. I've talked about acquisitions and capital investment in the London office. And so that kinda takes you through to what's not fundamentally a net outflow for the first half of the year. So to my financial kind of summary, if you like, before we we move forward, 6% organic growth, 11% revenue growth for for the full group. You index that against the set. That's a good result, we believe. The majority of the segments you've seen are in growth.

19:40 Yes. US Tech is here. It's a little bit in the first half, but we believe, and we'll talk about it a bit more in a minute, we've got recovery coming through into the second half year. That investment phase is complete. The business is highly efficient in terms of cash generation and operating cash level, so much of what we deliver in EBIT EBITDA throws straight out into operating cash flow. So as you complete that investment phase, as you complete those other things I've talked about, so you will see the debts be burned off over time. And as I say, just to finally wrap it up with commitments, progressive dividend strategy. Great. Thank you very much, Giles. As Giles sort of says, I'll go through some of the broader business updates, but also some of the initiatives and how we're progressing against those initiatives that we introduced in our full year 2022 results before I just finish on a a broad commentary about the outlook for the full year.

20:35 With regards to all of our agencies, we do have a a, if you like, a forecast for new business. So built within our numbers, built within our aspirations for a year, there's obviously the work that we get out of current clients, organic growth from those current clients, but then new client assignments. Now as I sort of say, each agency goes about their own new business program, but really pleased to sort of say that at a mission group level, we're now starting to win and secure clients that want multi agency assignments. So they want multiple agencies from within the mission group. Now the agencies love that because they wouldn't win that size of client on their own. They need the capabilities that have been brought in by others within the group. And, obviously, at a group level, it's fantastic because it means that we're actually securing all of of that that client spend.

21:21 And as we announced yesterday, we have been appointed by the post office. This is to do everything, strategic creative production services across everything in branch digitally as well as across all of their social and experience channels. We've created, because it is a mission win, a special vehicle called Cloak Lane for the reasons that is cited there. But there are four agencies heavily involved, but others that will also be involved. So CRO and Innovation Bubble, a customer experience and a behavioral scientist agency within the group, will also form part of that. So great proof point of the MISSION GROUP model, but also one that, again, leads is and is led by GROUP because we don't and this is an important distinction versus other marketing communications group that you may come across. We don't have a big head office. We don't have a big central cost.

22:08 Obviously, there's Giles and myself and and a couple of others within that sort of central team, but we drive and we trade through our agencies. So we are responsible for sort of, if you like, conducting this orchestra and pulling these teams together. So it's great that that model is starting to work without adding in the burden of a significant central cost to do so. Also, and in terms of value, we are allowed to state it. Not normally, are we allowed to state contract value because of client confidentiality, but because it is obviously a government contract, a significant retendering and securing of the department for business of trade on our events business. And they also are doing really well with regards to other new business, Goldman Sachs, Space Space Agency, and Worldpay, just to name a couple of others. And lastly, I've included Asia down there because, again, for some of you who know us a little bit better than others, last year, we re rebased some of our operations in Asia, and that's sort of really bearing fruit. So all look to have a it's never gonna be a big market for us, but a good year, and they're winning new business on the back of it. M one Telecom is through an agency that we have based in Singapore, but also using The UK and Hong Kong based data solution, Mesolabs, that sits within Mission Advantage. So, again, another proof point of the multiagency group approach.

23:23 Giles has talked about how, we are repairing North American technology business, and it really is on the back of new client wins. Again, I have anonymized the clients for their own confidentiality. But as you can see, there's a significant new client win there and then dribbling down into others of note. And these are all to start immediately, and that is the initial scope of work value. Now Now just to give a bit more color to what Giles was referencing, the ABM work that we do or the account based marketing work that we do is because we are selling large scale enterprise solutions of which there are only normally a few buyers globally. So we look at a broader pool. We do a lot of data and analysis on that, and then we come up with a long program of nurturing and building that relationship to ultimately secure a sale. So that's why we talk about one to few. That's why it's account based marketing, and that's why we have the expertise in that where others often don't because it is a fine art.

24:20 With regards to the property market, as you'll have seen, roughly nine to 10% of our revenue comes from the property market, and I've put this in because I'm conscious that a lot of you will be reading, you know, large, broadcast media and sort of saying, okay. Well, the new home developers are facing a very challenging time. Well, for us, because we are the leading and we have the leading UK property marketing agency, that's actually not a bad thing because, historically, the houses have been selling themselves. We now have a shrinking pool of buyers that require increased marketing efforts. So we're not worried about the delivery from our property agency over the next twelve months. Are specialists, as I say, they've invested a lot in UX and in terms of other digital transformation techniques, which the consumer and also our clients are demanding whilst maintaining their ability to deliver a physical presence, whether that is a remote show home, whether that's through actually, we do a lot of interior design as well as a traditional brochureware and collateral that we do for a lot of our clients.

25:23 Now I think if I'm gonna look to Mark, we've got a video which just highlights some of the multifaceted work that ThinkVDW do. Great. Thanks, Mark. So, hopefully, that gives you

26:22 a flavor of what I'm talking about here and the fact that we are a one stop shop for those large new home developers let's be honest, have a significant land bank and sort of library of new homes that they need to sell and are looking to us to help do that. What also it will show you is actually there are other huge line other usage points, should I say, that that for that type of work, not least in the commercial space. We traditionally haven't done much here, but over the last sort of six months into the last twelve months, we've done a couple of pieces of note, and we're looking to grow

26:53 that side of our property business as well. So the the first first was for a company called GHD, and I'll show you here an example of the work that we did because we actually redid their whole office. So this is the whole office interior design, build, fit out that we did as well as a lot of the digital pieces for them around that launch and and then then into some of the brochureware and collateral and even into hosting and managing events for them. Also, Saint Modwin, which are a basically, they build large out of town warehouses and then sublet them to the likes of an Amazon or or or the like. And, again, a lot of the skills that we've taken in residential, whether that's digital transformation, whether that's promoting and selling of these particular assets, we have done that in that commercial setting. So there's more growth that we're gonna focus on there as well as, as I sort of say, being ever more critical, and dare I say, indispensable to our traditional property clients over the next twelve months as they may hit some of the headwinds in their sector.

27:48 I talked a little bit before about mission advantage, and these are the things that are contained within mission advantage. But couple of points to point out and why we think it's unique, but also why it works is traditionally, a lot of people question the true nature of referral within agency groups because people are still quite territorial, and they feel threatened if you're introducing another agency to their particular client because they want to own the client relationship. Well, actually, if you do two things, if you actually create a platform which is called after the parent group, namely MISSION, if you fill it with skills and talent and technique that those agencies traditionally feel is quite hard to sell on a persistent basis, so the recoverability of that time in a singular agency is a lot harder to achieve than in across multiple agencies.

28:37 And then thirdly, if you strip out all of the cost challenges, move it from a fixed cost to a variable cost, and that variable cost is charged to them at the cost rate and they are therefore setting their own charge out rates and they're retaining the profit, then it works. And that's really why we've seen so much success and advantage by this approach. So I'm gonna quickly whiz around what's in there and some of the highlights, but I'm gonna focus on hubs because that was was in something that we introduced as a Notion six months ago, but we've made a lot of progress in that area. But mission people, we have a common approach to, recruitment. We don't pay really largely any any external recruitment cost. We recruit all of our people internally now. We manage them internally. We look after remuneration bans across all of our agencies and make sure that we're obviously compliant with regards to all of those things. But to beef that up a little bit more, we've actually hired somebody who's coming in to join us as head of people services out of the direct line group. So, again, good experience of working across and managing multiple employer brands, which is what we have.

29:42 Mission Labs, which contains Turbine, our performance media offering, as well as Mezzo, the data and insight piece, and others that sit in there in terms of the analytics and behavioral science work, have already had 60 opportunities successively referred into them in the first six months of this year. They've got another 83 in progress. And to reiterate, it works really well because if you are one of our go to market brands, whether that's a CRO, a Brayleno, again, post office is a case in point. Yes. I have that capability. It's provided in Mission Labs. Oh, well, that makes sense because you're part of the mission. Absolutely. Exactly. It's seamless. There are no barriers to us cross selling those services. Mission made is our twenty four seven digital production capability both here and Vietnam so that we can service throughout most of the day, and they are taking a lead. So, again, rather than multiple agencies having to chat sort of tackle with the thorny issue of AI, we have a singular approach. Also, the largest part of AI is, as as I think it's coming to the fore now, is about legality and governance and usage of certain things. That all sits within one home servicing the rest of the group.

30:49 And then lastly, mission reward is a property marketing piece where, again, there's some really interesting work that's happening. I think it's still live now, the monopoly double peel work. We are one of the key partners that McDonald's used to deliver that promotion. But as I mentioned, mission hubs was something that we set up six months ago, and it's and it's and it's matured quite quickly. So we have two levels of mission hubs. And this is all around making sure that we have more partners, more places, more solutions, but we don't have to acquire to do that. We can build up relationships, and, actually, we can charge for the benefit of being a mission partner or affiliate. So on the left hand side, and I won't go through it, line by line, but for a low annual partnership three fee, we can certify you to be a partner. That means that if we have, for argument's sake, a requirement in Dubai where we don't have an owned a wholly owned office, We have a partner there that we know. We understand their capability.

31:44 We can refer that income in, and then

31:46 there is a transaction around the commission payable on that. But they have paid for the privilege to do that. So this is in markets and territories where we think our clients might have a need, but it's not a persistent need for the group so that we would look to put a a more permanent operation on the ground. Mission affiliate is the next level up because there's a lot of agencies, and and, typically, they're the profile of agencies that historically we might have acquired, that need a lot of what mission advantage can bring, but really can't afford to invest in it themselves because they're a smaller business. They're owner operated. They will need best in class behavioral science, data and analytics, and the like, digital media planning and buying, but won't have it in house. Now we charge them more, so it's a more significant affiliate fee, but then we can pass those services through at a cost plus basis. So, again, we're still generating income there, both direct and indirect.

32:39 Importantly, the recoverability of that time and that resource that was sitting in MISSION ADVANTJES obviously increases. So we can expand our footprint quite quickly.

32:49 As I say, we're new into this. We are launching the activity on the left, which is just in terms terms of of a bit of a sales piece about how you can become a partner and then into an affiliate. We've already had significant success signing up some partners, and, hopefully, in the next day or two, we'll have an affiliate that will sign up based in The US and another one joining when their new budget starts in January 24.

33:09 So already, at no cost, the MISSION GLOBAL footprint has grown significantly. So the green are where we're discussing partnerships, or we already know somebody in that territory that is keen to be a partner. The red are now where we are permanently based or with a partner or affiliate, And the rest is actually because of the individual that we brought in to head this up. He has a vast experience of 1,500 agencies globally. There is a known relationship should our clients give us the opportunity to do that. So I wanted to spend

33:40 a little bit of time on that just to explain it because I think that is an interesting way of we talk about this later. We talked about it last time of the fact that we don't need to do any more m and a, both with regards to a geographical expansion or indeed in terms of a capability because we have all we need or through the initiative emission hubs, we can do it at a no cost basis. So this, again, goes back to the point that Charles was making in terms of over the next twenty four months, you know, really sort of beating down that debt because we're cash generative, and the large scale investments and initiatives have already been been done and taken place.

34:16 Couple of other things just for me. We do put it really front and center, our approach to ESG, and have done for a number of years. What we don't tend to do, though, is that the interims go into too much detail. So I just summarize it here, but I will draw you to the investor section of our website where you can see a number of reports with regards to our approach to ESG, but we do update more fully at the full year. But the key change, and I suppose the key sort of update, is that we are embedding it into our daily decision making. It's not just something that we sort of pick up once a month and then look at. On the environmental impact side, we track all of the expense reports and through the way that people submit their expenses now to look at the carbon, impact of whatever journey it may be to and from meetings, whether that's clients or internal, and that's something visible that every employee can see. Just one example again about how we're trying to embed it into day to day decision making.

35:09 On the social employee side, we are doing another engagement survey with all of our staff in October. We'll show you some of the results when we talk to you again hopefully next April, but also continuing to build our individual communities and, again, investing in the next generation. Really believe in apprenticeships and how it can, give a, you know, a a fantastic opportunity to a different audience, maybe from a different dynamic, and bring them through the group as well. One of the other things that we've started to do, and this is this is very early days, but it's getting quite exciting, is actually packaging up the journey that we've been on and doing it in a consultative way with our clients and a new set of clients, certainly certainly around the environmental journey that we've gone on and the partners that we work with. And we're starting to sell that as a service, to our clients. We've got three or four already live conversations around that, both existing and new clients as well. But I just thought it was quite interesting to sort of show you that it's not just us who are learning. We're actually now taking that learning and everything that we've learned over the last three or four years with regards to ourselves and what we've been doing and packaging it up so that we can help clients who are maybe a little bit more behind than ourselves on that particular journey.

36:17 We've talked a lot about product in this particular update, and that's because we're really trying to hero the work that we're doing, that work that counts. One of the pinnacles of that will be our first ever intergroup, award ceremony, which is gonna take place in December. We have got external validation, so it's not just us marking our own homework. For those of you who know the industry a little bit, a guy called Bill Bunge, who was one of the founder of Bunge, BT McGinniss, I always get that the wrong way around, and various other agencies will be heading up a chair of judges, which will be, as I sort of say, made up of internal and external people. And looking at various different categories, but all of those categories laddering back to how did it deliver against that client's business objective. Now the reason why we're doing it ourselves is because we really want to get that spirit of competition between the different agencies and to showcase some of the great work that's now coming out of the group.

37:08 And then very lastly with regards to initiatives, as you might have seen, in some of our communications over the last three weeks, we've put some boots on the ground in New York. This is with regards to Influence, which is a brand that sits within Mongoose Group. The reason why it's Influence is because it has such a strong pedigree and a number of clients in f one. And as we know, f one has exploded in North America. There is a real opportunity here for the next twenty four months to try and capitalize on that explosion on that explosion through our expertise in the area. We also got really good knowledge around the America's Cup and also other events which are looking to happen or have certainly a North American bias, as I sort of say, over the next two, three years. So it's a low risk because we're utilizing, obviously, a lot of the resource that we have here in The UK, but we've got that physical presence to try and capitalize, as I say, on what we think is quite a unique offering under influence sports and media.

38:02 Which takes me to my last slide before, hopefully, allowing, yes, twenty minutes for questions, which, again, I won't go through in detail. But as you can see on the left side, the summary really is that, you know, it's been a resilient performance. Yes. Like many others, we have had that impact and that surprising impact from technology. We think we've recovered well from that certainly for the shape of the second half of the year through new business, But we've seen strong revenue growth from all of our other sectors. The m and a that we did the back end of last year and the start ups that we've done earlier this year have integrated fantastically well both in terms of mission advantage and then directly in the terms of influence as well and and really sort of bearing fruit and hitting the ground running. That's then meant that the share of spend that we're getting when we're starting to track through that referral income has really started to sort of increase. And, hopefully, going into 2024, that's when we'll really see, and start to realize, some of the benefits from that investment.

38:57 So with regards to the outlook, like no like every other year, it's no different. If you look at some of the statistics and you go through some of our previous reports, you will see it's very similarly weighted with regards to h one and h two. As we always sit here, it's a very difficult time to, to talk to you because, obviously, September and October will be critical trading months we get back after that sort of summer lull that everybody sort of tends to have in this sector, and we see that sort of traction really drive through and and sort of close out at the end of the year. And whilst, yes, there are macro headwinds, you know, whilst it is obviously not the easiest of trading environments, the new business wins and the performance that we've seen there both in North America and in The UK sort of underpins the outlook that we've, again reiterated today.

39:42 And that will mean that, hopefully, we'll continue to see revenue growth across all sectors. And And then then as I sort of say, looking in isolation at the h two run rate for technology, see that repaired to levels back to 2022. So, again, thank you for your time. That is the presentation. I will close out this and check any questions. That's great. James, Giles, thank you very much indeed for updating investors this afternoon. Ladies and gentlemen, please do continue to submit your questions using the q and a tab just situated on the right hand corner of your screen. But while James and Giles take a couple of moments to review your questions submitted already, I'd just like to remind you the recording of this presentation along with a copy of the slides and the published q and a can be accessed via your investment company dashboard. James, Charles, you've received a number of questions. So firstly, thank you to everybody for your engagement this afternoon. If I may, hand back to you guys just to read out the questions where it's appropriate to do so, and then I'll pick up from you at the end. Yeah. Of course. Yeah. Thanks very much, man. So the first question is why are results always heavily weighted to the second half?

40:38 It it it is a strange quirk. We are we are no different to a lot of others. It tends to happen in our industry is that so where sometimes clients are just using budget up because if they don't use it, you lose it into the following year. And, also, a lot of people are preparing activity to hit the ground running in the first of January. So there is an activity spike. What you also have to remember is Christmas and the run up to Christmas is a significant spend for a lot of brands as well. So there, I suppose, some of the trading things. Would we like it to be smoothed out? Absolutely. But it's just sort of something that we've kind of got got got sort of used to, if you like. But what we do tend to do is run a lot leaner with regards to the second half of the year, which is why you see the spike with regards to the profits flowing through. Hopefully, that's answered the question. Yeah. Should I just also add to the financial dynamic, which is important, is that the operating spend operating expenditure is broadly fixed given it's mostly people and property.

41:43 It's spread quite straightforwardly across the year. And so, actually, I wouldn't want you to get the impression that our revenue increases proportionately to our profit in the second half year because that would be crazy. It's the revenue probably goes up around in order to model this and look at previous years, it probably grows about 11% first half versus second half, which is entirely consistent with what James was saying, plus on new business wins and so on. And you would expect the the revenue to be growing as you went through the year. And this kind of just comes through in how the business is operationally leveraged on the p and l. K. Thanks, guys. And I think that might touch off the next question, but I'll repeat it and just see if there's anything else that is worth putting out, which is so as your activities are very labor intensive, does the seasonal imbalance give you problems?

42:29 As I sort of say, you know, we we often sort of strive to sort of smooth that. We do go into the new year with the resource that we've exited the last very busy part of the year in. So, yes, there is always a bit of a rebalance rebalance that we do in the first quarter to make sure that we're at the right levels. But it's one that is very much broken down, and that's why we started showing that segmental analysis because it's not true across the whole group. You'll have some sectors which will hit the ground running and need all of that resource. Others, Others, as John says, that sort of build up. Sports and entertainment is a bit of a strange quirk because they are selling things ahead of realizing the income because they're commission based. So you need the resource and the sales team to go out and sell the the sponsorship sponsorship property. But then when actually that money comes in, there's no cost associated to that money. So, again, it's one that we'll just need to break down a little bit more segment by segment, but that's some of the explanation behind it.

43:24 The next question, I think I'm being caught out by previous statements. Yes. Here we go. In the last investor meet, you stated that you thought MISSION GROUP was undervalued at the then market capitalization of 50,000,000. Despite the cautious update in July, do you consider MISSION GROUP is significantly undervalued at the current capitalization 35,000,000? And if so, do you think this leaves MISSION GROUP vulnerable as a takeover target? Very good question, and very detailed question. I suppose the first part, of it is I obviously have my own personal view. And whilst I would love to set the share price and therefore the resulting market capitalization, I cannot. In my view, I think we are an absolute bargain. I'm not gonna deny that. I think at this particular share price for growth that we've seen, for the level of returns that we've seen, for the work that we're doing investing in the future, for our published target by the end of twenty twenty five of a 100,000,000 revenue translating to 13% and margin into 13,000,000 profit, then, yes, I do believe that we're undervalued.

44:21 What the market thinks of that is down to the market. I have a very good, as does Giles, relationship with all of our shareholders who are long term shareholders who see the value and looking forward to that macro environment repairing so they can realize that value. The next question, how is AI helping or hindering your workflow? Really good question. Obviously, a very topical question. I saw some stats the other day, which I thought were really interesting. So since the launch of well, really, suppose the explosion rather than launch of ChatGBT, awareness of AI has gone up from 50% to sort of 76% across the marketing community, the client marketing community. Usage of it is at 5%.

45:07 50% have never used it. So, actually, it's it's very over indexed with regards to the noise versus the application. I am not underestimating its power and its impact and its future importance. I'm just sort of saying as we sit here today, there is an imbalance. So where we have been starting to really see the power is actually exactly that is in our workflow. So we are using it to demystify across all of our teams, certainly in the production sort of side of our business, and making sure that they see it as a friend rather than as a threat. So it enables them to do their job better, faster, and more efficiently, and they can capitalize on it, and they can really understand it rather than sort of thinking it as a big sort of scary thing over there. So, yes, it is starting to help our workflow. We do introduce it to clients with regards to some of the solutions and some of the creative solutions and activity that we've done, most notably, actually, in the alcohol sector. We've done quite a few campaigns with regards to it. But in terms of being asked by our clients for it to be a consistent component of any brief we respond to, that certainly isn't there yet.

46:17 Next question from Christopher. What trends are you seeing in client spend across the sectors you operate in? Yeah. Good question. I I hope we've answered this in part, but just for a fuller one across the sort of six that we've if I go right to left this time, sports and entertainment, strong. Good strong trading. Lots of opportunity. The market feels good. Property, as I sort of say, a weird one because with regards to their industry, there are some challenges. With regards to what the impact that has on us, we see some opportunity there. Can you consumer and lifestyle, there has been a paucity of new business. That has been the one where all of those macro headwinds that you're seeing with regards to client spend is probably most profoundly felt, which is why we were really pleased by the post office win and the traction that we're getting in new business.

47:05 Health and wellness, for us, it's only 2% as Giles sort of pulled out in the segment analysis. So it's not a big revenue stream for us, and the revenue that we do in that particular vertical is very niche. So it's around rare diseases, market access pricing, and insight. So that is relatively immune to peaks and flows with regards to sector or client spend fluctuations. And then the final one, technology mobility, I I I think we've done in in some detail, so I won't go through that again. But, hopefully, that gives you a broad brush answer to that question. I think the next one's for Giles, but I'll read it out. How are high interest rates changing your buy and build strategy? Is capital now better deployed via share buybacks? Yes. Okay. So, Mark, I think there's a a few questions on that sort of topic down the list, but I would say our buy and build strategies, we said possibly already.

47:57 We're kind of pausing now. We had that strategy. We set it up for ourselves a couple of years ago coming out of COVID. There are certain things we needed we wanted in order to be able to augment the offer and and fight forwards. We believe we've we've completed that phase now, and so we are not expecting to deploy more of our resources in that area. Is capital better deployed via share buybacks? I know what you mean. I get I get the dynamics for that. And to some degree, you can kind of be in control of your own destiny if you believe you're undervalued by doing that. So just to share you some of the dynamics there. For us, though, specifically, I obviously you'd be buying shares with debt, and that in itself is you know, may or may not exacerbate an issue. You have to consider that. The other thing you've got to consider is who do you buy these shares from. Because with the share price being quite depressed, we believe undervalued, and we're not the only ones who think that finding people who actually sell at the moment isn't very straightforward.

48:57 And so we have, in the last twelve months or so, done this to a lesser extent. We instructed our employee benefit trust to to go to market to buy some shares to help fund future incentives. And it kind of worked for a for a little while and mopped some shares up, but, fundamentally, the the larger institutions we believe at the moment are are less interested in engaging on that. There's a there's a follow-up question from Mark, which is how is credit risk managed given increased debt, especially versus tech? Yeah. No. Mark Mark says that, and Thomas towards the end says, what's the risk of nonpayment by US tech given their reduction in prepayments? Thinking Musk style, sue me if you want your rent. Good questions. Now the way we generally manage risk is just by being careful. We're we're sort of fortunate to some degree that the the vast majority of our clients are blue chip.

49:49 And if they fail, then, you know, everybody's got a problem, not just us, not at least, you know, our largest our larger clients, we've got Amazon. We don't count x slash Twitter as one of our clients, so that so that's quite helpful possibly on that front. But to be serious, we we keep a very close eye on it. If we have any concerns through debt debt rating reviews and so on and so forth, credit credit reviews and things like that, we are paying this upfront. And so that's how we manage that. K. And the Andy has asked a question which there's just a sort of an add on answer, which was any plans for acquisitions? I think as Giles has sort of said, no. But I think it's also important that we know that there's some strange market dynamic, so we will never not have a coffee with somebody. There is always interesting opportunities.

50:34 But with regards to the need to buy anything, absolutely not. We we are fine. And then the last question, which I don't think we've yet answered, is again from Thomas. Where do you expect net net debt at end of year, and how do you intend to reduce the net debt ASAP considering the high cost of capital? Okay. So second half the first half of that first. The second half of the year, there are specific commitments that both that fall in the second half of the year. We have both dividend payments fall in the second half of the year. Beyond that, it's relatively light. So as I say, that point I made before about free cash flow being important to us will will help. I mean, to be honest, I would say that possibly we might end up roughly where we are at the moment, maybe a little bit less, but they're the right. So you're always at the behest somewhat of client payment terms and so on. But in the scheme of things, it feels, as I say, most of the investment is out of the way and is is now focusing on trading and cash generation.

51:39 James, Giles, I think, as you say, you've taken all those questions you can from investors this afternoon. If any further questions do make themselves available, we'll obviously send those to you post today's call. James, Giles, I know investor feedback is important to you both. I'll shortly redirect those on the call to give you their thoughts and expectations. But perhaps before doing so, if I may, James, just come back to you just for a few closing comments, and then I'll ask investors for their feedback. Yeah. Thanks very much, Ryan. Yeah. I mean, as I said, you know, thank you, really, I suppose, is all I want to say. Thank you for your time there. Always very enjoyable to talk to you, albeit virtually, and answer your questions. Hopefully, we've done so in a clear and honest way. But, yeah, again, I look forward to speaking to you again in the next six months, and we can share the full year results. That's great, James, GROUP. Thank you once again for updating investors this afternoon. Later, everyone. Please do not con please do not close the session as we're now automatically redirect you for the opportunity to provide your feedback in order the company can better understand your views and expectations.

52:33 This will only take a few moments to complete, but I'm sure it'll be 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. Good afternoon to you all.