Companies: MSQ   

Business seems to be picking up at Media Square, the once revered marketing services venture led by Jeremy Middleton that delivered a shock profits warning last year. Long known as one of the fastest growing ventures in the sector, Media Square disappointed followers when it announced integration teething problems related to the 2005 acquisition of Marketing Services Group (MSG) from Huntsworth.

Subsequent results for the six months to August revealed a dramatic fall in pre-tax profits from £1.3m to £295,000, despite sales more than tripling to £99.6m, with higher than expected costs impairing profitability. Overall, the first full financial year following the MSG deal proved more difficult than chief executive Middleton could have expected, with the scale of change proving challenging.

Nevertheless, a recent pre-close statement for the year to February just-ended put things in perspective. Middleton chronicled recent restructuring, noting the successful ditching of non-core businesses for substantial multiples (admittedly SBGFinex was sold at a loss), with proceeds used to bring net debt below £16m.

When annual figures are announced in June, he expects to report 40% plus revenue growth north of £103m, boosted by a 12-month turn from MSG, although exceptional costs will be higher than originally expected.

With the bulk of these business issues resolved, Middleton is now ‘more confident about the base level of profitability’ from which Media Square can grow and insists brands such as The Gate Worldwide, Coutts Retail Communications and Holmes & Marchant remain strong. Media Square is also looking to boost its presence in the digital space (where it currently derives 12% of revenues) with Middleton targeting 30% of sales to come from the digital business by 2010.

Leading from the front, he recently signalled his confidence in prospects, acquiring 500,000 shares and increasing his holding to 3.44%. Growth Company Investor believes the current market price tag looks way too low for a £100m plus revenues concern with a previous record of outperforming the sector. Media Square has speculative recovery appeal.