Irreversible migration towards online advertising, as well as increased usage of the internet by consumers, jointly underpin the growth prospects at online direct marketing counter TMN Group, the dotcom survivor formerly known as themutual.net.

Interims to October proved stellar stuff, building on last year’s strong second half, with revenues roaring 350% north to a record £8m, boosted by acquisitions, and pre-tax profits burgeoned by 46% to almost £1.4m.

Chief executive Mark Smith reported growth in all areas, with email marketing specialist TMN Media now boasting 10m email addresses across 36 different databases, posting 38% growth. 2005 acquisitions drove the bulk of the top-line surge, with planning and buying email advertising agency EDR enjoying 70% turnover growth and online market research specialist ID Factor reporting a 122% sales surge. This latter business carries out ‘targeted’ market research through 250,000 UK panel members, as well as a network of international partnerships. Clients include market research agencies working for giants such as Microsoft and Carlsberg.

Having grown into one of the biggest online direct marketing plays in the UK, TMN Group is outpacing a market growing at 30-40% and continues to build higher entry barriers with clients. ‘We’ve been around for a long time,’ says Smith, ‘and we’re not about jam tomorrow.’ Now, the goal is to dominate the UK online advertising and market research space.

Forecasts in the market for the full year, likely to be upgraded, suggest pre-tax profits of £3.3m and 4.4p of earnings, placing TMN on a forward p/e of 16.7. Too cheap, given the group’s superb growth prospects, with internet advertising spend and online retailing both spiralling, as well as its great cash conversion characteristics and the likelihood of further buy backs (rather than dividends for now) as a way of rewarding investors. Buy.