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Director dealings: Ebiquity

Ebiquity (LON: EBQ) non-executive chairman Rob Woodward is the latest director to buy shares in the media consultancy following the publication of its 2020 results at the end of March. He has invested nearly £15,000 in 41,759 shares at 35.9p each. That takes his stake to 147,280 shares. Woodward is a former boss of STV.

Chief executive Nick Waters, who joined last July from Dentsu Aegis, bought 50,000 shares at 32p each, which was his first purchase, while non-executive director Richard Nichols doubled the number of shares owned by him by buying 100,000 shares at 30.729p each.

Business

Ebiquity provides independent media analysis with 19 offices around the world. The company works for 70 out of the top 100 advertisers in the world and helps them to spend their advertising funds more efficiently. Recent wins include BMW, Ford and Colgate Palmolive.

The company’s media specialists analyse $55bn of media spending in 75 markets. The FirmDecisions compliance business audits $40bn of value each year.

The business has been split into five service lines: media management, media performance, marketing effectiveness, technology advisory and contract compliance. The plan is to cross-sell the services to clients.

Background

Ebiquity fell into loss last year, although it is expected to bounce back to profit in 2021. Revenues declined by 18% to £55.9m in 2020 and Ebiquity did manage to move back into profit during the second half as margins recovered. Net debt was £8.5m at the end of 2020.

That improvement in trading is continuing, and Ebiquity is winning business. The global advertising market is recovering and expected to grow at 5%-10%. New products will be launched later this year and they will enhance growth in future years. There is a greater focus on digital advertising.

Conclusion

A new management team has refined the strategy of Ebiquity and digital media will be increasingly important. It could also help to improve margins.

Less than two months ago the shares were at a 12-month low and since then they have more than doubled to 40p. A forecast 2021 pre-tax profit of £2.6m puts the shares on 16 times prospective earnings and that could fall to less than nine times in 2022. There could also be a return to dividends this year.

Given the recovery potential it is not surprising that Woodward and fellow directors are buying.

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