St Ives considers ad-tech buyouts as part of acquisition road map as it reveals 17% pre-tax profit hike to £29.4m

By Jessica Davies | News Editor

Kin + Carta


St Ives Group article

October 7, 2014 | 4 min read

St Ives Group, which owns agency Amaze, has reported a 17 per cent year on year pre-tax profit hike to £29.4m and revealed that further acquisitions lie ahead.

The group, which bought digital marketing and technology agency Amaze last year for £24.3m along with marketing service companies Hive Healthcare and Realise Digital, has seen revenue across the group rise 3 per cent year on year to £327.6m.

The net debt accrued following the buyouts and cash outflow of £42.7m cash outflow, was £42.7m for the 52 weeks ending 1 August 2014.

Marketing services now account for nearly half (46 per cent) of group underlying operating profit, including profit from acquisitions made in the last year.

Now it is on the hunt for further acquisitions, which could include ad-tech programmatic firms, according to its chief executive Matt Armitage.

“Predominantly our future growth will come from marketing services and so that’s where we want to build. Our current verticals in marketing services are data, digital, consultancy services and field marketing. So we are looking for additional businesses in these sectors, that don’t compete.

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“We are also looking at specialist media analytics businesses, and content management, as well as technology media planning businesses,” he said.

Initially it will look to the UK to make acquisitions before casting the net globally later down the line if necessary, according to Armitage.

Programmatic ad-tech companies are also of "major interest" to the group in terms of potential buyouts, however it is yet to see any companies that "stand out" as clear contenders.

"It’s still a nascent market and there are a lot of players there. So it's all about finding the right horse to back, but we are interested in that area, and if we find a business that we think offers something unique and different, then yes that would be an area of interest. So far we have not come across a likely candidate to date. But it’s a new, growing area and it’s also a challenger area which always interests us.

"Philosophically we like to look at companiess that are challenging the norm of the market or sector – and clearly that’s an area [programmatic trading] where that is happenning. But it's also important to find the right one as a high proportion of these kinds of tech businesses will likely fall by the wayside," he said.

In terms of the investment pot it can put aside for acquisitions, Armitage referenced last year’s buyouts as an indication of size.

“Our targeted businesses have delivered £3-4m in EBITDA – so we have tended to pay roughly six or seven-times multiples of EBITDA for those businesses. So in terms of scale it is businesses of about that quantum we are looking for and we have plenty of head room to be able to buy businesses of that size,” he said.

Armitage conceded that in the agency and marketing landscape there is an increasingly fierce competitor set, and that it is increasingly going head to head with management consultancies for business wins.

“The marketing industry is changing quickly, driven largely by changes in technology and consumer behaviour, and that is changing the competitor landscape. All markets are now very competitive and will continue to be so, and yes there are more new entrants,” he added

His comments regarding the increasing level of competition from management consultancies echo those made by DigitasLBi UK chief executive Anil Pillai earlier this year, having described the encroaching cometition from the likes of IBM Interactive and Accenture as a "turf war".

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