Print Published 13th May 2017, 09:37

Sector share prices: 12 May 2017

MSFI Index 12May17

Shares in marketing companies continued their steady rise in the month to 12 May 2017 – the seventh month in succession – as the sector’s MSFI Index reached 77.0 (Jan 2001: 100).  That is the highest value achieved since the MSFI Index last peaked at 71.1 precisely 10 years ago.

However, the increase in the Index in the latest month was very modest – just 0.11% – whereas the FTSE All-Share Index improved by 1.32%.   Indeed the latest month is the first in which the FTSE All-Share Index has outpaced the MSFI Index since November last year.

Part of the explanation for the outperformance of the MSFI Index may be a view that the industry generates a sizeable proportion of its revenue from abroad and therefore investors are less nervous about the short-term impact of Brexit than they are in the case of other industry sectors (see Election news depresses marketing shares, but why?).

However, that explanation is inconsistent with the decline in WPP’s share price, given that only 12.8% of its 2016 revenue was derived from the UK, but its share price slipped by 1.8% in the month.  The same could be said about shares in Next Fifteen Communications Group, Matomy Media Group and Reach4Entertainment Enterprises, although, with the exception of Next Fifteen, there were clear alternative explanations for their share price decline (see Reach4Entertainment Enterprises makes cautious progress and Restructuring announced at loss-ridden Matomy Media Group).

Shares in Next Fifteen were among the poorest performers in the month, losing 7.3% of their value without any obvious explanation other than the downward distortion of its 2016 results by reason of estimated increases in acquisition related payments that are required to be charged against profits rather than added to the acquisition price (see Acquisition related charges take shine off Next Fifteen’s 32% growth).

Worse still were the price declines in Crossrider shares (down 10.7% as the implications of last year’s loss continued to sink in – see Crossrider loses £10.7m after app retrenchment and Definiti write-down) and in GlobalData shares (down 10.1% after increasing its borrowing facilities – see Global Data agrees bigger bank borrowing package).

On a more cheerful note, Cello Group’s shares rose by 11.1% in the month, followed by shares in dotDigital Group (up 8.3%), Huntsworth (up 8.2%) and The Mission Marketing Group (up 6.9%).

Sector share prices 12May17