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Wednesday, October 19, 2016 10:41:21 AM
Trying to put UCP fianancial data in a wider industry context, I came across Cospirit MediaTrack. This company is the partner agency for Local Planet in France. They provide the same services and, as we have learned from LPM, use the same technology as Tre Kronor Media. Just in another Western European region. The following information comes from April 2016, so it is quite recent:
http://www.cospirit.com/worlds-leading-independent-media-agencies-join-forces-to-form-new-global-media-agency-network-local-planet-horizon-media-the7stars-zertem-communications-group-media-italia-pilot-cosp/?lang=en
There are some interesting information here:
- the company has generated similar growth rates in recent past.
- Cospirit only reports a fraction of the revenues of UCPA (23.96% in 2014; 34% in 2015), yet they employ 2.6 times as many people (105 full time jobs). If we superimpose Cospirit's size of workforce on to UCPA's financials, Cospirit should have approximately 5 million in administrative expenses. In order to maintain just a breakeven, the maximum direct cost of sales that Cospirit can afford is about $8.5m or 62.96% of the exp. 2015 revenues! Anything more would produce a loss for the company. Compare that to the 91% in cost of revenues that UCPA reports. They are world's apart. As if these 2 companies were operating in two entirely different industries and markets.
- Another interesting fact is the ratio of revenues to media billings. Cospirit reports a margin of 3.68% to 5.1% of total media spent as revenues. On the other hand, UCPA reports almost 50% of its media billings as “earned” revenues. For instance, in 2015, TKM Sweden reported 592m in SEK as media billings (which is roughly $70m in USD). Add to that an estimated max $10m USD from TKM Denmark and we get a figure of $80m in media billings for 2015 from UCP fully owned subsidiaries. Howcom and In Sight are irrevelant here because they are treated as equity investments and their revenues do not show up in the UCPA financial statements. That would result in 39.16/80 = 48.9% in revenues-to-billings ratio for UCPA. Compare that to the 4% expected by Cospirit! And yet, UCPA cannot generate a positive cashflow!?
To put the average 4% by Cospirit into perspective, UCPA should be responsible for media billings totaling $975 million (in 2015) to 1,250 million (in 2016).
As a result, I must conclude that revenues reported by UCPA are not of the same "type" as those reported by Cospirit. I suspect that a large part of media billings are classified as revenues. I simply have no other reasonable conclusion for this dramatic difference.
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