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Simplification and innovation

Centaur Media 11 November 2021 Update
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Centaur Media

Simplification and innovation

Capital markets day

Media

11 November 2021

Price

56p

Market cap

£82m

Net cash (£m) as at end September 2021

12.4

Shares in issue

146.9m

Free float

90.5%

Code

CAU

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

10.9

16.7

148.9

Rel (local)

7.2

14.5

110.5

52-week high/low

57p

23p

Business description

Centaur Media is an international provider of business information, training and specialist consultancy for the marketing and legal professions. Its Xeim and The Lawyer business units serve the marketing and legal sectors respectively and, across both, offer customers a wide range of products and services targeted at helping them add value.

Next events

Trading update

January 2022e

Preliminary results

March 2022e

Analysts

Fiona Orford-Williams

+44 (0)20 3077 5739

Max Hayes

+44 (0)20 3077 5700

Centaur Media is a research client of Edison Investment Research Limited

Centaur’s recent capital markets day (CMD) facilitated a deeper dive into the transformation that the group has undergone, with detailed presentations on the underlying businesses by operational management. These underlined the route map towards achieving the goals enshrined in MAP23 – management’s target of revenues of over £45m and an adjusted EBITDA margin of 23% by FY23. We edged up our estimates on the trading update accompanying the CMD and see the MAP23 targets as demanding but achievable, with the valuation overstating the execution risk.

Year end

Revenue
(£m)

PBT*
(£m)

EPS*
(p)

P/E
(x)

EV/EBITDA
(x)

Yield
(%)

12/19

39.6

(1.5)

(1.4)

N/A

15.4

2.7

12/20

32.4

(0.3)

0.2

280.0

18.4

0.9

12/21e

37.5

2.0

0.9

62.2

12.6

1.8

12/22e

42.8

4.2

2.2

25.5

8.8

1.8

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Deeper dive on the business

The CMD highlighted just how far the group has already travelled in its remodelling as a business-critical information and support provider to the legal and marketing professions. Management teams from The Lawyer and from Xeim presented in depth on how their respective businesses are positioning to take best advantage of existing and new opportunities in their markets. They particularly brought out the success to date of the transition to digital delivery and how that is helping to grow the proportion of recurring and repeatable revenues within the mix. Highlights of the divisional presentations, and that of CEO Swag Mukerji, are contained within this report, with the full recording of the session available on the investor relations pages of the company’s website.

Improving quality of earnings

The value being delivered to clients through the use of Centaur’s products and services is becoming much clearer, enhanced by more coherent messaging. The quality of earnings is also increasing as those products and services become more deeply embedded in clients’ workflows, driving recurring and repeatable revenue. It is also clear that there is considerable scope to increase revenue per client. The path to the MAP23 targets is set and the strong balance sheet (with a long-term £10m revolving credit facility also in place) provides further comfort.

Valuation: Still overstating the execution risk

With a further bounce on the trading update, the share price is now up 87% year to date as confidence builds that management will deliver against its MAP23 objectives. Centaur’s valuation remains at a discount to its quoted B2B media peers on EV/EBITDA (averaged over FY20–22 to smooth out the pandemic impact). If this discount were to close, the shares would be priced at 60p (October: 56p), 7% above the current level.

Highlights from the CMD

Centaur has the full recording of the CMD on its website. Below we highlight some of the pertinent elements in shorter form.

Overview of the transformation

In Exhibit 1 CEO Swag Mukerji outlines how the group has been brought into focus through a major simplification process to concentrate on two key markets: law and marketing.

Exhibit 1: Centaur CMD, group overview

Source: Centaur

Focus on the ‘Flagship 4’

The next part of the presentation gave a more thorough exposition on the history, positioning and opportunities of the four key brands identified by management as the key growth drivers to meet the MAP23 objectives.

The Lawyer

In the exhibit below, we show highlights of the presentation by Jane Wilkinson, managing director of The Lawyer, who joined in August 2021, and from Catrin Griffiths, Editor. Jane joined from Euromoney, where she was group chief marketing officer and was particularly focused on driving subscription revenues. In the video, Jane and Catrin identify key trends driving the need for accurate and timely information, who their key clients are and the products and services provided by The Lawyer that best suit their needs.

Exhibit 2: The Lawyer

Source: Centaur

The other three flagship brands fall within the XEIM portfolio and are here presented by Steve Newbold, group managing director, XEIM. To introduce them, he first discusses XEIM (standing for ‘Excellence in Marketing’).

Exhibit 3: XEIM

Source: Centaur

eConsultancy

eConsultancy supports its clients in the fast-changing arena of digital marketing through blended learning, expounded on by Steve in this video.

Exhibit 3: eConsultancy

Source: Centaur

Influencer Intelligence

A more recent innovation, Influencer Intelligence brings together the resources needed for marketers to efficiently deploy influencers within their campaigns.

Exhibit 5: Influencer Intelligence

Source: Centaur

The Marketing Week Mini MBA

Having started as an adjunct to the original print magazine, the Marketing Week Mini MBA has developed as a product and brand in its own right, with potential to extend its remit and to build recurring revenue streams, as explained here.

Exhibit 6: Mini MBA

Source: Centaur

Centaur’s core brands

Steve Newbold here briefly outlines the other important brands within the portfolio and how they deliver value to the group.

Exhibit 7: Core brands

Source: Centaur

Articulating the XEIM proposition

Richard Robinson, the managing director of XEIM Engage, here describes how XEIM is addressing its larger clients and driving cross-selling opportunities.

Exhibit 8: XEIM Engage

Source: Centaur

Financial implications

With the CMD, Centaur issued a trading update guiding to FY21 adjusted EBITDA margin of c 15% compared to our earlier expectation of 13.7%, indicating a more profitable mix of business coupled with good control of the cost base. We updated our forecasts to reflect this (see our update Building margin) and lifted our expectation for the EBITDA margin in FY22e from 18.0% to 18.5%.

Exhibit 4: Financial summary

£m

2019

2020

2021e

2022e

31-December

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

39.6

32.4

37.5

42.8

Other operating income

1.6

0.0

0.0

0.0

Cost of Sales

(9.4)

(7.3)

(10.3)

(12.2)

Gross Profit

30.2

25.1

27.1

30.6

EBITDA

 

 

4.0

3.8

5.6

7.9

Operating profit (before amort. and excepts.)

 

(1.2)

0.0

2.4

4.5

Amortisation of acquired intangibles

(2.5)

(1.5)

(1.1)

(0.5)

Exceptionals

(4.0)

(0.3)

0.0

0.0

Share-based payments

(0.1)

(0.5)

(0.5)

(0.5)

Reported operating profit/ loss

(7.8)

(2.3)

0.8

3.5

Net Interest

(0.3)

(0.3)

(0.3)

(0.3)

Joint ventures & associates (post tax)

0.0

0.0

0.0

0.0

Exceptionals

0.0

0.0

0.0

0.0

Profit Before Tax (norm)

 

 

(1.5)

(0.3)

2.0

4.2

Profit/ Loss Before Tax (reported)

 

 

(8.1)

(2.6)

0.4

3.2

Reported tax

0.6

0.9

(0.6)

(0.7)

Profit After Tax (norm)

(2.0)

0.3

1.4

3.5

Profit After Tax (reported)

(7.5)

(1.7)

(0.2)

2.5

Minority interests

0.0

0.0

0.0

0.0

Discontinued operations

9.4

(12.7)

(0.0)

0.0

Net income (normalised)

0.4

0.4

1.4

3.5

Net income (reported)

1.9

(14.4)

(0.2)

2.5

Average Number of Shares Outstanding (m)

143

144

145

147

EPS - normalised (p)

 

 

(1.4)

0.2

1.0

2.4

EPS - normalised fully diluted (p)

 

 

(1.4)

0.2

0.9

2.2

EPS - basic reported, continuing (p)

 

 

(5.3)

(1.2)

(0.1)

1.7

Dividend per share (p)

1.5

0.5

1.0

1.0

Revenue growth (%)

(2.5)

(15.6)

15.4

14.2

Gross Margin (%)

76.3

77.5

72.4

71.6

EBITDA (IFRS) Margin (%)

10.1

11.7

14.9

18.5

Normalised Operating Margin (%)

(3.0)

0.0

6.3

10.5

BALANCE SHEET

Fixed Assets

 

 

67.4

52.3

50.7

49.3

Intangible Assets

61.2

46.1

45.1

44.5

Tangible Assets

4.3

3.3

3.3

3.3

Deferred tax

1.4

2.4

1.8

1.0

Other receivables

0.5

0.5

0.5

0.5

Current Assets

 

 

19.7

14.3

16.8

20.8

Stocks

0.0

0.0

0.0

0.0

Debtors

10.3

5.8

4.9

5.6

Cash & cash equivalents

9.3

8.3

11.7

15.0

Other

0.1

0.2

0.2

0.2

Current Liabilities

 

 

(23.3)

(17.8)

(19.4)

(20.4)

Creditors

(12.5)

(8.8)

(9.6)

(9.6)

Tax and social security

0.0

0.0

0.0

0.0

Short term borrowings

0.0

0.0

0.0

0.0

Other/ Lease liabilities

(10.8)

(9.0)

(9.8)

(10.8)

Long Term Liabilities

 

 

(2.7)

(1.6)

(0.7)

(0.7)

Long term borrowings

0.0

0.0

0.0

0.0

Other long term liabilities, including leases

(2.7)

(1.6)

(0.7)

(0.7)

Net Assets

 

 

61.1

47.2

47.4

49.1

Minority interests

0.0

0.0

0.0

0.0

Shareholders' equity

 

 

61.1

47.2

47.4

49.1

CASH FLOW

Op Cash Flow before WC and tax

4.5

(0.0)

5.6

7.9

Working capital

2.1

(1.0)

2.6

0.2

Exceptional & other

(2.0)

3.1

0.0

0.0

Tax

0.1

0.0

0.0

0.0

Operating Cash Flow

 

 

4.7

2.1

8.1

8.1

Capex

(1.6)

(0.8)

(0.9)

(1.1)

Acquisitions/disposals

16.3

0.0

0.0

0.0

Net interest

(0.2)

(0.2)

(0.3)

(0.3)

Equity financing

(0.6)

0.0

(0.4)

(0.3)

Dividends

(7.1)

0.0

(1.5)

(1.5)

Other

(2.2)

(2.1)

(1.6)

(1.7)

Net Cash Flow

9.3

(1.0)

3.4

3.3

Opening net debt/(cash)

 

 

(0.1)

(9.3)

(8.3)

(11.7)

FX

0.0

0.0

0.0

0.0

Other non-cash movements

(0.1)

0.0

0.0

0.0

Closing net debt/(cash)

 

 

(9.3)

(8.3)

(11.7)

(15.0)

Source: Centaur Media accounts, Edison Investment Research


General disclaimer and copyright

This report has been commissioned by Centaur Media and prepared and issued by Edison, in consideration of a fee payable by Centaur Media. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Centaur Media and prepared and issued by Edison, in consideration of a fee payable by Centaur Media. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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