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Reworld Media — Digital progress and momentum

Reworld Media — Digital progress and momentum

Reworld Media has posted strong preliminary FY16 numbers, with EBITDA of €4.4m – well ahead of earlier guidance of around €3.3m and our estimate of €3.5m. This demonstrates the positive impact of the strategy to grow the digital aspects of the media brands and the improving performance of TradeDoubler. Our FY17 and FY18 forecasts are broadly unchanged and show a continuing positive trajectory as the brands gain traction. The market valuation is at an 18% discount to peers, more on a DCF basis.

Fiona Orford-Williams

Written by

Fiona Orford-Williams

Director, TMT

Reworld Media

Digital progress and momentum

Preliminary results

Media

30 March 2017

Price

€2.20

Market cap

€70m

€0.10/SEK

Net cash (£m) as at 31 December 2016

0.7

Shares in issue

31.9m

Free float

24%

Code

ALREW

Primary exchange

Euronext

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

5.8

80.2

127.1

Rel (local)

1.7

71.5

95.8

52-week high/low

€2.8

€0.8

Business description

Reworld Media is a digital media group that combines well-recognised media brands (with on- and offline presence) and ad tech digital performance marketing.

Next events

Interims

Estimated October 2017

Analysts

Fiona Orford-Williams

+44 (0)20 3077 5739

Bridie Barrett

+44 (0)20 3077 5700

Reworld Media is a research client of Edison Investment Research Limited

Reworld Media has posted strong preliminary FY16 numbers, with EBITDA of €4.4m – well ahead of earlier guidance of around €3.3m and our estimate of €3.5m. This demonstrates the positive impact of the strategy to grow the digital aspects of the media brands and the improving performance of TradeDoubler. Our FY17 and FY18 forecasts are broadly unchanged and show a continuing positive trajectory as the brands gain traction. The market valuation is at an 18% discount to peers, more on a DCF basis.

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

12/14

48.0

(2.9)

(11.8)

0.0

N/A

N/A

12/15

60.2

0.0

0.0

0.0

N/A

N/A

12/16

174.0

0.9

0.4

0.0

550.0

N/A

12/17e

186.3

3.1

5.7

0.0

38.6

N/A

12/18e

196.5

8.1

13.8

0.0

15.9

N/A

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

Progress across brands and performance

Both media brands and media performance (described in our initiation note) contributed positively to the FY16 headline results. Across the business, digital now accounts for 71% of revenues. Digital revenues within media branding grew by 30% year-on-year and now account for 17% of the segment (FY15: 13%), with this growth sufficient to offset the 4% decline in print sales. The digital element of media brands moved EBITDA positive, delivering a 5% margin for FY16, while the print margin slid from 5% to 4%, reflecting the industry decline in print advertising revenues. Media performance, in the form of TradeDoubler, is showing the first benefits from the earlier realignment of costs, moving back into profit in H216. The moves to broaden the technical aspects of the offer to include greater levels of targeting and retargeting should help lift the achievable gross margin. TradeDoubler has also helped drive the group’s internationalisation, with over half of revenues now generated outside France, with the UK the second largest market.

Forecasts broadly unchanged

Our model has been updated to reflect the headline numbers and the full detail on the balance sheet will be folded in when the accounts are published. Year-end net cash was €0.7m. Our FY17 and FY18 forecasts are broadly unchanged and the intended acquisition of Sporever will be included on completion. This asset will add another strong and complementary vertical – sport – to the media brand portfolio.

Valuation: Meaningful upside

In our recent initiation report, we valued the group on both a sum-of-the-parts (based on EV/EBITDA and EV/gross profit) and a DCF basis. Using the same approach and reflecting pricing changes to peer comparatives in the intervening period, the sum-of-the-parts calculation is now 10% higher at €2.56 (from €2.32). Repeating the previous DCF exercise, if Reworld can reach industry-average margins of 18% in the medium term, then a share price of €3.11 is justified. The current share price implies that the EBITDA margin will only reach c 12%.

Progress across digital

Exhibit 1: Revenue by activity

Exhibit 2: EBITDA by activity

Source: Reworld Media accounts, Edison Investment Research

Source: Reworld Media accounts, Edison Investment Research

Exhibit 1: Revenue by activity

Source: Reworld Media accounts, Edison Investment Research

Exhibit 2: EBITDA by activity

Source: Reworld Media accounts, Edison Investment Research

As explained in our recent note, the media brand strategy involves taking media assets that had good recognition and/or market positioning but had not been invested to make the digital transition. Reworld is showing that that this type of proposition can demonstrate good levels of growth and increasing profitability with the right support. The digital reach of the acquired brands under Reworld’s curation is moving ahead strongly. Mobile and desktop reach (average monthly audience) has reached 10m from a standing start just two years ago, with 7.4 pages viewed per visit, with around 2.25m average monthly interactions on social media. The investment in video content is also proving valuable. A library of over 6,000 videos achieved average monthly views of around 7m.

The extent of this reach and the specific attractions of the target audiences, gleaned from the data trails left behind them, make Reworld an increasingly attractive partner for advertisers. With the earlier rebasing of costs, the potential to grow the profitability from this activity is considerable.

TradeDoubler growing its toolset

For the media performance, the focus is clearly on growing the higher-margin revenue streams as well as on more straightforward geographic expansion, such as the recent extension to Asia. Partnerships have been set up with Avazu for mobile, AppNexus on display and DynAdmic for video. The retargeting offering was launched in the UK and in Germany during the year. As a results of these actions, gross margin steadily ticked up across FY16: 21.7% in Q1; 22.0% in Q2; 22.4% in Q3; and 22.7% in Q4. There were €5.6m of operational cost savings realised in FY16, with the benefit to come through more fully in FY17 and FY18, as shown in Exhibit 2 above.

Exhibit 3: Financial summary

Accounts: IFRS, Year-end: December; €m

 

2014

2015

2016a/e

2017e

2018e

Profit & loss statement

Total revenues

 

48.0

60.2

174.0

186.3

196.5

Total cash operating cost

 

(50.1)

(59.7)

(169.6)

(177.8)

(182.7)

Exceptionals and adjustments

0.0

0.0

0.0

0.0

0.0

Depreciation and amortisation

 

(0.8)

(1.0)

(3.2)

(4.0)

(4.5)

Reported EBIT

 

(2.8)

0.1

1.1

4.5

9.3

Finance income/(expense)

 

(0.1)

(0.1)

(0.2)

(1.4)

(1.2)

Other income/(expense)

 

0.0

0.0

0.0

0.0

0.0

Exceptionals and adjustments

(2.3)

3.6

(6.7)

0.0

0.0

Reported PBT

 

(5.2)

3.6

(5.8)

3.1

8.1

Income tax expense (includes exceptionals)

 

(0.0)

(0.0)

(0.8)

(1.0)

(2.8)

Reported net income

 

(5.2)

3.6

(6.6)

2.2

5.3

Basic average number of shares, m

 

24.4

33.4

38.5

38.5

38.5

Basic EPS (c)

 

(0.2)

0.1

(0.2)

0.1

0.2

 

 

 

 

 

 

 

Adjusted EBITDA

 

(2.0)

1.1

4.4

8.5

13.8

Adjusted EBIT

 

(2.8)

0.1

1.1

4.5

9.3

Adjusted PBT

 

(2.9)

0.0

0.9

3.1

8.1

Adjusted EPS, c

 

(11.8)

(0.0)

0.4

6.5

16.0

Adjusted diluted EPS, c

 

(11.8)

(0.0)

0.4

5.7

13.8

 

 

 

 

 

 

 

Balance sheet

 

Property, plant and equipment

 

0.7

0.7

1.1

1.1

1.1

Goodwill

 

0.3

0.1

24.8

24.8

24.8

Intangible assets

 

0.3

0.6

6.0

7.0

7.5

Other non-current assets

 

0.8

18.2

5.1

5.1

5.1

Total non-current assets

 

1.9

19.6

36.9

37.9

38.4

Cash and equivalents

 

12.6

13.6

28.6

28.8

34.7

Inventories

 

1.1

1.0

0.3

0.3

0.3

Trade and other receivables

 

22.9

25.0

57.1

51.0

43.1

Other current assets

 

0.7

1.2

3.2

3.2

3.2

Total current assets

 

37.3

40.8

89.2

83.3

81.3

Non-current loans and borrowings

 

0.0

0.0

0.0

0.0

0.0

Other non-current liabilities

 

12.2

10.6

4.2

4.2

4.2

Total non-current liabilities

 

12.2

10.6

4.2

4.2

4.2

Trade and other payables

 

23.0

31.4

78.5

71.4

64.6

Current loans and borrowings

 

0.0

2.3

27.9

27.9

27.9

Other current liabilities

 

5.5

6.9

6.9

6.9

6.9

Total current liabilities

 

28.6

40.7

113.4

106.2

99.4

Equity attributable to company

 

(1.6)

9.1

11.8

8.6

16.2

Non-controlling interest

 

0.0

0.0

(3.2)

(2.3)

0.0

 

 

 

 

 

 

 

Cash flow statement

 

Profit for the year

 

(5.2)

3.6

(6.6)

2.2

5.3

Depreciation and amortisation (incl. acquired intangibles)

 

(3.4)

(6.7)

3.5

4.0

4.5

Share based payments

 

0.0

0.0

0.0

0.0

0.0

Other adjustments

 

(1.8)

(3.6)

6.4

0.0

0.0

Movements in working capital

 

(2.4)

1.4

(2.0)

(1.0)

1.1

Interest paid / received

 

0.0

0.0

0.0

0.0

0.0

Income taxes paid

 

0.0

0.0

0.0

0.0

0.0

Cash from operations (CFO)

 

(12.8)

(5.3)

1.4

5.2

11.0

Capex

 

(1.0)

(0.1)

(3.9)

(5.0)

(5.0)

Acquisitions & disposals net

 

19.6

0.1

22.9

0.0

0.0

Other investing activities

 

(0.2)

(12.2)

(4.3)

0.0

0.0

Cash used in investing activities (CFIA)

 

18.5

(12.2)

14.7

(5.0)

(5.0)

Net proceeds from issue of shares

 

2.6

7.2

(0.3)

0.0

0.0

Movements in debt

 

0.0

11.3

(0.6)

0.0

0.0

Other financing activities

 

(0.0)

(0.0)

(0.2)

0.0

0.0

Cash from financing activities (CFF)

 

2.5

18.5

(1.0)

0.0

0.0

Currency translation differences and other

 

0.0

0.0

0.0

0.0

0.0

Increase/(decrease) in cash and equivalents

 

8.2

1.0

15.0

0.2

6.0

Currency translation differences and other

 

0.0

0.0

0.0

0.0

0.0

Cash and equivalents at end of period

 

12.6

13.6

28.6

28.8

34.7

Net (debt) cash

 

12.6

11.3

0.7

0.9

6.9

Movement in net (debt) cash over period

 

12.6

(1.3)

(10.5)

0.2

6.0

Source: Reworld Media accounts, Edison Investment Research. Note: 2016 figures have been updated where available; full details will be incorporated post publication of the accounts.

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Reworld Media and prepared and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and 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 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. This document is provided 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. Edison has a restrictive policy relating to personal dealing. 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. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. 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. 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 (ie 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. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, 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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Reworld Media and prepared and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and 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 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. This document is provided 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. Edison has a restrictive policy relating to personal dealing. 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. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. 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. 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 (ie 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. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, 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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Immunovia — Final top-line IMMray data in Lupus, FY16 results

Immunovia has announced final top-line data of the IMMray platform from a retrospective study in autoimmune diseases. The study showed that the IMMray biomarker platform could differentiate blood samples from patients with systemic lupus erythematosus (SLE) from other autoimmune diseases with 96% accuracy. This is an important first step to show the versatility and potential expansion of the IMMray technology to other indications. Immunovia’s main focus continues to be pancreatic cancer in high-risk individuals and newly diagnosed diabetic patients. Additionally, the company has reported full year 2016 financial results. Cash at end 2016 was SEK259m; we have updated our valuation to SEK151 per share.

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