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Research: TMT
Centaur’s strategy of focusing on the development its key operations, the Flagship 4, is underpinning group EBITDA levels against a difficult trading backdrop limiting revenue growth potential. Flagship 4 revenues grew by 6% in H1 and now represent 74% of the group, with total H123 revenues down 3% y-o-y as other areas came under greater pressure. The increased proportion of higher-quality revenues in the mix means that the adjusted EBITDA margin should at least achieve the target FY23 level of 23% set in management’s MAP23 plan. Net cash remains strong, £8.8m at end June, post the special dividends paid out in H123, giving good scope for further investment in the core growth areas of business intelligence and learning.
Centaur Media |
Higher-quality revenues support EBITDA growth |
Interim results |
Media |
20 July 2023 |
Share price performance
Business description
Next events
Analyst
Centaur Media is a research client of Edison Investment Research Limited |
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Centaur’s strategy of focusing on the development its key operations, the Flagship 4, is underpinning group EBITDA levels against a difficult trading backdrop limiting revenue growth potential. Flagship 4 revenues grew by 6% in H1 and now represent 74% of the group, with total H123 revenues down 3% y-o-y as other areas came under greater pressure. The increased proportion of higher-quality revenues in the mix means that the adjusted EBITDA margin should at least achieve the target FY23 level of 23% set in management’s MAP23 plan. Net cash remains strong, £8.8m at end June, post the special dividends paid out in H123, giving good scope for further investment in the core growth areas of business intelligence and learning.
Year end |
Revenue |
PBT* |
EPS* |
DPS |
P/E |
Yield** |
12/21 |
39.1 |
3.0 |
2.0 |
1.0 |
25.1 |
2.2 |
12/22 |
41.6 |
5.2 |
2.7 |
1.1 |
17.8 |
2.4 |
12/23e |
41.6 |
7.3 |
3.8 |
1.4 |
13.0 |
3.0 |
12/24e |
44.0 |
8.1 |
4.0 |
1.7 |
12.2 |
3.7 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. **Dividend yield is based on ordinary dividends only.
Backing the winners
Centaur’s Flagship 4 brands are Econsultancy, MW Mini MBA, Influencer Intelligence (all within the Xeim umbrella brand) and The Lawyer. We see plenty of potential for further development of these brands, leveraging internal expertise and existing client relationships as well as from new business. Despite a difficult macro trading environment, price rises have been achieved in the structured products. Additional elements, such as new courses within the MW Mini MBA, are starting to generate revenues, offsetting sluggish conditions elsewhere. The beneficial timing of its major event in June (FY22: July, so H2) lifted The Lawyer’s revenues by 21%. Underlying growth of 1% was more weighted to the higher-margin premium content.
Adjustments to forecasts show margin goal in sight
This is the final year of the MAP23 margin improvement plan, which targets an FY23 adjusted EBITDA margin of 23%. Although we have trimmed our revenue projection to flat year-on-year, we have made only a slight change to adjusted EBITDA to £10.0m (was £10.2m), giving a margin of 24.0%. Lower depreciation and amortisation post a change to the office lease arrangements helped lift our EPS and dividend forecasts, based on a 40% payout ratio. Cash conversion is inherently strong (H123: 115%), boosted by the build in deferred income as the proportion of recurring revenues grows.
Valuation: Continues to be well below peers
The year-to-date share price performances of B2B media peers vary widely, in a range of -71% to +25%, making Centaur (+21%) one of the best performing stocks over the period. Despite this, the valuation on EV/EBITDA remains lower than quoted peers (averaged over FY22–24). If this discount were to close, the shares would be worth 63p (March 2023: 64p), 36% above the current level.
Premium content, training and advisory lead revenue growth
Exhibit 1: Summary H123 results
£m |
Xeim |
% change on prior year |
The Lawyer |
% change on prior year |
Central costs |
% change on prior year |
Total |
% change on prior year |
Premium content |
5.0 |
2% |
2.5 |
11% |
7.6 |
6% |
||
Training & advisory |
7.0 |
5% |
7.0 |
5% |
||||
Events |
0.5 |
-58% |
1.2 |
116% |
1.7 |
-4% |
||
Marketing services |
1.2 |
-22% |
1.2 |
-22% |
||||
Marketing solutions |
0.9 |
-36% |
0.2 |
-32% |
1.1 |
-35% |
||
Recruitment advertising |
0.1 |
-57% |
0.5 |
-3% |
0.6 |
-20% |
||
Total revenue |
14.9 |
-8% |
4.4 |
21% |
19.3 |
-3% |
||
Underlying revenue growth |
-8% |
1% |
-6% |
|||||
Adjusted operating profit |
2.6 |
-7% |
1.6 |
75% |
(1.8) |
-2% |
2.4 |
29% |
Adjusted operating margin |
17% |
H122: 17% |
37% |
H122: 24% |
13% |
H122: 10% |
||
Adjusted EBITDA |
3.4 |
1.8 |
(1.7) |
3.5 |
3% |
|||
Adjusted EBITDA margin |
23% |
H122: 24% |
41% |
H122: 32% |
18% |
H122: 17% |
Source: Centaur Media
Between them, premium content and training and advisory represented 76% of H123 revenues (H122: 70%) and it is within these revenue types that most of the recurring and repeatable income lies. While the revenue is not split out into the individual brands, the proportion generated by the Flagship 4 was 74%, up from 68% in the first half of the prior year and up by 6% in absolute terms (to £14.2m). However, this figure was boosted by the fact that The Lawyer’s important awards event was held this year in June, rather than July (as in FY22). Adjusting for this effect, revenues from the Flagship 4 were flat year-on-year, which is a good result in our view considering the current pressures on spending in the marketing industry.
The brands appear to be negotiating the difficult trading environment well. Econsultancy has increased its renewal rates from 73% to 86% and the multi-touch learning platform is increasing engagement. This was discussed in our recent Edison TV recording with Richard Breeden, managing director (see Exhibit 2).
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Exhibit 2: Edison TV with Econsultancy Managing Director Richard Breeden |
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Source: Edison Investment Research |
With the larger contracts being negotiated, conversion times have lengthened, with the result that some revenue expected to accrue in H123 is now set to come through in H223. H123 revenues were 9% below H122, and we anticipate a stronger H223 with momentum into FY24 in the training and advisory segments. The smaller marketing solutions element remains a tough market but, importantly, remains profitable.
The MW Mini MBA goes from strength-to-strength, with the quality and efficacy of the product helping the implementation (and sticking) of ‘significant’ price increases with only a small reduction in delegate numbers, resulting in a yield increase of 15%. Some of the spring course revenues will accrue in the second half, in addition to all of the autumn course revenues, and we expect that additional courses will be launched in the second half. H123 revenue was 7% ahead of prior year.
Influencer Intelligence continues to operate in a somewhat sluggish market, biased to retail and fashion, but is achieving respectable renewal rates of 81% (down from 86% in H122) and has reportedly had a good recent run of new business wins, which should support H2 results. The book of business at the period end was slightly above prior year, as was revenue.
The core brands that form the balance of Xeim had mixed trading in the half, from a 36% reduction in non-strategic marketing solutions revenues to a strong revenue performance at Oystercatchers (+37%), which advises on marketing agency search and selection for blue-chip clients.
The Lawyer made further good progress building its higher-quality subscription revenue base in both corporate subscriptions (renewal rates of 105% by value) and of Signal (100%), where it offers in-depth strategic insight and competitor benchmarking. The Lawyer’s premium content revenues were up 11%, part offset by more challenged conditions for its marketing solutions offering. The timing of The Lawyer Awards reverted to June this year, rather than July, which has distorted the comparisons. Excluding this impact, revenues were up 1% on H122.
Careful cost management constrained central costs, held level at £1.8m. This has combined to generate an adjusted EBITDA margin of 18%, from 17% in H122. Adjusted operating profit margin rose by a greater extent, from 10% to 13%, reflecting a change to the lease arrangements, which has reduced the depreciation and amortisation charge.
Adjustments to forecasts
Management is guiding to maintained revenue year-on-year, where we had previously been looking for an 8% uplift. This implies H223 revenue growth of 3.4%, which seems eminently reasonable given the additional MW Mini MBA course and spill into the second half of the spring course, together with the Festival of Marketing scheduled for October and back to a full programme of content. We have adjusted our FY23 revenue estimate down from £45.0m to £41.6m, as now guided.
Importantly, the outlook statement indicates that management expects to achieve an adjusted EBITDA margin of at least 23%, in line with the MAP23 plan, and adjusted EBITDA of over £10.0m. We have set our adjusted EBITDA forecast at this level, from £10.2m, with an upwards revision in adjusted operating profit falling through to higher EPS of 3.8p, from 3.3p, as the reduced lease costs and resultant adjustment to the interest charge (now a small net positive) are reflected.
For FY24, we have lowered our revenue expectations from £47.7m to £44.0m and make a small trim to our adjusted EBITDA estimate, at £10.6m (was £10.9m), equating to a margin of 24.1%. At the EPS level, this gives a figure of 4.0p, from 4.1p. Our dividend forecast is now 1.7p, up from 1.4p.
Cash position and generation remain strong
Cash at the end of June was £8.8m, with only lease debt (£2.4m, down from £3.4m at end H122) on the balance sheet. Conversion in the first half was 115% and we would expect this figure to remain strong given the continuing shift towards subscription income in the mix.
The group paid dividends totalling £8.0m in the period, being the final from FY22 (0.6p per share) and two special dividends (3.0p per share in February and a further 2.0p per share in March). Management’s view was that the earlier build in cash had left the group with more cash resource than necessary to run the business, invest to the degree needed to support organic growth and provide a working capital buffer. Our year-end forecast is now for net cash of £12.8m (from £12.8m), rising to £17.4m by end FY24.
Valuation
The UK B2B media peers are diverse in size, geographic exposure and business model. Those with more of a tech bias have suffered from the derating and rotation away from the adtech sector. Following the purchase of Hyve by private equity, we have replaced it in the peer cohort with Informa, which, although considerably larger, has some comparable operations. Due to the variance in performance, we use the median rather than the arithmetic mean for our calculation.
Exhibit 3: Peer valuations
Current price (p) |
Market cap (£m) |
Ytd performance (%) |
EV/sales 1FY (x) |
EV/EBITDA FY0 (x) |
EV/EBITDA 1FY (x) |
EV/EBITDA 2FY (x) |
P/E 0FY |
P/E 1FY |
P/E 2FY |
|
Wilmington |
273.0 |
242 |
-14 |
1.9 |
6.8 |
7.9 |
7.3 |
6.2 |
13.6 |
12.7 |
Ebiquity |
46.5 |
64 |
-6 |
0.9 |
5.7 |
4.9 |
4.2 |
9.7 |
7.9 |
6.3 |
Merit Group |
42.5 |
10 |
25 |
1.0 |
8.3 |
8.7 |
6.4 |
17.7 |
||
Kin and Carta |
61.7 |
112 |
-71 |
0.7 |
15.1 |
6.8 |
6.0 |
10.3 |
9.0 |
|
Informa |
735.0 |
10,283 |
17 |
3.6 |
16.1 |
12.5 |
10.5 |
65.6 |
18.5 |
15.3 |
Relx |
2,547.0 |
47,770 |
11 |
6.0 |
16.5 |
15.9 |
14.8 |
27.0 |
22.9 |
20.9 |
Ascential |
221.0 |
986 |
10 |
2.2 |
11.0 |
9.6 |
8.5 |
21.0 |
21.5 |
13.6 |
Average |
-4.0 |
2.3 |
11.4 |
9.5 |
8.2 |
25.9 |
15.8 |
13.6 |
||
Median |
9.5 |
1.9 |
11.0 |
8.7 |
7.3 |
21.0 |
16.0 |
13.6 |
||
Centaur Media |
46.5 |
68.5 |
20.5 |
1.4 |
7.0 |
5.9 |
5.6 |
17.8 |
13.0 |
12.2 |
Source: Refinitiv, Edison Investment Research. Note: Prices as at 17 July 2023.
Based on EV/sales for the current year and EV/EBITDA for FY22–24, the share price implied for parity with peers would be 63.2p, a shade below the 64.2p we quoted in March, reflecting the intervening share price movements but still 36% ahead of the current level.
Exhibit 4: Financial summary
£m |
2021 |
2022 |
2023e |
2024e |
||
31-December |
IFRS |
IFRS |
IFRS |
IFRS |
||
INCOME STATEMENT |
||||||
Revenue |
|
|
39.1 |
41.6 |
41.6 |
44.0 |
Other operating income |
0.0 |
0.0 |
0.0 |
0.0 |
||
Cost of Sales |
(10.9) |
(11.2) |
(10.8) |
(11.3) |
||
Gross Profit |
28.3 |
30.4 |
30.9 |
32.6 |
||
EBITDA |
|
|
6.4 |
8.5 |
10.0 |
10.6 |
Operating profit (before amort. and excepts.) |
|
|
3.2 |
5.3 |
7.2 |
8.0 |
Amortisation of acquired intangibles |
(1.1) |
(0.5) |
(0.1) |
(0.1) |
||
Exceptionals |
(0.0) |
(0.1) |
0.0 |
0.0 |
||
Share-based payments |
(0.5) |
(0.8) |
(1.2) |
(1.2) |
||
Reported operating profit/ loss |
1.6 |
3.9 |
5.9 |
6.7 |
||
Net Interest |
(0.3) |
(0.1) |
0.1 |
0.1 |
||
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) |
|
|
3.0 |
5.2 |
7.3 |
8.1 |
Profit/ Loss Before Tax (reported) |
|
|
1.4 |
3.8 |
6.0 |
6.8 |
Reported tax |
0.1 |
(1.0) |
(1.5) |
(1.8) |
||
Profit After Tax (norm) |
2.8 |
3.9 |
5.5 |
5.9 |
||
Profit After Tax (reported) |
1.4 |
2.8 |
4.5 |
5.0 |
||
Minority interests |
0.0 |
0.0 |
0.0 |
0.0 |
||
Discontinued operations |
0.0 |
0.0 |
0.0 |
0.0 |
||
Net income (normalised) |
2.8 |
3.9 |
5.5 |
5.9 |
||
Net income (reported) |
1.4 |
2.8 |
4.5 |
5.0 |
||
Average Number of Shares Outstanding (m) |
145 |
144 |
147 |
147 |
||
EPS - normalised (p) |
|
|
2.0 |
2.7 |
3.8 |
4.0 |
EPS - normalised fully diluted (p) |
|
|
1.9 |
2.6 |
3.6 |
3.8 |
EPS - basic reported, continuing (p) |
|
|
1.0 |
1.9 |
3.1 |
3.4 |
Ordinary dividend per share (p) |
1.0 |
1.1 |
1.4 |
1.7 |
||
Revenue growth (%) |
19.5 |
6.4 |
(0.0) |
5.7 |
||
Gross Margin (%) |
72.2 |
73.1 |
74.1 |
74.2 |
||
EBITDA (IFRS) Margin (%) |
16.4 |
20.4 |
24.0 |
24.1 |
||
Normalised Operating Margin (%) |
8.3 |
12.7 |
17.2 |
18.2 |
||
BALANCE SHEET |
||||||
Fixed Assets |
|
|
49.6 |
45.9 |
48.4 |
48.3 |
Intangible Assets |
44.3 |
43.8 |
44.0 |
44.3 |
||
Tangible Assets |
2.5 |
0.4 |
2.1 |
2.9 |
||
Deferred tax |
2.5 |
1.7 |
1.9 |
0.7 |
||
Other receivables |
0.3 |
0.0 |
0.5 |
0.5 |
||
Current Assets |
|
|
19.3 |
21.5 |
18.6 |
23.5 |
Stocks |
0.0 |
0.0 |
0.0 |
0.0 |
||
Debtors |
6.1 |
5.4 |
5.7 |
6.0 |
||
Cash & cash equivalents |
13.1 |
16.0 |
12.8 |
17.4 |
||
Other |
0.2 |
0.2 |
0.1 |
0.1 |
||
Current Liabilities |
|
|
(21.1) |
(18.5) |
(20.6) |
(21.5) |
Creditors |
(11.4) |
(9.7) |
(9.2) |
(9.7) |
||
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 |
(9.7) |
(8.9) |
(11.4) |
(11.8) |
||
Long Term Liabilities |
|
|
(0.6) |
(0.0) |
(1.6) |
(1.6) |
Long term borrowings |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other long term liabilities, including leases |
(0.6) |
(0.0) |
(1.6) |
(1.6) |
||
Net Assets |
|
|
47.1 |
48.8 |
44.9 |
48.8 |
Minority interests |
0.0 |
0.0 |
0.0 |
0.0 |
||
Shareholders' equity |
|
|
47.1 |
48.8 |
44.9 |
48.8 |
CASH FLOW |
|
|||||
Operating Cash Flow |
6.4 |
8.5 |
9.7 |
10.3 |
||
Working capital |
3.2 |
0.1 |
0.8 |
0.6 |
||
Exceptional & other |
(0.1) |
(0.2) |
(0.2) |
(0.1) |
||
Tax |
0.0 |
(0.0) |
(1.5) |
(0.6) |
||
Operating Cash Flow |
|
|
9.5 |
8.4 |
8.8 |
10.1 |
Capex |
(0.8) |
(1.4) |
(1.6) |
(1.7) |
||
Acquisitions/disposals |
0.0 |
0.0 |
0.0 |
0.0 |
||
Net interest |
(0.1) |
(0.0) |
0.1 |
0.1 |
||
Equity financing |
(0.3) |
(0.6) |
(0.6) |
(0.6) |
||
Dividends |
(1.4) |
(1.4) |
(8.8) |
(2.3) |
||
Other |
(2.1) |
(2.2) |
(1.1) |
(1.1) |
||
Net Cash Flow |
4.8 |
2.8 |
(3.2) |
4.6 |
||
Opening net debt/(cash) |
|
|
(8.3) |
(13.1) |
(16.0) |
(12.8) |
FX |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other non-cash movements |
0.0 |
0.1 |
0.0 |
0.0 |
||
Closing net debt/(cash) |
|
|
(13.1) |
(16.0) |
(12.8) |
(17.4) |
Source: Company accounts, Edison Investment Research
|
|
Research: TMT
Esker continued to make good progress in Q223, with constant currency (cc) year-on-year revenue growth of 15% (the same as in Q123). Order intake on an annual recurring revenue (ARR) basis was 14% higher cc for Q223 and 18% higher for H123. The company narrowed its organic cc revenue growth guidance for FY23 to the upper end of the previous range (now 14–15%) and maintained its operating margin expectations. We maintain our revenue and EPS forecasts and raise our dividend forecasts.