Centaur Media — MAP23 plan delivers a higher-quality business

Centaur Media (LSE: CAU)

Last close As at 22/05/2024

GBP0.40

0.00 (0.00%)

Market capitalisation

GBP59m

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Research: TMT

Centaur Media — MAP23 plan delivers a higher-quality business

Centaur’s FY23 results mark the end of its MAP23 margin acceleration plan, with the adjusted EBITDA margin more than doubling over its three-year course to 26%, ahead of the original 23% target. This is despite an unhelpful economic backdrop with extended pressure on corporate marketing budgets. Centaur’s strategy for the next period will be outlined on 23 April at a capital markets day, at which time we will extend our forecast horizon to FY25. We expect the new plan to enhance the business model, rather than rethink it. FY23 results were in line with January’s update, with a greater uplift in dividend, putting the shares on a sub-market rating and a premium yield.

Fiona Orford-Williams

Written by

Fiona Orford-Williams

Director, TMT

TMT

Centaur Media

MAP23 plan delivers a higher-quality business

FY23 results

Media

13 March 2024

Price

40p

Market cap

£59m

Net cash (£m) at 31 December 2023

9.5

Shares in issue (excluding 4.55m held in treasury)

146.86m

Free float

90.84%

Code

CAU

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

8.1

1.3

(23.8)

Rel (local)

5.8

(1.7)

(23.9)

52-week high/low

53p

36p

Business description

Centaur Media is an international provider of business intelligence, learning 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 event

Capital markets day

23 April 2024

Analyst

Fiona Orford-Williams

+44 (0)20 3077 5739

Centaur Media is a research client of Edison Investment Research Limited

Centaur’s FY23 results mark the end of its MAP23 margin acceleration plan, with the adjusted EBITDA margin more than doubling over its three-year course to 26%, ahead of the original 23% target. This is despite an unhelpful economic backdrop with extended pressure on corporate marketing budgets. Centaur’s strategy for the next period will be outlined on 23 April at a capital markets day, at which time we will extend our forecast horizon to FY25. We expect the new plan to enhance the business model, rather than rethink it. FY23 results were in line with January’s update, with a greater uplift in dividend, putting the shares on a sub-market rating and a premium yield.

Year end

Revenue (£m)

Adj EBITDA*
(£m)

EPS*
(p)

DPS**
(p)

P/E
(x)

Yield
(%)

12/21

39.1

6.4

2.0

1.0

20.0

2.5

12/22

38.4

8.1

3.1

1.1

12.9

2.8

12/23

37.3

9.7

4.4

1.8

9.1

4.5

12/24e

39.2

9.8

4.3

1.8

9.3

4.5

Note: Adj EBITDA and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. **DPS excludes special dividends.

Focus on business intelligence and learning

Premium Content and Training & Advisory now constitute 80% of group revenues, up from 67% at the start of the MAP23 plan, and it is in these areas that Centaur is best placed to win and retain higher-quality recurring and repeatable income streams. While overall revenues were slightly down (-4%) at Xeim, the division addressing the marketing services sector, this was attributable to smaller-scale activities (Events, Marketing Solutions and Recruitment). Xeim’s adjusted operating margin rose from 19.2% to 25.7%, while at The Lawyer, the gain was from 29.8% to 36.1%. Central costs were down 13% following a review of overheads and two smaller businesses within the portfolio have been closed. For FY24, our estimates now project a 5% group revenue uplift (was 7%). We are relatively cautious on margin, given the current trading environment with constrained corporate budgets.

Strong balance sheet provides growth capital

Centaur ended the year with net cash and short-term deposits of £9.5m, with modest lease debt only. This is despite having paid out £8.9m to shareholders in dividends over the year. With an inherently cash generative business model and a normal payout ratio of around 40%, this gives plenty of firepower to drive the next phase of the group’s development. Prioritisation of capital allocation within the new plan should become clearer after the capital markets day in April.

Valuation: Trading below peers

Centaur’s shares continue to trade at a discount to the median rating of business-to-business (B2B) media peers, with a clear scale advantage evident across sector ratings. Were the discount, averaged across FY23–24, to close, Centaur’s shares would be valued at 68p, ahead of the 64p that a similar exercise implied in January and well ahead of the current share price.

Flagship brands bring focus

The MAP23 plan targeted £45m of revenue and an adjusted EBITDA margin of at least 23% for FY23 through focusing the group’s efforts on the four flagship brands: Econsultancy, MW Mini MBA, Influencer Intelligence (all under the Xeim umbrella branding, addressing the needs of the marketing services sector) and The Lawyer (catering for the legal sector).

By investing in enhanced product offerings and driving digital within the mix, the aim has been to sell more to the existing customer base and to grow the overall reach.

Shifts in the underlying marketplace and the general economic backdrop throughout the COVID pandemic, and the rebuild thereafter, made achieving the initial revenue target too much of a stretch, particularly given business divestments and closures of some of the smaller operations.

Strongest growth at Premium Content

Exhibit 1: Summary results by activity

Xeim

% change

The Lawyer

% change

Central

% change

Total

% change

Premium Content

10.0

0%

5.2

9%

15.2

55%

Training & Advisory

14.9

3%

14.9

3%

Events

2.1

-18%

1.8

-11%

3.9

-15%

Marketing Solutions

1.9

-33%

0.4

-25%

2.3

-32%

Recruitment Advertising

0.1

-59%

1.0

1%

1.1

-11%

Total revenue

29.0

-4%

8.4

1%

37.3

-3%

Adjusted operating profit

7.4

-7%

3.0

75%

-2.9

-2%

7.6

54%

Adjusted operating margin

26%

36%

20%

Adjusted EBITDA

9.7

19%

Adjusted EBITDA margin

26%

Source: Company accounts. Note: May not cast due to rounding.

Econsultancy’s activities largely comprise Premium Content and Training & Advisory, with smaller elements of Events and Marketing Solutions. The group has been focusing on upgrading the eLearning content and adding additional courses, which are largely sold to an international blue-chip client base. The emphasis is on improving cross-selling and providing compelling content to improve renewal rates. Revenue was down 14%, ascribed to the trading backdrop for Training & Advisory making lead conversion a slow process. Given gradual rebuilding in consumer confidence translating into a brighter corporate outlook, we would expect the revenue line to pick up as the pipeline converts, although this may be skewed to H224 and into FY25.

At MW Mini MBA, revenue growth was 8%, despite a dip in delegate numbers, due to improvements in the pricing structure driving better yields. A third course, the MW Mini MBA in Management (aimed at equipping marketing professionals with essential boardroom skills) was launched in September. The group is concentrating on growing its geographic reach and commercial customer base and there obviously would be further brand extensions that could be offered to the growing pool of alumni within those corporate customers.

The market background for Influencer Intelligence improved as the year progressed, with renewal rates for the full year of 84% ahead of the position at the half year (81%). This area is only starting to find its feet after the impact of COVID but has a high proportion of the higher-quality revenue streams in Premium Content.

All of the Xeim brands are focused on supplying the UK’s top 200 marketing spend companies and, increasingly, blue-chip multinationals.

At The Lawyer, corporate subscription renewal rates of 108% indicate that cross- and up-selling are having the desired impact, particularly with the launch of the data-driven subscription products, Signal and Litigation Tracker. The expectation is that once clients embed these in their workflows, they will prove very sticky. Overall segmental revenue progress would have been better but for a relatively weak performance in sponsorship for Events (revenues down 11%), which we understand to be significantly improved for the current year.

Plans for FY24 at The Lawyer include new categories of content, a new digital platform for subscribers, the launch of a proprietary data-driven subscription intelligence service and additional events, all targeted at the UK and international markets.

Significant cash resources

Centaur ended the year with cash of £2.0m and short-term deposits of £7.5m, down from a combined total of £16m at end FY22. The group paid out a special dividend of 3.0p in February and a further 2.0p in March. Along with the prior year final ordinary dividend and the FY23 interim dividend, this gave a return to shareholders of £8.9m in dividends during the year. The group carries a small amount of lease debt only and no bank debt.

Capital expenditure of £2.1m was higher than the prior year (£1.4m) and the group also paid cash tax of £1.6m.

Our modelling derives an end-FY24 figure of £12.4m cash and short-term deposits, giving plenty of scope for investment in the business alongside ordinary dividends.

Although the new strategic plan remains under wraps for now, the core objective is for Centaur to be ‘a customer-centric business intelligence and learning organisation’, through internal investment in new product development and through acquisition, which has not been a recent feature of the group.

Valuation remains well below market

Exhibit 2: Peer valuations

Current price (ccy value)

Market cap (£m)

ytd perf (%)

EV/sales 1FY (x)

EV/EBITDA FY0 (x)

EV/EBITDA 1FY (x)

EV/EBITDA 2FY (x)

P/E 0FY (x)

P/E 1FY (x)

P/E 2FY (x)

Wilmington

357.0

321

8

2.3

10.7

9.8

9.3

12.4

16.1

14.9

Ebiquity

37.0

51

14

0.8

4.8

4.2

3.8

7.1

6.1

5.0

Merit Group

63.5

15

(3)

1.0

5.5

5.0

17.9

12.3

Kin and Carta

128.4

229

(3)

1.3

11.4

10.8

8.3

18.3

11.9

Informa

801.2

10,980

3

3.7

13.4

12.1

10.7

26.2

16.2

14.2

Relx

3,360.0

63,440

8

7.2

19.6

18.5

17.4

33.2

27.7

25.3

Ascential

300.0

1,350

2

2.5

12.3

10.7

9.7

25.8

19.1

16.6

Average

4.0

2.7

11.1

10.2

9.9

20.4

16.5

14.6

Median

2.6

2.3

11.4

10.7

9.5

21.8

16.2

14.5

Centaur Media

40.0

59.0

(14.0)

1.3

6.1

5.1

5.0

13.4

9.6

9.8

Source: LSEG. Note: Prices as at 11 March 2024.

Centaur’s valuation continues to be well below peers across the relevant metrics. Our February MediaWatch publication showed it trading at a 77% discount to its own long-term average EV/EBITDA multiple.

Were Centaur to trade at par with other UK-based B2B media companies on FY23–24 multiples, the share price would be 68p, well above the current 40p.

Exhibit 3: Financial summary

£m

2021

2022

2023

2024e

31-December

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

39.1

38.4

37.3

39.2

Other operating income

0.0

0.0

0.0

0.0

Cost of Sales

(10.9)

(14.1)

(13.7)

(14.2)

Gross Profit

28.3

24.2

23.6

25.0

EBITDA

 

 

6.4

8.1

9.7

9.8

Operating profit (before amort. and excepts.)

 

 

3.2

6.0

7.6

7.7

Amortisation of acquired intangibles

(1.1)

(0.5)

(0.1)

(0.1)

Exceptionals

(0.0)

(0.1)

(0.4)

0.0

Share-based payments

(0.5)

(0.8)

(1.1)

(1.1)

Reported operating profit/ loss

1.6

4.5

6.1

6.5

Net Interest

(0.3)

(0.1)

0.0

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

5.9

7.6

7.8

Profit/ Loss Before Tax (reported)

 

 

1.4

4.5

6.1

6.6

Reported tax

0.1

(1.2)

(0.8)

(1.6)

Profit After Tax (norm)

2.8

4.4

6.4

6.2

Profit After Tax (reported)

1.4

3.3

5.3

5.1

Minority interests

0.0

0.0

0.0

0.0

Discontinued operations

0.0

0.2

(0.5)

0.0

Net income (normalised)

2.8

4.4

6.3

5.9

Net income (reported)

1.4

3.5

4.9

5.4

Average Number of Shares Outstanding (m)

145

144

144

144

EPS - normalised (p)

 

 

2.0

3.1

4.4

4.3

EPS - normalised fully diluted (p)

 

 

1.9

3.0

4.2

4.1

EPS - basic reported, continuing (p)

 

 

1.0

2.3

3.7

3.5

Ordinary dividend per share (p)

1.0

1.1

1.8

1.8

Revenue growth (%)

19.5

(1.9)

(2.7)

5.0

Gross Margin (%)

72.2

63.1

63.3

63.7

EBITDA (IFRS) Margin (%)

16.4

21.1

25.9

25.0

Normalised Operating Margin (%)

8.3

15.5

20.4

19.7

BALANCE SHEET

Fixed Assets

 

 

49.6

45.9

49.3

49.3

Intangible Assets

44.3

43.8

44.7

45.1

Tangible Assets

2.5

0.4

2.2

3.0

Deferred tax

2.5

1.7

2.2

0.7

Other receivables

0.3

0.0

0.2

0.5

Current Assets

 

 

19.3

21.5

14.9

18.1

Stocks

0.0

0.0

0.0

0.0

Debtors

6.1

5.4

5.1

5.4

Cash & cash equivalents

13.1

16.0

9.4

12.4

Other

0.2

0.2

0.4

0.4

Current Liabilities

 

 

(21.1)

(18.5)

(17.9)

(18.9)

Creditors

(11.4)

(9.7)

(8.6)

(9.2)

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)

(9.3)

(9.8)

Long Term Liabilities

 

 

(0.6)

(0.0)

(1.3)

(1.3)

Long term borrowings

0.0

0.0

0.0

0.0

Other long term liabilities, including leases

(0.6)

(0.0)

(1.3)

(1.3)

Net Assets

 

 

47.1

48.8

45.0

47.2

Minority interests

0.0

0.0

0.0

0.0

Shareholders' equity

 

 

47.1

48.8

45.0

47.2

CASH FLOW

Operating Cash Flow

6.4

9.2

10.3

10.6

Working capital

3.2

0.1

(1.6)

0.7

Exceptional & other

(0.1)

(0.9)

(1.4)

(1.6)

Tax

0.0

(0.0)

(1.6)

(0.3)

Operating Cash Flow

 

 

9.5

8.4

5.7

9.4

Capex

(0.8)

(1.4)

(2.1)

(1.8)

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)

(0.3)

(0.6)

Dividends

(1.4)

(1.4)

(8.9)

(2.6)

Other

(2.1)

(2.2)

(0.1)

(1.1)

Net Cash Flow

4.8

2.8

(5.6)

3.3

Opening net debt/(cash & short term deposits)

 

 

(8.3)

(13.1)

(16.0)

(9.4)

FX

0.0

0.0

0.0

0.0

Other non-cash movements

0.0

0.1

(1.0)

(0.3)

Closing net debt/(cash & short term deposits)

 

 

(13.1)

(16.0)

(9.4)

(12.4)

Source: Company accounts, Edison Investment Research

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20 Red Lion Street

London, WC1R 4PS

United Kingdom

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Research: TMT

4imprint Group — Continued market share gains

4imprint’s FY23 results are as outlined in January’s trading update, with 16% top-line growth and a further step up in operating margin to 10.3% from 9.0%. Given that the trading backdrop became more difficult over the final few months, as shown in industry reports, this implies that the group continues to build share in its large and fragmented addressable market for promotional products. 4imprint ended the year with net cash and short-term deposits of $105m after particularly strong cash conversion in H2. This amply allows for the expansion project at the main Oshkosh distribution centre as well as a good uplift in the final dividend, making 215 cents for the year, with the shares trading at a yield of approximately 3%.

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