Mitula Group reported a first half net profit, adjusted for significant items, of A$5.6m, up 94% y-o-y for the six months to 30 June. The result, while below the company’s half-year forecast of A$5.87m, was 16% ahead of our NPAT forecast for the period. Significantly, the company’s EBITDA margin lifted to 52.5% from 43.7% as EBITDA growth outpaced revenue growth. EBITDA excluding significant items increased 83.8% to A$7.1m, while revenue grew 52.7% y-o-y to A$13.6m. One-off items of A$1.21m related to non-cash share payments of A$0.57m related to its IPO and an allowance for depreciation of intangibles associated with the Lokku acquisition (A$0.64m). Exhibit 1 sets out H116 versus H115 and Edison’s forecasts for H116. As highlighted, revenue and gross profit delivered in H116 were 8% below our forecasts, but normalised EBITDA was 4% ahead of our expectations due to lower than expected operational and corporate expenses, while EBIT was 13% ahead of our forecasts due to lower than forecast depreciation and amortisation charges.
Exhibit 1: H116 versus H115 and Edison’s forecasts
A$m |
H116 |
H115 |
% diff |
Edison H116e |
% diff |
Revenue |
13.6 |
8.9 |
52.7 |
14.7 |
-7.7 |
Gross profit |
11.9 |
7.8 |
53.2 |
12.9 |
-7.8 |
Gross profit margin |
88% |
87% |
0.4 |
88% |
-0.1 |
EBITDA (normalised) |
7.1 |
3.9 |
83.9 |
6.9 |
4.2 |
EBIT (normalised) |
7.0 |
3.8 |
85.6 |
6.2 |
13.0 |
PBT (normalised) |
6.8 |
4.0 |
72.7 |
6.5 |
5.6 |
NPAT (normalised) |
5.6 |
2.9 |
94.0 |
4.8 |
15.7 |
EPS (normalised) (c) |
2.62 |
1.65 |
58.7 |
2.27 |
15.7 |
Source: Mitula Group, Edison Investment Research
Revenue and gross profit were both affected by a lower than expected performance from the Americas, which was affected by both the devaluation of local currencies against the US dollar and a decrease in the volume of clicks purchased. As Exhibit 2 sets out below, the lower growth in revenue in the Americas was offset by a decline in the traffic (which is the cost of sales) that MUA purchased for that region, enabling a 12% increase in gross profit. Exhibit 2 also demonstrates the benefit of MUA’s geographical spread. With operations in 49 countries, the impact of a downturn in one region can be mitigated by growth in other regions. In H116, gross profit from MUA’s operations in Asia-Pacific grew 49%, while gross profit in EMEA (Europe, Middle East and Africa) almost doubled and contributed more than half the gross profit generated in the period.
Exhibit 2: Geographical performance H116 versus H115
A$m |
Americas |
Asia-Pacific |
EMEA |
H116 |
H115 |
% diff |
H116 |
H115 |
% diff |
H116 |
H115 |
% diff |
Revenue |
3.5 |
3.4 |
4% |
2.8 |
1.9 |
48% |
7.3 |
3.7 |
100% |
Cost of sales |
0.2 |
0.4 |
-60% |
0.4 |
0.3 |
45% |
1.1 |
0.5 |
113% |
Gross profit |
3.3 |
3.0 |
12% |
2.4 |
1.6 |
49% |
6.2 |
3.1 |
97% |
Source: Mitula Group accounts
The weaker performance of the Americas caused MUA to miss the guidance it set after its March quarter result in May. At that time, the company predicted it would generate revenues of A$7.2m, EBITDA of A$4.1m and NPAT of A$3.2m in the June quarter. As Exhibit 3 demonstrates, April to June 2016 revenues and EBITDA were A$0.25m lower than guidance and NPAT was A$1.2m lower due largely to non-cash significant items including share-based payments. It is also worth noting that, despite not achieving guidance, MUA delivered a much expanded EBITDA margin of 54.9% in Q216, up from 50% in Q116 and which assisted the company to achieve its record EBITDA margin of 52.5% in the half year.
Exhibit 3: June quarter actual versus company’s guidance
(A$m) |
June quarter 2016a |
June quarter 2016e |
Variance |
Revenue |
6.931 |
7.176 |
(0.245) |
EBITDA |
3.808 |
4.061 |
(0.253) |
EBITDA Margin |
54.9% |
56.6% |
|
Statutory profit for the quarter |
2.039 |
3.223 |
-1.184 |
Normalised profit for the quarter |
2.904 |
3.223 |
-0.319 |
Operationally, MUA continues to build on its key performance indicators with almost 190m visits to its 79 websites in the June quarter, a 22% y-o-y increase. Significantly, an increasing number of the traffic is coming directly to MUA’s websites, with this source of visit increasing to 26.9% in the June quarter compared with 21.6% in Q215. Correspondingly fewer visits are coming via organic search, which essentially is via search engines such as Google. The company also noted that around 1.1% of its visits in the June quarter came from its mobile apps, which it launched in mid-May and which generated an estimated A$0.25m in revenue. These apps, together with the growth in direct traffic, position MUA to have a more direct relationship with its users/visitors and this is further evidenced by the growth in email alert subscribers. At quarter end, 11.0 million people had subscribed to MUA’s websites for email alerts, up more than 50% y-o-y.
Exhibit 4 below also highlights the improving yield per click-out sold that MUA is extracting, with a 52.3% increase in yield to 3.93c per click-out in the June quarter.
Exhibit 4: Key performance indicators, Q216 versus Q215
|
June quarter 2016 |
June quarter 2015 |
% chg |
Visits (millions) |
189.7 |
155.4 |
22.1 |
Visits from organic search (%) |
64.3 |
72.6 |
N/A |
Direct visits (%) |
26.9 |
21.6 |
N/A |
Email alert subscribers (m) quarter end |
11.0 |
7.3 |
50.7 |
|
|
|
|
Click-outs (m) |
276.2 |
224.9 |
22.8 |
Click-outs sold (m) |
112.1 |
125.7 |
-10.8 |
Click-outs sold (%) |
40.6 |
55.9 |
N/A |
Yield/click-out sold (cents) |
3.93 |
2.58 |
52.3 |
We have adjusted our earnings forecasts following the interim results release. The key changes, as highlighted in Exhibit 5 below, relate to our revenue and gross profit expectations for the full financial year, which have been reduced to reflect the weaker H116 result from the Americas. However, we have upgraded our EBITDA forecasts by 8.5% in FY16 and 0.7% in FY17 to reflect the cost containment demonstrated in the first half. We have also taken into account the significant items booked in H116 and the effect we expect this to have on normalised FY16 profit.
Exhibit 5: Earnings adjustments
A$m |
New CY16e |
Old CY16e |
% chg |
New CY17e |
Old CY17e |
% chg |
New CY18e |
Old CY18e |
% chg |
Revenue |
30.1 |
32.2 |
-6.6% |
39.6 |
42.8 |
-7.4% |
47.7 |
51.7 |
-7.7% |
Gross profit |
26.6 |
28.3 |
-6.2% |
34.7 |
37.6 |
-7.5% |
41.9 |
45.4 |
-7.7% |
Gross profit margin |
88% |
88% |
0.5% |
88% |
88% |
-0.1% |
88% |
88% |
-0.1% |
EBITDA normalised |
16.8 |
15.4 |
8.5% |
21.0 |
20.8 |
0.7% |
25.6 |
25.6 |
-0.1% |
EBIT normalised |
14.7 |
14.1 |
4.2% |
19.9 |
19.7 |
1.0% |
24.6 |
24.6 |
0.0% |
PBT (normalised) |
17.0 |
15.9 |
6.9% |
21.8 |
21.6 |
1.1% |
26.8 |
26.7 |
0.2% |
NPAT (normalised) |
13.6 |
12.0 |
12.9% |
16.3 |
16.2 |
1.0% |
20.0 |
20.0 |
0.2% |
EPS (normalised and fully diluted) (c) |
6.4 |
5.7 |
12.8% |
7.7 |
7.6 |
1.1% |
9.5 |
9.4 |
0.2% |
Source: Edison Investment Research
