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Research: TMT
Centaur’s management has reframed its outlook for the remainder of FY24 to reflect the continuing difficult trading environment for XEIM, where its clients (predominantly major global brand owners) are holding back their marketing budgets. This in turn reflects the cautious consumer spending environment, coupled with corporate restructurings and internal focus. Group revenues are now guided to at least £34m, with an adjusted EBITDA margin of c 15%. This is where we have set our revised forecasts, with a consequent impact on FY25 and FY26 projections, with stronger recovery and a clearer benefit from the BIG27 strategy on margin in the latter period.
Centaur Media |
Tough trading backdrop persists into H2 |
Trading update |
Media |
10 October 2024 |
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 management has reframed its outlook for the remainder of FY24 to reflect the continuing difficult trading environment for XEIM, where its clients (predominantly major global brand owners) are holding back their marketing budgets. This in turn reflects the cautious consumer spending environment, coupled with corporate restructurings and internal focus. Group revenues are now guided to at least £34m, with an adjusted EBITDA margin of c 15%. This is where we have set our revised forecasts, with a consequent impact on FY25 and FY26 projections, with stronger recovery and a clearer benefit from the BIG27 strategy on margin in the latter period.
Year end |
Revenue (£m) |
Adjusted EBITDA* (£m) |
EPS* |
DPS** |
P/E |
Yield |
12/22 |
38.4 |
8.1 |
2.5 |
1.1 |
11.8 |
3.7 |
12/23 |
37.3 |
9.7 |
4.2 |
1.8 |
7.1 |
6.1 |
12/24e |
34.0 |
5.0 |
1.6 |
1.8 |
19.0 |
6.1 |
12/25e |
36.0 |
5.9 |
2.0 |
1.8 |
15.3 |
6.1 |
12/26e |
39.0 |
7.2 |
2.7 |
1.8 |
11.4 |
6.1 |
Note: *Adjusted EBITDA and EPS (fully diluted) are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. **DPS excludes FY23 special dividends.
Some positive elements
We have reduced our FY24 revenue forecast from £36.1m to £34.0m, with the reduction effectively dropping straight through to the adjusted EBITDA line due to the high operational gearing and the shift in mix away from the highest margin revenue streams. The trading update has positive elements in that Econsultancy clients are still on the roster, they are simply spending less money (activities and BIG27 are described in our July Outlook) and key brands such as MW Mini MBA and The Lawyer continue to trade well. Marketing Week’s subscription business is ahead, and the recent Festival of Marketing was up on the prior year. Our adjustments to FY25 and FY26 forecasts are consequent to these changes, delaying the full benefit from implementation of the BIG27 strategy announced earlier in the year.
Cash resource stays strong
Net cash at 30 September was £9.5m, up from the half-year figure of £8.9m (the group carries lease debt only). We expect some modest unwind of working capital benefit by the year-end, giving the group a significant buffer against the trading headwinds. Centaur also announced its new chair is Martin Rowland, who has considerable experience in both public markets and private equity.
Valuation: Reflecting trading and industry issues
Centaur’s share price is 34% down year-to-date, reflecting the current malaise in UK smaller stock valuations and across the wider media sector, as well as the trading-specific issues. On our new forecasts, the valuation remains well below UK and global peers. Parity across FY24 and FY25 (on P/E and EV/EBITDA) suggests a price of 39p, down from 51p in July, but still well above the current level. Closing that gap will require evidence that BIG27 can deliver on its objectives.
Exhibit 1: Financial summary
Year end 31 December, IFRS |
£m |
2022 |
2023 |
2024e |
2025e |
2026e |
|
INCOME STATEMENT |
|||||||
Revenue |
|
|
38.4 |
37.3 |
34.0 |
36.0 |
39.0 |
Other operating income |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Cost of Sales |
(14.1) |
(13.7) |
(13.0) |
(13.2) |
(13.9) |
||
Gross Profit |
24.2 |
23.6 |
20.9 |
22.7 |
25.1 |
||
EBITDA |
|
|
8.1 |
9.7 |
5.0 |
5.9 |
7.2 |
Operating profit (before amort. and excepts.) |
4.9 |
7.6 |
2.9 |
3.7 |
5.0 |
||
Amortisation of acquired intangibles |
(0.5) |
(0.1) |
(0.1) |
(0.1) |
(0.1) |
||
Exceptionals |
(0.1) |
(0.4) |
(0.2) |
0.0 |
0.0 |
||
Share-based payments |
(0.8) |
(1.1) |
(0.3) |
(1.1) |
(1.1) |
||
Reported operating profit/loss |
3.5 |
6.1 |
2.4 |
2.6 |
3.9 |
||
Net Interest |
(0.1) |
0.0 |
0.1 |
0.1 |
0.1 |
||
Joint ventures & associates (post tax) |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Exceptionals |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Profit Before Tax (norm) |
|
4.9 |
7.6 |
3.0 |
3.8 |
5.1 |
|
Profit/loss Before Tax (reported) |
|
3.5 |
6.1 |
2.4 |
2.6 |
3.9 |
|
Reported tax |
(0.9) |
(0.8) |
(0.7) |
(0.8) |
(1.1) |
||
Profit After Tax (norm) |
3.7 |
6.4 |
2.4 |
2.9 |
3.9 |
||
Profit After Tax (reported) |
2.6 |
5.3 |
1.8 |
1.7 |
2.7 |
||
Minority interests |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Discontinued operations |
0.2 |
(0.5) |
0.0 |
0.0 |
0.0 |
||
Net income (normalised) |
3.7 |
6.3 |
2.4 |
2.9 |
3.9 |
||
Net income (reported) |
2.8 |
4.9 |
1.8 |
1.7 |
2.7 |
||
Average number of shares outstanding (m) |
144 |
144 |
144 |
144 |
144 |
||
EPS - normalised (p) |
|
|
2.6 |
4.4 |
1.6 |
2.0 |
2.7 |
EPS - normalised fully diluted (p) |
|
|
2.5 |
4.2 |
1.6 |
1.9 |
2.6 |
EPS - basic reported, continuing (p) |
|
|
1.8 |
3.7 |
1.2 |
1.2 |
1.9 |
Ordinary dividend per share (p) |
1.1 |
1.8 |
1.8 |
1.8 |
1.8 |
||
Revenue growth (%) |
(1.9) |
(2.8) |
(9.0) |
5.9 |
8.6 |
||
Gross margin (%) |
63.1 |
63.3 |
61.7 |
63.2 |
64.3 |
||
EBITDA (IFRS) margin (%) |
21.1 |
25.9 |
14.7 |
16.5 |
18.5 |
||
Normalised Operating margin (%) |
12.9 |
20.4 |
8.6 |
10.2 |
12.7 |
||
BALANCE SHEET |
|||||||
Fixed Assets |
|
|
45.9 |
49.3 |
49.0 |
49.2 |
49.6 |
Intangible Assets |
43.8 |
44.7 |
44.9 |
45.1 |
45.3 |
||
Tangible Assets |
0.4 |
2.2 |
2.9 |
3.4 |
3.8 |
||
Deferred tax |
1.7 |
2.2 |
0.7 |
0.0 |
0.0 |
||
Other receivables |
0.0 |
0.2 |
0.5 |
0.8 |
0.5 |
||
Current Assets |
|
|
21.5 |
15.0 |
13.7 |
13.1 |
14.8 |
Stocks |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Debtors |
5.4 |
5.1 |
4.7 |
5.0 |
5.5 |
||
Cash & cash equivalents |
16.0 |
9.5 |
8.7 |
7.7 |
9.0 |
||
Other |
0.2 |
0.4 |
0.4 |
0.4 |
0.4 |
||
Current Liabilities |
|
|
(18.5) |
(17.9) |
(17.3) |
(17.8) |
(19.0) |
Creditors |
(9.7) |
(8.6) |
(8.6) |
(9.2) |
(9.7) |
||
Tax and social security |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Short term borrowings |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other/ Lease liabilities |
(8.9) |
(9.3) |
(8.7) |
(8.7) |
(9.3) |
||
Long Term Liabilities |
|
(0.0) |
(1.3) |
(0.7) |
(0.7) |
(0.5) |
|
Long term borrowings |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other long term liabilities, including leases |
(0.0) |
(1.3) |
(0.7) |
(0.7) |
(0.5) |
||
Net Assets |
|
|
48.8 |
45.1 |
44.6 |
43.8 |
44.9 |
Minority interests |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Shareholders' equity |
|
|
48.8 |
45.1 |
44.6 |
43.8 |
44.9 |
CASH FLOW |
|||||||
Operating Cash Flow |
8.1 |
10.3 |
5.8 |
6.3 |
7.8 |
||
Working capital |
0.1 |
(1.6) |
(0.2) |
0.2 |
0.8 |
||
Exceptional & other |
0.2 |
(1.3) |
(0.8) |
(0.7) |
(0.7) |
||
Tax |
0.0 |
(1.6) |
0.3 |
(0.8) |
(1.1) |
||
Total Operating Cash Flow |
|
8.4 |
5.8 |
5.1 |
5.0 |
6.7 |
|
Capex |
(1.4) |
(2.1) |
(1.3) |
(1.5) |
(1.5) |
||
Acquisitions/disposals |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Net interest |
(0.0) |
0.1 |
0.1 |
0.1 |
0.1 |
||
Equity financing |
(0.6) |
(0.3) |
(0.6) |
(0.3) |
(0.3) |
||
Dividends |
(1.4) |
(8.9) |
(2.6) |
(2.6) |
(2.6) |
||
Other |
(2.2) |
(0.1) |
(1.5) |
(1.5) |
(1.1) |
||
Net Cash Flow |
2.8 |
(5.5) |
(0.8) |
(0.9) |
1.2 |
||
Opening net debt/(cash & short term deposits) |
(13.1) |
(16.0) |
(9.5) |
(8.7) |
(7.7) |
||
FX |
0.0 |
(0.0) |
0.0 |
0.0 |
0.0 |
||
Other non-cash movements |
0.1 |
(1.0) |
0.0 |
0.0 |
0.0 |
||
Closing net debt/(cash) |
|
(16.0) |
(9.5) |
(8.7) |
(7.7) |
(9.0) |
|
Source: Company accounts, Edison Investment Research
|
|
Research: Investment Companies
The managers of Baillie Gifford US Growth Trust (USA), Gary Robinson and Kirsty Gibson, invest in exceptional US businesses with the potential to grow substantially faster than the market and deliver above market returns. Such businesses tend to operate at the cutting edge of technology-led change, and USA has exposure to companies focused on AI, space travel and online services. The company’s performance was very good in outright and relative terms in the years following its launch in 2018 (see following chart), and recent returns have remained strongly positive in absolute terms, although the company’s unlisted holdings have been a drag on relative returns due to the adverse impact of higher interest rates on valuations. However, many of USA’s holdings have been doing ‘exceptionally well’ on an operational basis, and the managers are excited about the future. They believe AI is driving some of the biggest technological developments of the century, and they expect this tech revolution to accelerate and spread across the economy. They expect this to generate ‘huge structural opportunities’ for the innovative and adaptable businesses they target to realise outsized returns.