ELE says current revenue lines are insufficient to support Group overheads
Companies: Endesa S.A.
Electric Word (LON: ELE), has announced Interim Results this morning confirming the completion of the iGaming Business stake, a strong performance in its Sports Division but a mixed performance in Education. Management confirm the Balance Sheet is healthy following the recent sale of iGaming Business but that the current revenue lines are insufficient to support Group overheads.
The Sport division, which provides market information and knowledge to professionals in the global business of sport, delivered a strong performance with revenues up 15% to £1.3m and Adjusted EBITA increasing 300% to £114k. Two thirds of the revenue came from live or digital services. Encouragingly for future earnings visibility, the majority of the revenue is coming from subscriptions:
"Subscriptions grew by 18% and now account for 69% of the revenue in this division"
The Education division, which includes the Optimus and Speechmark businesses, has now focussed on a narrower group of "school leaders" which has resulted in fewer events, less revenue, but greater profitability versus 2015:
"We ran 14 events in the first half of 2016 (which is 5 fewer than 2015) and this contributed to 27% lower revenues compared to H1 2015, although profitability per event was higher."
Broker Panmure flags in a report this morning that the Sports division is trading well but Education is still mixed:
"H1 numbers were broadly in line with expectations, with trading continuing to be strong for Sports but mixed for Education"
Analyst Jonathan Helliwell also highlights that although the group are now sitting on a healthy cash pile, the underlying business still needs to be addressed:
"The January sale of iGaming Business for £14.5m has left the group in a substantial net cash position (£10m) but with continuing central costs in excess of continuing divisional profits...The group continues to review ways to address this – whether to get bigger or get smaller – but no decision has been made yet"
Julian Turner, CEO of Electric Word, commented:
"Following the disposal of the Group's stake in iGaming Business Ltd, we now have a much stronger balance sheet. The performance of the trading divisions in the first half of the year has met expectations and been satisfactory, given market conditions. Our strategy of investing in higher value subscription products is now resulting in both higher revenues and margins in the Sport division whilst sales of our premium subscription products in Education are also encouraging. The Sports and Education businesses are not currently of sufficient size to support the existing level of Group overheads and central costs, however, and we are reviewing ways to address this."
