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Reach’s prelims were ahead of N1S estimates for H2 sales and EBITDA (1% and 3% resp.) and showed excellent progress with both the customer value strategy (‘CVS’) and business transformation agenda. Whilst FY’20 Group sales were 15% y/y lower as CV19 impacted Print, Digital revenue grew +11% y/y to £118m (H2: +20% to £70m), supported by a strong uptick in user engagement with content (page views/user: +39% y/y) and further progress in signing up new registered users (Feb’21: 5.8m; Dec’20: 5.0m; Dec’19: 0.7m). Meanwhile quick action to mitigate CV19 impact on Print volumes and execution on the business transformation plan saw AOP margins increase 50bps y/y, with Group H2 AOP down just 4% y/y (FY’20: -13%). Looking ahead, there were highly encouraging results from initial campaigns on the Group’s ReachID platform (+10%-40% uplift in click-through rates on early campaigns), whilst further cost savings of £11m are announced through rationalisation of the Group’s Print sites. Strong cash performance was reflected in £42m of cash inflow (post pension and historic legal and contractual payments), which gives management confidence to declare a final cash dividend of 4.26p/share. The path to sustainable top-line and FCF growth remain very much open, with FY’21E adj FCF of £120m generating an 11% yield at current valuation.
Companies: Reach plc
CentralNic released unaudited preliminary 2020 results showing pro forma 9% revenue growth, ahead of expectations (ZC: 4%). The company continues to take market share in a growing market. EBITDA was in line with consensus expectations but below our top of consensus forecasts. CNIC is increasing investment in new products and integration, which we expect to continue in 2021 and provide net returns in 2022. The company’s results demonstrate its ability to integrate, scale and extract synergies from acquisitions. We see potential earnings upside from the Codewise acquisition and expect CNIC to deliver further significant earnings accretive acquisitions in 2021.
Companies: CentralNic Group Plc
I wake up in my DFS (DFS) bed with a Gin and Fevertree (FEVR) hangover, place a trade on my phone through CMC Markets (CMCX), have a quick go on my Hornby (HRN) train set, eat half a box of Hotel Chocolat (HOTC), all before heading out in my brand spanking new Joules (JOUL) wellies to my local Metro Bank (MTRO) branch. All of these well-known consumer brands share a common theme in that they are all listed or quoted on the London Stock Exchange. It’s been a year so far reminiscent of 2014 when we saw a flurry of large brands rush for the IPO door such as Pets at Home (PETS), Saga (SAGA), AA (AA) and Poundland (PLND). Most looking for a private equity exit. The IPO adventure of these companies tends to be fairly boiler plate: the valuation is a battleground between the exiting private equity house and incoming institutional investors, the book is many times covered and the scale backs are eye watering. But what makes these companies more alluring to investors than a company nobody has ever heard of which in fact may be profitable, dividend paying and ultimately, on a lower valuation?
Companies: CMCX CSP VMUK WJG ACRL ASCL
Future has announced a pre-close trading update for H1’20 highlighting continued strong online audience growth which is further driving eCommerce and digital advertising revenue streams. Recent weeks have been unprecedented, however the Group continues to see limited impact to online consumer behavioural trends (Feb audience traffic: +2% month on month per ComScore), whilst in Magazine y/y growth in Grocers is partly offsetting declines in travel outlets. Key metrics are holding up well, and the Group expects to continue to trade in-line with expectations. Half year net cash of £47m-£53m is expected by management, implying FCF is ahead of our £18m H1 forecast (N1Se H1 net cash: £44.9m). The Group is a highly cash-generative business, and post TI acquisition (consideration: £140m) will enjoy £30m-£40m of headroom in debt facilities and plenty of comfort on covenants (1.0x net debt/pro forma EBITDA; covenant: <3.0x). The Group trades on a 6.6x EV/pro forma FY’20E EBITDA multiple (peers: 12x-17x), and offers an FY’21E FCF yield of 13.5% (peers: 3%-5%).
Companies: Future plc
Future’s H1 results highlight the benefits of the Group’s diverse revenue model. Group sales grew 33% y/y to £144.3m (organic: +11%; N1Se: £145.0m), with AOP up 77% to £39.9m (organic: +40%; N1Se: £38.7m). Organic Media sales growth of +21% y/y reflects strong online user growth, with H1 average monthly online users up +26% to 253m, driving eCommerce sales up +68% organic. Online audience growth rapidly accelerated post lockdown (+66% y/y in March) supported by gaming and Live Sciences verticals. Magazine revenues, particularly at TI Media, have been impacted by lockdown, yet the opportunity to leverage Future’s Vanilla platform and SEO expertise to drive growth in TI’s asset base remains significant. We make no changes to forecasts, yet with strong H1 performance, H2 forecasts look undemanding with risk to the upside. Future offers a 7.4% FY’21E FCF yield on our conservative forecasts.
Future today released an update highlighting FY’20E adj EBITDA which is trading towards the top-end of consensus (£86.3m-£91.0m; N1Se: £88.5m). Strong performance has been supported by acceleration of the consumer shift to digital, positive cost control and cost synergy extraction from the TI Media acquisition (c.£9m annualised savings delivered so far). Migration of TI Media sites to the Group’s Vanilla platform are underway, whilst Hawk (price comparison platform) has been successfully deployed on three key existing TI Media websites. TI Media represents a significant opportunity to drive strong EBITDA growth in the medium-term as the portfolio transitions to digital, whilst the Group also has a number of additional levers to drive outperformance against conservative consensus forecasts. We leave forecasts unchanged for now, although upside risk is building. Future offers a 7% FY’21E FCF yield on N1Se forecasts, peers offer closer to 4%.
Reach plc, the market-leading commercial regional and national news publisher, is approaching a positive revenue inflection point which is transformational to perceptions of the Group. With the 5th largest digital unique visitor base (>40m) in the UK (behind the likes of Facebook and Google), the Group has a material, yet currently under-exploited opportunity which could see Digital revenues double on a 4-year view. Among initiatives to unlock value, new management is focused on granular data capture, audience stratification, and targeted, highly-relevant content dissemination, with successful execution already manifesting itself in rising user engagement. Cost efficiencies and a mix shift towards Digital support margin expansion, and are forecast to improve already attractive FCF margins (FY’20E: 19%). A progressive dividend (N1S FY’21 DPS: 6.8p) augments the investment case whilst an intrinsic value of 300p/share offers significant upside potential.
Reach plc today provides a strong Q4 trading update highlighting upgraded FY’20E AOP expectations of £130m-£135m ahead of consensus (cons: £124.3m) and record growth in Digital. Digital sales growth has recovered strongly since Q2, accelerating to 25% y/y (Q3: +13%; H1: -1%) benefitting from both higher traffic through implementation of Group engagement initiatives and yield recovery as advertisers in CV19 impacted verticals return. Print circulation revenue decline moderated to 11.7% y/y in Q4 (Q3: -12.6%), a significant deceleration from the -18.2% y/y in H2 and modestly better than our H2 forecasts. Continued focus on audience engagement, the quality of audience data and insights, and further extension of locally focused digital content we see driving further gains online, with Digital sales still on track to double on a four year view. We are upgrading forecasts, increasing FY’20E sales, AOP and adj FCF by 2%, 6% and 5% respectively, with upgrades filtering into future periods. A 17% FY’21E FCF yield sits well in advance of global peers (3%-7%), with a 10% FCF yield generating an intrinsic valuation of 315p/share.
Upon Admission to AIM, Nightcap will acquire The London Cocktail Club Limited (the "London Cocktail Club"), which is an award winning independent operator of ten individually themed cocktail bars in nine London locations and one location in Bristol. Offer TBC. HSS Hire Group, HSS.L transfer from Main to Aim. Mkt Cap c. £70m. Recently raised £52.6m. Leading supplier of tool and equipment for hire in the United Kingdom and Ireland and has provided equipment hire services in the United Kingdom for more than 60 years, primarily focusing on the B2B market. VH Global Sustainable Energy Opportunities plc, a closed-ended investment Company focused on making sustainable energy infrastructure investments, today announces intends to launch an initial public offering of shares on the Official List (Premium) of the Main Market of the London Stock Exchange.
Companies: PMI RMM SUN BOIL ITM TRMR MLVN 88E IME ANP
The MISSION’s trading update indicates the group had a comfortably better Q4 than expected, with the full-year PBT over £1m, against our forecast £0.5m. Cash performance was significantly ahead, with a year-end net debt position of £1.3m allowing the payment of the delayed final 1.53p dividend from FY19. We will update our FY20 numbers with the full results in April. We have trimmed our FY21 forecast revenue by 7.5% to reflect the ongoing impact of the pandemic in H121, reducing PBT from £9.0m to £7.1m. We also publish our first thoughts on FY22, on an improving trend. The shares remain priced at a significant discount to peers on earnings multiples.
Companies: Mission Group Plc
4imprint’s trading update indicates that order intake in Q4 was a little better than we had anticipated. Unaudited FY20 revenue was reported at c $560m, or 5% above our prior forecast. We remain circumspect around trading prospects for FY21, given the impact of the pandemic on corporate America and leave our forecast unchanged for now. The indicated year-end net cash balance at $39.8m (excluding lease debt) was well ahead of our projected figure ($22.5m in our modelling), and close to the $40.1m reported in October, implying that cash collections have held up strongly. We continue to view 4imprint as a high-quality investment proposition.
Companies: 4imprint Group plc
Interims (six months to September) demonstrate resilient revenue of £4.4m, adjusted EBITDA profitability at £0.3m (especially impressive vs £0.5m for 15m to FY20), and cash of £1.2m. Current cash of £1.3m is reassuring, with end January expected to be the cash low point for the year. Despite COVID pressure on the customer base, AIM membership remained steady at 2,085 at 1 January (September 2020: 2,103, March 2020: 2,276) and preferred supplier numbers were unshaken at 175. Purchase orders processed through the system are regaining strength, returning to 70% of original management volume expectations, while AIM Capital Solutions, and the associated premium member benefits, gains momentum. While we are not yet free of COVID, the group demonstrated action and resilience in this key period from March to September where the pandemic’s impact was most novel and most brutal – and with the current cash balance, the trading update delivers optimism for the long term. Forecasts remains suspended, and we look forward to further updates.
Companies: Altitude Group plc