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Centaur Media plc
Centaur is making good progress in realising the value within its portfolio, with the sale of the MiniMBA and Oystercatchers in July and the agreed disposal of The Lawyer, announced more recently and expected to complete in October. The residual brands (excluding The Lawyer) generated revenues of £
As part of its ongoing strategic review and commitment to returning value to shareholders, CAU has already realised c.£62m from business disposals and has made “good progress” to potentially sell Marketing Week and Creative Review (M&C), leaving The Influencer Group (TIG) and Econsultancy. Today’s H1 results indicate that both businesses continue to face macro headwinds, but we expect management to remain focused on improving their financials and potential exit values, while also reducing central costs. Once The Lawyer sale completes CAU expects to have c.£67m of cash (c.46p per share) more if M&C is sold too.
Centaur Media has announced the conditional sale of The Lawyer, its business supporting the legal sector with information and events. The sale price of £43m enterprise value represents a multiple of 16x its FY24 operating profit, with completion expected in October. The announcement comes soon afte
Centuar Media has announced the conditional sale of its MiniMBA business to Brave Bison, for £19m (cash free, debt free). This follows on from the announcement in December of a strategic business review designed to maximise shareholder value, and MiniMBA is a key asset. The agreed price represents
A difficult year Whilst Centaur notes the difficult year that it faced in 2024 given macro pressures on marketing budgets, the company has reported FY results broadly in-line with revised estimates. Revenue of £35.1m – reflecting an organic decline of 6% – was modestly ahead of our estimate, as was EBITDA of £5.9m with a margin of 17% (management note this would have been 20% ex new investments to drive future growth). Net cash ended at £8.9m, and goodwill has been impaired by £12m. Digging into the detail More granular detail has been given on revenue per brand now – the two largest grew with The Lawyer (c.£9m of revenue) seeing 7% growth, helped by 111% corporate subscription renewal rates, and Mini MBA (c.£11m) up 5%, helped by 4% delegate growth (in particular supported by growth in sales to corporates). On the outlook, management note that they are making progress on their ongoing review of operations and strategy with a view to ensuring that the brands are set up for future success and to generate value for shareholders. Fundamentally undervalued As we wrote in our January sector note (here), we continue to think a separation of the businesses could help maximise value. In our group SOTP valuation, The Lawyer on its own is worth just under £50m, relative to the current market cap of £40m and a net cash position, with Mini MBA also offering significant value – assuming a 20% EBITDA margin and 10x multiple, this could be worth >£20m. The stock currently trades at c5.5x CY25E EBITDA, a premium to Future but still fundamentally below what we believe is justified.
Centaur Media plc Future plc
FY24 delivered EBITDA 5% ahead of our forecasts because of a better than expected performance towards the end of the year by The Lawyer (+7% rev y/y), MiniMBA (+5% y/y), and Marketing Week subscription revenues (+16% y/y). These brands now account for 68% of group revenues, which gives us confidence that group revenue and profit can return to growth post FY24, where group revenue fell -6% y/y and AOP -52%, due to the macro-induced-headwinds faced by the other brands. Meanwhile, the strategic review continues. It has already found that most of CAU’s customers only have 1 or 2 of its products; so a brand-by-brand focus (instead of looking for synergies across Xeim) may produce better results. At c. 6x FY26 EV/AOP (vs a peer average 8x) CAU continues to look undervalued.
Centaur Media’s full year results are broadly in line with January’s trading update, with revenue from continuing operations down 6% on the prior year. Adjusted EBITDA came in slightly better than anticipated at £5.9m (guidance was £5.6m). Key brands The Lawyer and MiniMBA both performed well, grow
FY trading ahead: Yesterday Centaur released an unscheduled trading update for the FY: trading since the last update in October has been ahead of expectations, and management now expect revenue for FY24 of £35m (INVe previously £34.1m), with an EBITDA margin of 16% - implying £5.6m EBITDA, c.8% ahead of our previous estimate. Management note the ongoing marketing sector headwinds still impacting parts of the business, but also note the underpinning impact of growth at The Lawyer (7%) and the MW Mini MBA (5%), and highlight a net cash balance of £8.9m at YE. Strategic review: The company notes that a review of Centaur’s business operations and strategy is underway, post the previous CEO’s departure, with the new executive chair noting the focus on defining the strategy and maximising shareholder value. We discussed in our recent sector outlook note (see here) the fundamental value in the business from The Lawyer (worth nearly £50m in our SOTP), the Mini MBA and the cash position, relative to a market cap currently of <£45m. Fundamental value to be had: On forecasts, we increase FY24E EBITDA by 8%, but more modest future growth assumptions leave EBITDA up 3% in FY25E and unchanged longer-term. Centaur currently trades at c.6x CY25E EBITDA – we have often argued that this leaves scope for EBITDA multiple expansion once estimate revisions reached an inflection point. If such a point has now been reached, we see scope for re-rating, either as a reflection of the business today, or because of the potential for value crystallisation over time through portfolio restructuring.
FYDec24 revenues are expected to be £35m, +3% ahead of our forecasts, but down -6% y/y. The outperformance was due to Xeim, which delivered £26.1m revs (vs £25.2mE) driven by 5% y/y growth to MW Mini MBA. Meanwhile both Oystercatchers and Econsultancy declined (but by less than expected) having suffered from the tough macro backdrop, as their bluechip customers restructured their marketing teams, delaying training and marketing investment. Meanwhile The Lawyer continues to grow, revs +7% y/y and in/line with our £8.9m forecast. EBITDA is expected to be £5.6m (+4% ahead) down 42% y/y due to the y/y reduction to revenue and investment made into the MW Mini MBA and other brands. Net cash of £8.9m is also slightly better (vs £8.3mE). No change to guidance and forecasts materially unchanged, such that we continue to expect a return to modest growth in FY25, driven by MW Mini MBA and The Lawyer. CAU trades on 5.9x FY26 EV/AOP which continues to looks cheap against what we think is a fair value multiple, being 8.5x.
Centaur’s year-end trading update points to revenues of around £35m, which is ahead of our earlier modelling (and management guidance) of £34m. This is attributed to strong revenue performances from The Lawyer (+7%) and from the MW Mini MBA (+5%), a counter to continuing difficult trading condition
Whilst The Lawyer continues to grow, macro headwinds continue to impact marketing budgets for Xeim’s blue-chip customers. Further disruption comes from the restructuring of these marketing teams, with any training or investment delayed. As a result, we downgrade our FY24 revenue forecast to £34m with £5.1m of EBITDA. Despite the tough operating market, this is still a profitable business (with £9.5m net cash at Sept 24). As a result, the 0.6p dividend is maintained and the investment phase of BIG27 will continue. At a c. 7x FY26 EV/AOP (vs a peer average 8.5x) this downgrade has largely already been priced in.
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.
Unscheduled trading update: Centaur today note that macro challenges continue to drive pressures on marketing budgets at the blue-chip clients of Xeim – and hence that these challenges have materially impacted revenue and profit in H224. This impact has been particularly seen in Econsultancy, & Oystercatchers. More positively for the longer-term, management note strategic areas of focus such as The Lawyer and Marketing Week MiniMBA are expected to see an improving trajectory in H2, and that investment around the ‘BIG27’ program to support these areas continues. On guidance, management note the high operational gearing from the revenue shortfall - FY revenue is now expected to be ‘at least £34m’, with an EBITDA margin of 15% - and they recognise the likely impact on revenue / profit expectations in FY25, given no anticipation of trading conditions improving near-term. Questions for the future: A net cash position of £9.5m at Sept 30, alongside ongoing cash generation, provides support to navigate this period of uncertainty. At the same time, Centaur has announced the appointment of Martin Rowland as the new chair, taking over from Colin Jones on Oct 28 – Martin is currently executive director for transformation at Carr’s Group PLC (with Centaur noting the shareholdings of Harwood Capital in each firm). Risks, but fundamental value: We cut revenues by 4-6% and EBITDA by 28% in FY25E, with EPS falling c.40% that year - this drives our target price cut to 40p. Based on yesterday’s close, Centaur now trades at c.7x FY25E EBITDA, which we continue to believe still fundamentally undervalues the longer-term growth prospects of the underlying businesses. We do however recognise that confidence in stabilising earnings revisions may be needed for a re-rating to more meaningfully come through.
A tough first half sees revenues fall 8% y/y to £16.5m, however because of the timing of the Festival of Marketing and the Mini MBA courses, we’re confident in a stronger H2. But even so, full-year revenue is now expected to be slightly down y/y, while EBITDA more so reflecting the lower top line and also investment in Centaur’s strategic assets, where growing subscribers and upsell/cross-sell potential present exciting growth opportunities. We capture this in maiden FY25/26 forecasts, which show growth returning and alongside this strong margins also. 8.2x FY26 EV/EBITDA gives a 55p TP. A good time to get in on the cheap.
Centaur’s new mantra is ‘Build, Improve, Grow’ and this underpins its four-year management plan, BIG27, first unveiled in April. At its heart, BIG27 is predicated on leveraging Centaur’s strong brands addressing the marketing and legal sectors. The focus is on building ‘strategically valuable’ revenues in premium content, training and advisory and events, increasing the group’s subscription and recurring revenue. Implementing the plan will suppress EBITDA margins in the short term but should accelerate revenue growth within BIG27’s timescale, building towards management’s medium-term revenue aspiration of £60m. We withdrew forecasts on April’s (abandoned) potential bid and now reinstate them, with the costs of BIG27 factored in.
H1 results below expectations: Centaur has today reported H1 revenues of £16.5m, down 8% yoy, with EBITDA down 26% to £2.5m (in small part impacted by the first of the investments flagged at the recent CMD) and EPS more than halving to 0.7p. The dividend and net cash are both flat yoy, supported by lower cash tax payments, and management announce a new progressive dividend policy (the higher of the previous year’s dividend or 40% of adjusted earnings). On the outlook, management expect growth to return in H2. Digging into the detail: By division, The Lawyer grew 7%, but Xeim declined 13% as areas such as EConsultancy and Oystercatchers saw macro headwinds; encouragingly at least, strategically important areas such as Marketing Week Mini MBA saw impressive operational performance. Over time, the BIG27 programme to drive long-term resilient growth should significantly improve the quantum and resilience of revenues but, in our view, the scope for more product pruning & restructuring nearer term is a potential possibility. Under-valued, whilst awaiting an inflection point: We cut revenue by c.68% from FY24E onwards – this, combined with investment, means we now assume a c.20% EBITDA margin in FY24E (from c.25% previously), leading to EBITDA falling 27% this year (moderating to -18% by FY26E) and EPS falling c.35% near-term. We reduce our target price to 55p as a result. Centaur now trades at just under 7x CY25E EBITDA – inexpensive, in our view, but for a significant re-rating we recognise the need for clarity on the sustainable base for revenues / profits to grow from.
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.
Centaur Media has delivered a resilient revenue and strong profit performance in FY23. Group revenues declined 3% yoy, but higher quality revenue streams increased 3% yoy and now account for 80% of group revenues. FY23 was the final year of Centaur’s MAP23 and FY23 adj EBITDA increased 20% yoy to £9.7m while margins improved 5pp to 26%. Margin expansion has been a multi-year theme with adj EBITDA margins more than doubling over MAP23 from 11.7% in FY20 to 25.9% in FY23. Centaur Media’s management have proven themselves throughout MAP23 and we await the next growth strategy, set to be unveiled at a CMD in late April. We stay at a Buy and note Centaur’s 5x FY24 EV/EBITDA multiple for a business with c.80% high quality revenue (i.e. visible and repeating) and delivering a 26% EBITDA margin.
Robust FY23 results: The recent trading update ensures limited surprises, but Centaur’s FY23 results were robust – revenue of £37.3m was down 3% on a continuing basis, albeit the ‘higher quality’ revenues (now 80% of the group) were up 3% given resilient demand from the customer base. EBITDA of £9.7m represented a 26% margin, well above the MAP23 target, and a net cash position of £9.5m at year-end supports a dividend of 1.8p. Life post MAP23: By division, of the Flagship 4 brands, The Lawyer and the Marketing Week Mini MBA were the stand-outs, with revenue growth up 1% and 8% respectively. We also believe there are signs for optimism in forward booking / RFP trends going into 2024 in businesses like The Lawyer and EConsultancy (respectively). Looking further out, management have announced a planned CMD on April 23 where we expect greater detail on their strategic plans and aspirations post MAP23, in the context of revenue growth, investment & margin targets and plans for cash utilisation to support the scaling of the business intelligence and learning organisation that has been built – potentially involving selective bolt-on acquisitions. Value under-appreciated: In terms of our forecasts, we cut revenues and EBITDA by 1-2% in FY24E and FY25E, whilst introducing new FY26E numbers. Centaur currently trades at <5x CY25E EBITDA – having undergone a significant transformation in recent years to allow the increasing strategic importance of its data and tools to become apparent, we believe a much higher valuation is warranted. If public markets do not apply this, we see scope for private / trade buyers to take advantage.
Centaur’s year-end trading update indicates that the group has delivered a strong EBITDA margin for FY23, above 25% and well ahead of the level targeted in the MAP23 margin acceleration plan. This is despite it having been a difficult year in which to grow revenues, with clients slow to close out larger contracts, as broadly reported across the sector. We currently expect confidence to pick up in H224, after a relatively cautious start to the year. We have made provisional adjustments to our estimates on that basis, with the picture likely to be clearer by the March prelims.
Centaur Media has provided a trading update for FY’Dec23 with yoy growth in both adjusted EBITDA and margin. This is a strong performance, and consistent with Centaur’s Margin Acceleration Plan 2023 (‘MAP23’) target. The Centaur business today, is unrecognisable to that of just a few year ago with a focus on higher-margin, recurring revenue streams and a c.25%+ EBITDA margin vs the c.10% margin delivered four years ago. Over that same period, Centaur has generated impressive shareholder returns, and returned a total of £8.9m (13.6% of the market cap) of ordinary and special dividends in FY23 alone. We have reduced our FY23 revenue forecasts 8% (reflecting the closure of Really B2B and Design Week), but upgraded adj EPS double digits reflecting the strong margin performance, lower expected amortisation and tax charge in the period. We view the current 11% FY24 FCF Yield as a highly attractive entry point for a proven management team that is moving Centaur Media towards higher-margin, recurring revenue products.
Profit delivery is key: In a FY trading update released this morning, Centaur has confirmed that it has delivered ‘good’ yoy growth in both EBITDA and EBITDA margin in FY23, with margin expected to be above 25%, reflecting the ongoing focus on expanding its key strategic revenue streams and the operational leverage this provides. This brings the margin ahead of the profitability target in the company’s MAP23 plan set out 3 years ago. Revenues on a continuing basis are however now expected to be down slightly relative to FY22 given further declines in non-strategic revenue streams in Marketing Solutions / Recruitment. Centaur closed certain of these assets in December (to be presented as ‘discontinued’ in future), with the comparable revenue base in FY22 at £38.4m. Looking to the future: Focusing on the longer-term, management note that widely publicised macro & inflationary pressures caused revenue trends to slow in H2, and that, as a result, they maintain a cautious outlook going into 2024. More broadly, management will outline the latest aspects of their future strategy after the full results on March 13th, which will be supported by a net cash position of £9.5m at year end. Significantly under-valued: On forecasts, we cut EBITDA by 5% in FY23E and FY24E, and trim our TP to 65p. Centaur currently trades at <6x CY24E EV/EBITDA - given the increasing strategic importance of its data and tools to customers, we continue to believe this is a fundamental mis-pricing. We believe there is scope for private / trade buyers to take advantage of this over the medium-term should the stock not re-rate.
Centaur’s strategy of focusing on the development its key operations, the Flagship 4, is underpinning group EBITDA levels against a difficult trading backdrop limiting revenue growth potential. Flagship 4 revenues grew by 6% in H1 and now represent 74% of the group, with total H123 revenues down 3% y-o-y as other areas came under greater pressure. The increased proportion of higher-quality revenues in the mix means that the adjusted EBITDA margin should at least achieve the target FY23 level of 23% set in management’s MAP23 plan. Net cash remains strong, £8.8m at end June, post the special dividends paid out in H123, giving good scope for further investment in the core growth areas of business intelligence and learning.
Centaur Media’s outlook points to FY’23e EBITDA (and therefore cash) in-line with MAP23 goals laid out three years ago, although with revenues light given the weaker macro backdrop. H1 revenues were £19.3m (-3% y/y; SCMe: £21.3m), impacted by decline in non-core sales (advertising, recruitment and marketing solutions) even as Flagship 4 (74%/Group) revenues grew +6% y/y. EBITDA margins were in-line at 18.1% (+110bps y/y), whilst net cash stood at £8.8m (FY’22: £16.0m) post payment of £8.0m of dividends (special and underlying). Management remains confident of meeting MAP23 EBITDA of >£10m representing FY’23e growth of +17% y/y in FY’23 and ~40% CAGR since FY’20, yet is now guiding to revenues falling short of the >£45m goal set three years ago (new FY’23e guidance: flat y/y, so ~£41.6m). We adjust numbers to reflect the updated outlook (FY’23e revs: -8%; EBITDA -2%). Focus on higher-margin, recurring revenue streams and exposure to attractive eLearning and Marketing/Business Intelligence subscription opportunities is delivering business resilience reflected in strong profit performance, and creates a compelling forward-looking investment case. A 17% FY’24e unlevered FCF yield holds strong appeal. BUY.
Centaur’s FY22 results have come in slightly better than indicated at the year-end update, showing good revenue growth of 6% and a notable step-up in adjusted EBITDA margin, from 16% to 20%, as the group focuses on its higher-quality repeat and recurring revenue streams. The ‘new’ news is of an additional special dividend of 2.0p, coming soon after the 3.0p special dividend paid in February, reflecting the accumulation of cash on the balance sheet beyond the level needed to support the existing business and the investment required to support the anticipated growth. Management’s FY23 MAP23 targets of £45m in revenue and an EBITDA margin of 23% are demanding but achievable.
Centaurs FY22 once again demonstrates managements positive underlying operational execution to date, with prelims confirming continued top-line growth and strong H2 margin expansion despite the uncertain market backdrop. Revenues grew +6% y/y to £41.6m (SCMe: £41.1m) with EBITDA margins of 20.4% (adj EBITDA: 19.5%). Net cash of £16.0m at the full year outturn (+22% y/y) reflects continued strong cash conversion (99%), with FCF of £5.1m delivered in the period. Balance sheet strength and further forecast FCF growth in FY23e enables the announcement of a further 2p/share special dividend, incremental to the 3p/share announced in January and paid last month. By June23, Centaur will have successfully paid out £11.6m since the pandemic (15% of market cap) whilst still growing net cash and investing for growth. The business is well on track to deliver its MAP23 strategy, with no changes to forecasts. A 12% FY23e FCF yield offers compelling value, and we reiterate our BUY.
Robust momentum: Centaur has today reported strong FY results, with revenue up 6% to £41.6m and EBITDA of £8.5m (5% ahead of cons), a margin of 20.4%. Impressively, repeatable revenue is now 77% of the group. Net cash (pre-IFRS16) ended the year at £16.0m – management announced a FY ordinary dividend per share of 1.1p but, following on from the 3.0p special dividend announced in January, announced another 2.0p special dividend – a total of 6.1p per share. Both Xeim and The Lawyer delivered revenue modestly ahead of our updated assumptions, but Xeim profitability was the key driver of out-performance. Strategy taking effect: Management notes that the Flagship 4 brands have underpinned momentum in the group in 2022, helped by both cross-selling initiatives and new product launches to grow average revenue per major client – in particular we would highlight The Lawyer performing ahead of expectations (with corporate renewal rates reaching 116%) and MW Mini MBA delivering 7% growth despite tough comparables, supported by price inflation. On the outlook, the focus on organic growth combined with cost control continues, with trading in 2023 thus far in line with expectations – despite the macro uncertainty, mgmt. expects to deliver on the MAP23 targets. Still fundamentally the wrong price: The share price rose sharply in the early part of 2023, helped by the first special dividend, but the shares still only trade at <6x calendar FY24E EBITDA – we believe this significantly under-values the faster, and increasingly resilient, long-term growth trajectory of the group as it becomes even more integral to the operations of its blue-chip customers. If public markets do not reflect this over time, we believe – as seen in other sector examples recently –trade / private buyers may take advantage of this.
Centaur’s year-end trading update indicates revenue of at least £41m and an EBITDA margin of more than 19.5%. Our FY22e EBITDA, PBT and EPS numbers are unchanged, showing strong growth over the prior year, albeit with a slower H222. Notwithstanding the reduced momentum, Centaur should still meet its FY23 MAP23 targets of £45m in revenue and an EBITDA margin of 23%. Given the strong cash performance, with year-end net cash of £16.0m (excluding lease debt), management has announced the payment of a special dividend of 3.0p per share, payable in February. This still leaves the group with plenty of cash to invest and grow.
Centaurs FY22e update once again demonstrates positive underlying business momentum delivering continued top-line growth and strong H2 margin expansion despite the uncertain macro backdrop. Revenues are guided to be at least £41m (+5% y/y; SCMe: £42.1m) with margins of 19.5% implying £8.0m adj EBITDA (+25% y/y; SCMe: £8.0m). Net cash of £16.0m was well ahead of forecasts (£15.3m) implying cash conversion remains strong given balance sheet strength, management are to return £4.4m (equivalent to 3p/share) to shareholders on the register on 27th January via a special dividend (incremental to a forecast FY23e 1.5p/share underlying payment), bringing total payments to c£8m since the pandemic. On outlook, management offer slightly more cautious view given the uncertain macro backdrop and soft enterprise spending outlook, yet remain focused on meeting MAP23 targets for revenues of £45m and EBITDA margins of 23%. We make minor (2%-3%) downward tweaks to forecasts only, and continue to see current valuation (FY23e FCF yield: 12%) as a compelling entry-point.
Overall resilience: In its FY22 trading update today, Centaur has delivered a resilient performance, noting the good yoy growth in revenue, profit and cash the company has achieved. Revenues are expected to be ‘at least £41m’ - modestly below our previous forecast, reflecting the impact of the uncertain macro-economic environment and inflationary pressures in the year causing growth to slow in H2. We believe the ‘Core’ brands are likely to have been the main area seeing slowing growth, reflecting the greater cyclicality inherent in areas such as marketing solutions & recruitment. The increasingly high quality nature of the revenue streams, combined with natural operational gearing, means management expect a margin of more than 19.5%, ahead of our previous estimate. Strong cash generation leaves net cash at c.£16m at YE22. Understandable caution, but confidence nonetheless: On the outlook, management maintain a cautious view on the wider global economy going into 2023, but we continue to expect them to deliver on their MAP23 targets in the programme’s final year. The innate confidence in the quality of the business and its cash-flows is reflected in management announcing a special dividend of 3p today (c£4.4m) over and above any ordinary dividend (INVe 1p for FY22E) – to be paid on February 10 to those on the register on January 27. Value not reflected in the share price: We cut EBITDA by c.4% mid-term. Despite the recent rally, Centaur still trades at just 5.6x CY24E EBITDA (or c13x PE). Given the increasing strategic importance of Centaur’s products and services to customers, and the increasing resilience of the cash generative revenue growth this underpins, we believe the valuation is fundamentally the wrong level, and that trade buyers could seek to take advantage of this opportunity if public markets do not re-rate the stock.
Centaur has posted good H122 figures, with revenues ahead by 8% on H121 and an uplift in EBITDA margin from 12% to 17%, well on the way to achieving the 23% targeted within management’s MAP23 objectives. The emphasis on driving higher-quality revenues from premium content, marketing services and training and advisory is giving the group a resilient earnings base. High subscription renewal levels indicate the utility to clients, with continued investment in content and products ensuring that these stay relevant and value-adding. The half-year balance sheet net cash was £14.2m and the valuation remains at a marked discount to peers.
Centaur Media posts another half of strong progress as the Group progresses further towards its transformational MAP23 goals (FY’23e revenues and EBITDA margin of >£45m and 23%). Revenues grew +8% y/y to £19.8m (SCMe: £19.8m), supported by continued strong MW Mini MBA performance (+16% y/y; est H1 Mini MBA revs: c£5m), and steady ‘The Lawyer’ growth (+6% y/y to £3.7m; SCMe: £3.8m). Adjusted EBITDA margins expanded +5pp y/y to 17% benefitting from enhanced scale and strong management cost control. Whilst Centaur is not immune from inflationary headwinds, management have successfully driven structured customer price rises, helping to mitigate the inflationary impact alongside continued transition to higher quality revenue streams (Premium Content, Marketing Services and Training/Advisory sales now 78%/revenues; H1’21: 73%). Net cash rose to £14.2m at the HY outturn, with adj FCF of £2.4m again demonstrating the attractive cash generative nature of the business model. We make no material changes to our forecasts, and project £4.4m of FCF in FY’22e representing a 9% FCF yield. Centaur remains a strong BUY, with a 12-month price target of 76p offering c70% upside.
Robust H1 results: Centaur has today reported robust interim results, with revenue of £19.8m underpinned by 8% organic growth. Tight cost control led EBITDA to grow 55% to £3.4m (a margin of 17%), and cash conversion of 125% leaves net cash of £14.2m at period end (with the company paying an interim dividend of 0.5p). By division, Xeim grew 9% and The Lawyer grew 6%, albeit the Flagship 4 brands in the group together grew 11% (representing 68% of total revenues) – in particular The Lawyer saw double digit growth in the value of subscription renewals, and MW Mini MBA saw another 16% growth. More broadly, management note that structured price rises have allowed them to mitigate inflationary cost pressures thus far. Confidence in the future: Management note that the results met their expectations in H1, and that looking further out trading in H2 has continued as expected, with a strong performance for The Lawyer’s awards event in July. Management believe the performance makes them confident on delivering on their MAP23 targets – and the net cash position provides both headroom to invest in driving future growth and support in the event of macro-economic weakening. Fundamentally under-valued: We leave forecasts broadly unchanged. The shares currently trade at around 5x FY23E EBITDA, a significant discount to a wider peer group, potentially reflecting limited liquidity. The transformation of the group in recent years has been dramatic, leaving a much higher quality portfolio delivering resilient growth from their underpinning technology platforms – from a fundamental standpoint, we believe this should justify a much higher valuation. Should this not occur in public markets then, as seen in recent transactions, private investors may take advantage of the opportunity.
Centaur’s FY21 results are ahead of our forecasts, showing 21% revenue growth and adjusted EBITDA margin of 16.4%. This constitutes good progress towards management’s MAP23 goals for FY23 revenues of £45m and adjusted EBITDA margins of 23%, both of which should be achieved under our modelled scenario, despite potential headwinds of rising costs. Iterative improvements in the client offering and a greater emphasis on cross-selling underpin the forecast top-line growth, funded from the cash-positive balance sheet. The valuation remains at a marked discount to peers.
Centaur Media continues to execute successfully on its MAP23 strategy. FY’21 revenues grew +21% y/y to £39.1m (SCMe: £38.5m), marginally ahead of SCMe forecasts and benefitting from strong renewal rates, positive momentum in eLearning and recovery in events. Adj EBITDA grew +68% y/y to £6.4m (SCMe: £6.1m) supported margins expanding to 16.4% (+470bps y/y), tracking ahead of forecasts and remaining on track for MAP23 (>£45m revs and 23% EBITDA margin). Top-line momentum is underpinned by continued investment into the Group’s ‘Flagship 4’ brands, which is enabling Centaur to capture rising demand for high quality digital content and learning resource. Top-line growth forecasts of 8% y/y for FY’22e include further recovery in events as travel restrictions ease further, whilst recovery in Influencer Intelligence revenue trends (Fashion and Retail vertical exposed) also support projections. Further subscription and eLearning delegate additions is forecast to drive continued margin expansion, which alongside structured price increases, more than offset inflationary cost pressures in FY’22e. An EV/FY’22e EBITDA multiple of 6.4x and FCF yield of 10% create a compelling entry-point into a high-quality content story.
Strong FY21 results: Centaur has today reported strong FY results – revenue of £39.1m (reflecting 21% underlying growth) was 2% ahead of our recently upgraded forecast, with EBITDA of £6.4m also ahead of expectations. With net cash of £13.1m (pre-IFRS16) at year end, the company has proposed a total FY dividend of 1p, in-line with policy. Management highlight that the business saw its Flagship 4 brands benefit from optimised pricing, strong renewal rates and a recovery in events during the year, and the internationalisation of the group continues (37% of revenue now outside the UK). EConsultancy performed particularly strongly, whilst The Lawyer saw an impressive 116% client renewal rate. On track for MAP23: Management note the performance in 2021 provides a good platform for further growth in 2022 (trading in the first two months is in-line with expectations) and leaves them on track to deliver on their MAP23 targets. This is despite the headwinds of inflation, competition for talent and geopolitical developments, with management noting the plan to use structured price rises, supplier negotiations and flexible reward structures to manage margin against this backdrop, whilst continuing to invest to take advantage of market trends. Mis-priced equity: We leave revenues and EBITDA broadly unchanged and introduce new FY24E forecasts. After a strong share price performance in 2021, the recent pull back in the shares leaves them trading at c.5x FY23E EBITDA, a meaningful discount to peers. The group has undergone a fairly radical transformation in recent years, leaving it with robust long-term structural growth drivers in place, enabled by scaleable technology platforms that have been built – in our view this warrants a significantly higher valuation.
Impressive FY trading update: Centaur has today released a short FY trading update after a strong period of trading in Q4. Management note that trading was strong across the Flagship 4 and Core brands, but particularly so in EConsultancy, MW Mini MBA, The Lawyer, and Marketing Week. As a result, it now expects revenues of at least £38.5m for FY21 (previously ‘at least £37m’), with an EBITDA margin ‘in excess of 15%’ (previously 15%). Strategy on track: As a result, the company ended the year with net cash of £13.1m (INVe previously £12.3m pre-IFRS 16) and management state that they remain on track to meet their MAP23 targets – we believe these results further de-risk the achievement of these. As highlighted in our note post the recent Capital Markets Day, we see a number of exciting opportunities ahead for the business, as its scalable tech platforms and proprietary expert content make it both increasingly important to customers, and better positioned to capture structural growth in demand. The role of the UK as a hub for global legal activity is driving demand for legal market intelligence, underpinning 110%+ subscription renewal rates and new product demand at The Lawyer whilst at Xeim, the pivot to providing multi-product subscription offerings to major marketers is well underway. Still early days: We increase FY21E revenues/EBITDA by 3/8%, and by 2/3% longer-term. Despite being one of the best performers in the sector in 2021, the shares still trade at just c.6x calendar FY23E EBITDA, a discount to peers. The effects of the dramatic transformation the portfolio has undergone in recent years are becoming increasingly apparent, and as the company builds a track record of delivering on or beating expectations, we expect the shares to continue to re-rate. We still see significant upside to go for.
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Centaur’s year-end trading update indicates the group had a good Q421 and FY21 results will show revenue and EBITDA margin ahead of consensus. We lift our FY21 revenue estimate by £1.0m to £38.5m, which represents 19% growth over FY20, and EBITDA by 5% to £5.9m (+55% y o y). Our increased FY22 projections reflect this higher base. Year-end cash of £13.1m (excluding lease liabilities) was also ahead of our previous forecast of £11.7m. We see management’s MAP23 targets as demanding but achievable, with the valuation overstating the execution risk.
Positive Centaur Media trading momentum has continued into Q4, with both revenues and EBITDA outperforming market expectations. Group FY’21e revenues are now guided to be £38.5m (SCM: £37.1m), growing +19% y/y as Flagship 4 brands continue to deliver. The increasing proportion of higher-quality premium content, elearning and subscription revenues continues to support margin expansion, driving EBITDA margins to >15% EBITDA (SCMe: 14.9%). Implied EBITDA outperformance (c£0.5m) and strong cash control saw net cash rise to £13.1m at the FY’21e outturn, materially ahead of SCMe forecasts (£10.5m; FY’20: £8.3m). We note an abnormally strong implied FCF margin of c18% (SCMe: 11%) reflecting strong cash control, yet bolstered we believe by some one-off working capital benefit to unwind in FY’22e – we see 15% as a sustainable mid-term FCF margin projection. We upgrade FY’22e/FY’23e revenue and adj EBITDA forecasts by 2%/1% and 3%/1% respectively. FY’22e adj FD EPS forecasts rise +8%, crossing the 2.4p/share dividend growth threshold and raising FY’22e DPS forecasts by +3% above the minimum 1p/share (40% pay-out ratio). CAU enters FY’22e with positive growth momentum and a strong balance sheet, whilst thought-leadership in core verticals and an increased proportion of higher-margin sales offers protection against inflationdriven margin pressure. Our forecasts, which imply successful execution on management’s MAP23 strategy, generate FY’23e FCF of £7m, a 12% FCF yield.
Centaur’s recent capital markets day (CMD) facilitated a deeper dive into the transformation that the group has undergone, with detailed presentations on the underlying businesses by operational management. These underlined the route map towards achieving the goals enshrined in MAP23 – management’s target of revenues of over £45m and an adjusted EBITDA margin of 23% by FY23. We edged up our estimates on the trading update accompanying the CMD and see the MAP23 targets as demanding but achievable, with the valuation overstating the execution risk.
Centaur’s emerging potential Yesterday’s Capital Markets Day gave a clear view of the opportunities ahead for Centaur. At the most fundamental level, the ability to provide business information, training and specialist consultancy services to help its professional customers navigate ever more complex markets makes Centaur increasingly valuable to them. Providing blended enterprise level subscription offerings, via cross-selling initiatives, that get embedded in customer workflows should make Centaur increasingly resilient, profitable and cash generative, as well as strengthening its competitive position. The net cash position provides a buffer in uncertain times, but optionality longer term to support growth and cash returns in our view. Growth – tech-supported, content-led and demand-driven Scalable tech platforms also support growth, the importance of proprietary expert content across both Xeim and The Lawyer was highlighted, and the numerous structural drivers of demand were clear in our view. The role of the UK as a hub for global legal activity is driving significant growth in demand for trusted legal market intelligence, underpinning 90%+ subscription renewal rates and new product demand at The Lawyer. At Xeim, the pivot to providing multi-product subscription offerings to major marketers is well underway and the likes of Influencer Intelligence / Mini MBA both have sustainable pathways for long-term growth. The strong group performance on the back of these factors in FY21 increasingly de-risks the achievement of MAP23 targets. Plenty more to go for Even post yesterday’s 7% gain, the shares still trade at c.6.4x FY23E EV/EBITDA. Having undergone a metamorphosis in recent years, the robust underlying drivers of revenue are becoming increasingly apparent. As Centaur continues to build a track record of delivering on growth expectations, we expect the valuation discount versus larger peers to continue to close - we still see significant upside to go for.
Centaur’s trading update, issued alongside its capital markets day, indicates good progress in H221 to date, building on the post-pandemic recovery in revenues and margin reported for H1. We have edged up our expectations, particularly on the pace of improvement in EBITDA margin towards the FY23 management target of 23%. The share price has held the gain made after the interim results and is now up 68% year-to-date, yet the rating remains at a discount to peers.
Robust growth: In its 9-month trading update today, Centaur notes that strong trading conditions have continued in H2, underpinning growth in revenues and EBITDA across both divisions. In the key ‘Flagship 4’ brands, eConsultancy has seen subscription growth ahead of expectations on the back of new business wins, whilst Mini-MBA continues to see high double-digit growth and, encouragingly, Influencer Intelligence is seeing a recovery on the back of improving renewal / new business trends. The Lawyer is also ahead of target for renewal rates. Net cash reached £12.4m at the period end (pre-IFRS 16). FY21 revenues at top end of expectations: Centaur expects FY21 revenues of >£37m (the top end of expectations) with an EBITDA margin of c.15% – within this, Xeim is expected to see >17% organic growth, with The Lawyer up >7% (both faster than our previous forecasts). Longer-term, management reiterate that Centaur is on track to meet the MAP23 targets – we expect more detail on all these trends at the CMD later today. Asset mis-pricing: We increase revenues by 3% in FY21E and 1-2% after that, with EBITDA increasing c.6% this year and c.1% longer-term. Centaur currently trades at <6x EV/EBITDA in FY23E, or <15x PE – Centaur is gradually building a track record of delivering on growth expectations, and the robust drivers of this growth are becoming more apparent. Both of these factors should help highlight the dramatic transformation that the group has undergone and the fundamental mis-pricing of the business at the current level which leaves scope for significant upside.
Centaur Media’s strong operational performance has continued into H2, with both revenue and EBITDA margin now guided to exceed current market expectations. Outperformance is being driven primarily by the Group’s XEIM (Marketing) segment, where Econsultancy subscriptions ran ahead of management forecasts driven by new business wins, whilst Mini MBA continues to see high double-digit growth (H1’21: 84% y/y). The Lawyer segment has also performed strongly, and is now guided to deliver 7% y/y growth in sales. Management project Group revenues to exceed £37m (SCM: £36.4m), with EBITDA margins of 15% (SCM: 14.5%), and we upgrade our forecasts for the second time since numbers were reintroduced in January – our FY’21e revenue and EBITDA forecasts rise by 2% and 5% respectively. Forecast FY’21e FCF represents a compelling 6% FCF yield, with the Group trading on an 8.5x FY’22e EV/EBITDA multiple whilst offering a 38% 2-year EBITDA CAGR to FY’23e.
Centaur delivered strong H1 sales and EBITDA results well ahead of our forecasts (+8% and +16% respectively). H1 sales grew +22% y/y to £18.3m (SCM: £17.0m) as event recovery came through quicker than forecast, whilst adjusted EBITDA margins expanded to 12.0% (+6pp y/y; SCM: 11.2%). Strong working capital control and an increase in advanced orders also led to a £4.7m FCF inflow (SCM: £0.2m), driving net cash up to £11.9m and providing ample support for the interim dividend (0.5p/share). Within the mix, Centaur’s ‘Flagship 4’ brands (66%/revs) delivered +26% y/y revenue growth: Mini MBA remains the standout performer (+84% y/y), whilst The Lawyer and Econsultancy brands also performed well (+30% and +14% y/y respectively). Continued blue-chip contract win momentum is helping to drive growth, and includes wins with Pepsico, Abrdn, Toyota and TikTok. Results leave management well on track to achieve MAP23 goals (>£45m sales and 23% EBITDA margin by FY’23). Given H1 strength, we upgrade FY’21e sales and EBITDA forecasts by +1% and +3% respectively. Centaur trades on 6.2x EV/FY’22e EBITDA, offering a 10% FY’22e FCF yield on our numbers.
Centaur Media’s H121 results show revenue and EBITDA margin picking up strongly, with the group on track to meet its FY23 targets, as set out in January in its MAP23 strategy. This envisages group revenue of £45m, with a 23% EBITDA margin. The Flagship 4 brands are leading the way, posting 26% revenue growth over H120. Econsultancy’s blended learning is achieving good traction, while events across the group are benefiting from attractive digital propositions. We have edged our revenue forecast up by £1m in both FY21e and FY22e, retaining earlier expectations on adjusted EBITDA. The H121 cash performance was particularly strong, and we now expect year-end net cash of £11.0m (was £8.3m).
Centaur Media enters FY’21 in excellent shape having delivered adj FCF of £3.6m and retaining a net cash position of £8.3m at the FY’20 outturn. As previously flagged, CV19 headwinds impacted events and recruitment advertising, with a16% y/y decline in sales from continuing ops to £32.4m in-line with expectations. A beneficial revenue mix shift towards premium content sales and strong cost control led to EBITDA moderating just 5% y/y, whilst cash conversion remained strong at 100%. Encouragingly, net renewal rates at The Lawyer have remained strong (106%), whilst Mini MBA revenues rose c.90% y/y. Management recently introduced its MAP23 strategy targeting 23% EBITDA margins on “at least” £45m of sales by FY’23E, and we see the Group has well placed to meet these updated targets. Our forecasts generate £6.5m of FY’23E FCF, representing a 22% FCF yield.
Centaur’s FY20 results are a shade ahead of our forecast and show a resilient performance considering the impact of the pandemic. Q1 trading to date is in line, in what is generally the quietest quarter for revenues with no scheduled events or Mini MBA courses, and cash at end February was £8.2m (IFRS liabilities only). The group is now reinstating dividend payments and will pay 0.5p for FY20, with a minimum payment of 1.0p set out for future years. Centaur’s MAP23 strategy, laid out in January, gives the framework and impetus for revenue growth and improving profitability, which should in turn drive an increasing valuation.
Centaur has undergone a significant transformation over recent years. It is now a focused provider of market intelligence and consultancy, with growing subscription revenue, addressing two verticals, the marketing and legal markets. Management’s updated three-year plan, MAP23, sets out how its portfolio, including four key flagship brands, will be developed as a growing, profitable and sustainable B2B business, with attractive cash-flow characteristics. Under MAP23, revenues are targeted to exceed £45m in FY23 on a 23% EBITDA margin, which sits comfortably with our FY22 forecasts. The shares are priced at a notable discount to B2B media peers, with cash at 17% of the market capitalisation.
Centaur’s trading update highlights revenues and EBITDA in-line with guidance. Revenue from continuing operations declined 16% y/y to c.£32m, encouraging in the context of CV19 impact to events sales and retail and fashion end-markets. Premium content has remained resilient, with Mini-MBA growth (H1: >100% y/y) a stand-out for the Group during FY’20E, whilst renewals in The Lawyer were also positive (105% net renewal rate). The Group exits 2020 with a healthy net cash position (£8.3m) and resilient FY’20E performance giving management the confidence to introduce its MAP23 strategy, targeting 23% EBITDA and “at least” £45m of sales by FY’23E. Reintroduced N1S forecasts generate £45.3m of sales and £10.5m of adj EBITDA, with FY’23E FCF of £6.5m representing a 24% FCF yield.
Encouraging pre close; targets in for 2023
Centaur’s Q3 shows high business resilience in the context of a challenging market backdrop. Ex-MarketMakers (“MM”; closed Aug’20), revenue decline slowed in Q3 to -16% y/y (Q2: -24%) whilst net cash actually rose (Q3: £9.3m; Q2: £8.4m) supported by exceptional cash management. Across Centaur’s portfolio, events and recruitment advertising saw continued CV19 impact, yet premium content performed well and the e-learning business saw continued strong demand. The Group also anticipate The Lawyer to achieve an FY’20E renewal rate of 105%. The Group is reinstating FY’20E guidance, with sales of >£32m from continuing ops (ex MM), and an adj EBITDA margin of c.10% (FY’19: 9%). Given improved visibility over FY’20 we also reinstate forecasts to the year end, yet longer term forecasting for events/ advertising streams remains challenging given fluidity in the macro backdrop. 0.75x EV/FY’20E sales (ex MM) looks inconsistent with growing premium content and elearning sales which make-up >50% of forecast FY’20E revenues.
Centaur Media has delivered a resilient H1 in which adj EBITDA remained positive at £1.0m (H1’19: £1.2m). Group sales decline of 27% to £17.7m was substantially offset by tight cost control and a shift in mix towards higher quality revenue streams. The Lawyer revenue renewal rate remained strong (106%) and supported Group premium content sales (-3% y/y to £6.9m), with Mini MBA sales (+101% y/y) performing well. Telemarketing sales (-36% y/y) and events (-82% y/y) were unsurprisingly impacted by lockdown restrictions, with MarketMakers now being restructured to focus Group resources on more profitable areas. The outlook remains uncertain, and we are not reintroducing forecasts at this time, however in an undemanding medium-term scenario, we see £5m FCF as achievable which would generate a FCF yield of 19% at current valuation. Net cash of £8.4m was held at 30 June, while an undrawn £1.7m overdraft and £10m facility with covenants waived until Sept 2021 provide additional balance sheet strength.
Centaur has provided an update offering further insight into trading post-lockdown. Encouraging performance has been noted across digitally focused segments, with MiniMBA (e-learning) seeing strong demand and contract wins in Econsultancy and XEIM labs supporting clients with digital transformation projects. The Lawyer subscription renewal rate, supported by premium content, also remains healthy. As previously flagged however, Telesales has seen a sharp drop in sales as a function of disruption to customer businesses; c50% of MarketMaker staff have been furloughed to minimise impact to profits. H2 events are also at risk, although the Group is considering online formats early in order to reduce irrecoverable costs and maximise delegate and sponsorship revenues. Focus on near-term cash preservation has led to the prudent decision not to pay the final FY’19 dividend, saving £0.7m of cash. The Group held cash of £6.7m at April 3rd, with potential access to undrawn banking facilities of £25m subject to positive discussions currently being held to amend covenants should short-term liquidity be required. The range of outcomes remains wide, and we have no forecasts published at this time, however at 0.6x EV/ FY’19 sales the Group looks to be priced as a distressed asset. Given balance sheet strength, a building recurring revenue model and improving high-margin revenue mix, this valuation looks incongruous with fundamentals in all but the most extreme downside scenarios.
Centaur Media has issued an update including an assessment of the potential impact of Covid-19 and the measures being taken to conserve cash. Remote customer support operations have been enabled to ensure continuity, training and learning modules have been transitioned online, whilst digital subscription revenues remain resilient. Elsewhere, profit protection measures include a substantial reduction in marketing costs, temporary demand-driven furlough of some employees, a halt on recruitment and deferral of non-essential capex. The Group’s dividend payment date (due 29 May) has been delayed as a result of the forced rescheduling of the AGM due to travel restrictions. The AGM has been rescheduled to 30 June in line with the Group’s articles, meaning shareholder approval for dividend payment cannot be sought. The range of potential outcomes remains wide near-term given the developing Covid-19 situation, and management have temporarily withdrawn FY’20E guidance. We are temporarily placing forecasts under review, although route to longer-term fulfilment of the Group’s MAP22 target of EBITDA margins of 20% by 2022 remain open we believe. The Group enters this uncertain period with a strong balance sheet (3 April: £6.7m cash), and untapped debt facilities of £25m, and looks well placed to capture the uptick in demand as Enterprise marketing campaigns return.
Centaur Media has announced its FY’19 results which show continued delivery against the Group’s transformational MAP22 strategy. Group adj EBITDA rose by 86% to £2.6m, as the Group benefitted from a change in revenue mix, exiting lower margin operations (Group sales: -3% y/y). Centaur enters FY’20E a radically different proposition from 2018, with building high-quality digital subscription and e-learning revenues, a strong balance sheet (£9.3m net cash and an untapped £25m credit facility) and a stream-lined cost base (£5m of annualised cost savings delivered, with the bulk of impact forecast in FY’20E). The Group trades on 4.7x EV/EBITDA, a 50% discount to peers, and is forecast to pay a 3.2% FY’20E dividend yield.
Centaur Media has announced a positive trading update, in line with market expectations. We are highly encouraged by growth in Lawyer subscription revenues and mix-driven margin improvement in XEIM which are progressing in line with management expectations for the MAP22 strategy (targeting 20% pre-IFRS16 EBITDA margins by 2022; H1’19: 2.5%). Centaur enters 2020 a radically different proposition than in 2019, stream-lined to focus on two core verticals in which the Group has strong brand presence. FY’20E EBITDA margins are forecast to improve rapidly as the Group rationalises support costs to match its new, focused structure having completed its disposal programme in H1. With trading in-line, we make no adjustments to our forecasts at this time. Our selected peer group trades at 10.5x EV/FY’20E EBITDA (Centaur: 5.8x), offering 21% 3-year EBITDA CAGR (Centaur: 51%).
Since 2016 Centaur has transformed into a lean and digitally-focused Group, delivering a high and growing proportion of revenues generated through subscription sales. Having generated c.£16.8m of net cash proceeds from the Group’s disposal programme, focus now turns to successful monetisation of the attractive remaining brands alongside additional stream-lining of central office costs. Management have announced ‘MAP22’, setting out the Group’s aim to deliver a 20% pre IFRS16 EBITDA margin by 2022 (FY’19E: 4.5%). With high margin subscription and e-learning revenues building, and £5m of cost savings identified, we see management’s targets as achievable. We forecast 6.3% Group sales CAGR to FY’22E, alongside a 15pp improvement in margins. A peer-based multiple approach to valuation implies an intrinsic value of 58p/share which looks compelling versus current levels (33p/share).
Interims revealed broadly flat underlying revenue performance, with adjusted operating losses narrowing to £1.3m (H1’18: (1.8m)). Financial performance was secondary however, to the news that management have now completed the strategic disposal program, receiving £16.0m of net proceeds in the period. £5m of disposal proceeds are due to be returned to shareholders as part of a 3.5p/share dividend payable on 25 October (inclusive of 2p/share special dividend), with further returns to shareholders in 2020 subject to performance. Management expect the completion of the disposal program and simplification of the business model to enable a £5m reduction in annual costs. The Group has also announced its MAP22 strategy targeting revenue acceleration and cost efficiencies alongside a new progressive dividend policy targeting a 40% pay-out ratio of adjusted earnings or 1p/share, whichever is higher. We have no forecasts in the market at this time; however with the disposal program complete and new strategy outlined we will look to update the market in due course.
Centaur Media (CAU LN) AGM statement – trading in-line | Elektron Technology (EKT LN) Hidden value | GlobalData (DATA LN) Exploiting the GlobalData model |Horizon Discovery Group (HZD LN) Possible offer by Abcam illustrates attractive growth prospects | James Fisher & Sons (FSJ LN) Trading in line; good contract momentum | Springfield Properties (SPR LN) Acquisition of Dawn Homes to accelerate growth
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Despite a slightly soft top line (£72.6m vs N1Se £74.3m) Centaur has delivered EBIT 10% ahead at £6.6m (N1Se £6.0m). 2018 trading has started satisfactorily with core subscriptions and events bookings healthy. Advertising remains a drag, but a shrinking one. Looking forward to 2018, revenues will be driven by the changing mix of the business. The big engines (MarketMakers and Marketing) should drive the top line with MarketMakers annualisation due to boost profits along with good growth at the Lawyer and a margin improvement in Marketing. We expect 2018 consensus revenues to edge down to £77.0m (N1Se £79.7m) and EBIT to £6.5m (N1Se £6.7m). Cash generation was significantly ahead of even the revised January guidance with £4.1m of net cash (N1Se pre-update £0.2m). Working capital improvement is sustainable so we expect cash to build to c£4.5m+ during FY18. As we have flagged this means there is substantial capital available (£15m+) for acquisitions to boost earnings and improve the mix further. Centaur has moved on to the front foot and now has the opportunity to break free of its past. We expected the motivated management team to push on with change with the support of the new chairman. The shares are cheap and could re-rate higher than our TP implies. Buy.
Centaur Media (CAU LN) Investor Day | IQE (IQE LN) Joint Venture starting to deliver | LiDCO Group (LID LN) Appointment of French distributor | Northgate (NTG LN) Complex update – change to fleet strategy | Rathbone Brothers (RAT LN) Solid FY17 outturn, some additional cost investment flagged | Surgical Innovations Group (SUN LN) Prelims to show strong growth | Wilmington (WIL LN) Interim results & new Chairman | Zinc Media Group (ZIN LN) Update and contract awards | Zytronic (ZYT LN) AGM Update
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Centaur has signalled a satisfactory end to 2017 with earnings on track. The MarketMakers acquisition has been integrated and is performing well. This and other portfolio adjustments will have improved the revenue mix further (a key focus that will improve visibility and earnings quality). Looking forward there are some positive elements from 2017 that we focus on. Cost reduction activities during the year will help underpin our 2018 profit estimates. With cash collection improvements in H2 2017 having continued to be strong we expect the net cash position at year end to be better than our £0.2m estimate. This will in turn lift the capacity for acquisitions. Centaur can comfortably invest £10m to £15m to boost earnings and further improve its product mix and offering. The Company has announced an investor seminar that will focus on the MarketMakers acquisition and its potential to help the wider group (date: 21st February). The stock trades on just 6.7x 2018 EV/EBITDA and this fails to reflect progress. Continued execution should help drive a re-rating (for example a 10x EV/EBITDA multiple would imply 68p and 12x 79p). We also expect an acquisition(s) at some point to boost earnings adding to the potential upside. We reiterate our Buy rating.
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The market will not be surprised by Friday’s disposal of Centaur’s non-core B2C Home Interest business to Future, nor that some of the proceeds are immediately being applied to investment in B2B, via the conditional back to back acquisition of MarketMakers. We regard this deal as very important strategically and we are also encouraged by Centaur’s in line trading commentary. We put our numbers under review ahead of the interims on 26th and look forward to seeing how Centaur proceeds with its much strengthened balance sheet and transformational focus on B2B.
Applied Graphene Materials (AGM LN) Board and operational appointments | Centaur Media (CAU LN) Trading update provides reassurance | Clinigen Group (CLIN LN) In line H1 update | Eckoh (ECK LN) Significant contract win via Capita partnership | Restaurant Group (RTN LN) Mixed YE update with further downgrades | StatPro Group (SOG LN) Full year revenue and profits in line
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Centaur has agreed to acquire the business and assets of Oystercatchers LLP ("Oystercatchers") for a maximum £3.35m on a multiple of c5x PBT, subject to performance. These assets will add to Centaurs’ existing Marketing sector assets and more specifically to its consulting activities led by Econsultancy. There is an opportunity to cross sell CAU services to Oystercatchers high quality client base, which features many multi-national FMCG companies (Oystercatchers cites a ln impressive list, see http://theoystercatchers.com/what-our-clients-have-to-say/ ). Oystercatchers offers three main services; (i) mandate tender advice and management (essentially helping advertisers appoint agencies for projects), (ii) marketing training for clients in-house marketing staff and (iii) a series of networking events (The Oystercatchers Club) for client staff and agencies. While we don’t expect any benefit to FY16 there should be a full effect in FY17. We estimate accretion of 4.2% at the diluted EPS level (PBT rises 5.1%, i.e. before share dilution effects). After the disappointment of the July warning, driven by weak advertising around BREXIT, it is encouraging to see Centaur continuing to move ahead with strategic development in its largest unit. Provided Centaur delivers a satisfactory update in mid-October and continues to progress the shares should recover further (now c45p vs low of <35p). We put our forecasts under review ahead of formalising our adjustments. The shares look cheap, BUY.
P&L results were in line with N1Se expectations with net debt slightly high due to working capital timings. After a difficult end to 2015 the Group appears to have had an encouraging start (notably the large Travel show revenue was +30%). Bookings are up 6% YTD and the company is targeting at least 5% with a modest improvement in margin (2015: 14.9%). We forecast 4.5% with a 15.4% margin and maintain this. We expect consensus to edge down to this level. Improving the performance of Marketing is key and the unit has a new MD. Centaur is keen to deliver against it promise of consistent healthy revenue growth and with less turmoil from change has a better chance of delivering against this in 2016. Our TP is based on just 8x EV/EBITDA and a decent performance this year should realise this potential.
The November trading update disappointed after signs earlier in the year supported Centaur delivering against its plan to generate healthy organic growth. Entering 2016 we expect revenue execution risk to reduce as the inherent turmoil of structural change, new staff, new working practices, a new finance system and product change/launches eases. The key to the re-rating of Centaur is delivering on the top line and we remain more focused on revenue progress than profit growth at this point. Nonetheless we do forecast high single digit earnings growth. We adjust our TP to 75p (was 94p) to reflect the need for execution. The stock does look good value with a 12m TSR of 29% (including a healthy 5% yield component). The share price has continued to slide post the update and touched 55p briefly, c30% below the levels before the trading update. While there has been disappointment there is no disaster. Lower execution risk and tempered enthusiasm should provide a floor for recovery.
Centaur Media (CAU LN) Seeking revenue progress in 2016 | Swallowfield (SWL LN) Interims due on 1st March
Centaur Media plc Brand Architekts Group plc
Revenue growth has disappointed slightly (underlying revenues are up 2% for first 9 months) but efficiencies essentially protect profit expectations. In essence a combination of events reorganisation and weak Marketing sector recruitment revenues has resulted in slightly softer growth. Cost controls and continuing benefits from reorganisation support profit expectations (we expect to edge down BPT by only c£01.m). New product launches are on track and the significant changes to the back end are in place. Digital growth is strong (+19%) and forward bookings for events is up 29%. These two areas are key to Centaur delivering on its growth plans. The shares have eased, but on the basis trading is brought back on track this looks like an opportunity. The company is giving an investor presentation later today that should shed more light on how initiatives are progressing.
CENTAUR MEDIA (CAU LN) Q3 trading update | ECKOH PLC (ECK LN) 3-Year Haloh win with global multimedia retailer | FENNER PLC (FENR LN) US coal still deteriorating; US restructuring | IMAGINATION TECHNOLOGIES GROUP (IMG LN) New CFO appointed | PREMIER TECHNICAL SERVICES GRP LTD (PTSG LN) Geographical expansion of Electrical Testing division | ST IVES PLC (SIV LN) Execution leads to the inflexion point | VERONA PHARMA PLC (VRP LN) Cystic Fibrosis data published in American Journal of Physiology
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In this edition of our biannual sector review, we summarise the manner in which recent results, trading statements and M&A activity have influenced our forecasts and recommendations. Most updates have met expectations/ provided reassurance on full-year prospects; however, recent share price performance has been disappointing and in many cases, primarily influenced by macro factors. We see value across a range of stocks (our top five positive picks are WPP, ITV, UBM, ITE and Quarto Group*) and regard several others as fairly valued. We have no Sell recommendations in place at present.
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Centaur has been seeking to change its business so that it can deliver a better quality more consistent organic growth rate and H1 showed a solid 3%. We continue to expect the changes made to the structure and focus of the business to deliver healthy growth going forward. Based on our full year forecasts we also expect good margin progress (+120bps to 15.2%). At this stage our forecasts look conservative relative to managements target of achieving 20% margin in 2017 (N1Se 2017e 16.4%) highlighting upside risk. We lift our TP to 94p (was 90p) to reflect H1 trading is complete and maintain our Buy rating, that continues to perform well (YTD TR 25.5%).
Centaur Media (CAU LN) Progress continues | Cineworld Group (CINE LN) Assessing H2-15 EPS upside & what’s in the price | Cyprotex (CRX LN) Solid half year results | H&T Group (HAT LN) Interims in-line, positive retail performance | John Menzies (MNZS LN) Disappointing Aviation trading | Summit Therapeutics (SUMM LN) SMT C1100 progresses to Phase II open label trial
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Centaur has delivered a better than expected profit result on lower than forecast revenues. Organic growth was 3% at the group level with the Financial Services portfolio the only negative at -1%, but still better than we expected (£6.8m revenue vs N1Se £6.5m). Marketing showed the biggest variance from our expectations (£13.0m revenue vs N1Se £13.9m) and this is related to the smaller events (larger events and data/content are good). The Company is addressing this. Guidance on phasing issues implies that CAU can still achieve our revenue estimate for the year which in turn suggests that there is some upside potential. The outlook statement confirms event bookings are strong with The Festival of Marketing running on track. It also indicates advertising revenues are stable and there is good momentum in digital paid-for content revenues. Subject to the analyst meeting we expect to roll forward our TP to an FY16 basis. This implies c100p vs 90p currently and maintaining our Buy rating.
