Executing against transformational MAP22 strategy
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.
18 Mar 20
A year of transformation
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%).
15 Jan 20
Refreshed strategy: a lean and focused new Group
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).
04 Nov 19
Interims highlight completion of disposal program
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.
25 Sep 19
Small Cap Feast
Renalytix AI—developer of artificial intelligence ("AI") decision support and clinical management tools for improving early diagnosis, continual monitoring and drug development for kidney disease. incorporated in March 2018 as a subsidiary of EKF Diagnostics Holdings (AIM-EKF). Total fundraising in the range £21 - 25 m. Mkt cap - c. £67.5- £71.0m. Due 2 Nov. Finncap—proposed acquisition of M&A adviser Cavendish Corporate Finance and AIM admission. Offer TBA Kropz PLC—an emerging plant nutrient producer with an advanced stage phosphate mining project in South Africa, a phosphate project in the Republic of Congo and exploration assets in Ghana. Looking to join AIM, offer TBC, market cap TBC. Due Late October. Azalea Energy—oil and gas production and development company based in Louisiana, United States. Net production of 13 MMcfe/D (2,200 boepd) and total 1P proved reserves of 91 Bcfe (15.1 mmboe), 2P reserves of 111 Bcfe (18.5 mmboe) raising up to $38m, expected mkt cap over $100m. Due 29 Oct Path Investments— First acquisition of a 50 per cent. participating interest in the producing Alfeld-Elze II gas field located 22 kilometres south of Hannover in Germany. Seeking £10m raise. Due late Oct Crossword Cybersecurity PLC* (NEX:CCS)—the technology commercialisation company focusing exclusively on the cyber security sector is exploring its options in relation to a potential move to the AIM market of the London Stock Exchange which, if it were to proceed, would likely take place over the next few months.
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25 Oct 18
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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03 May 18
Profits and cash ahead
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.
21 Mar 18
accesso Technology (ACSO LN) Mixed performances but strong overall result | Anpario (ANP LN) Modest forecast changes; remain at Hold | Brady (BRY LN) New FY19 estimates introduced, no change to Hold rec or 56p TP | Carador Income Fund (CIFU LN) Record start for CLO new issuance | Centaur Media (CAU LN) Profits and cash ahead | Future (FUTR LN) Adding more depth | Microsaic Systems (MSYS LN) Contract with CPI Innovation Services Ltd | Vectura Group (VEC LN) FY2017 results in line, highlighting new generics strategy | Verona Pharma (VRP LN) Imminent Phase IIb data in COPD | Xaar (XAR LN) 2017 results in line, transformation continues
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21 Mar 18
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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22 Feb 18
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.
24 Jan 18
N+1 Singer - Centaur Media - Proposed disposal and acquisition as B2B evolution continues
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.
10 Jul 17
N+1 Singer - Morning Song 25-01-2017
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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25 Jan 17
N+1 Singer - Centaur Media - Acquisition to bolster Marketing division
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.
21 Sep 16
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.
17 Mar 16
Cello Group (CLL LN) Prelims | Centaur Media (CAU LN) Prelims | Imagination Technologies Group (IMG LN) Significant further cost reductions | Marshall Motor Holdings (MMH LN) Quality franchise mix, B/S and growth outlook for just 9x | Safestyle UK (SFE LN) Capital returns and factory expansion for growth | Vernalis (VER LN) Interim results impacted by a mild US flu season
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17 Mar 16
Seeking revenue progress in 2016
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.
19 Feb 16
Q3 trading update
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.
11 Nov 15
Media - The story so far
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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04 Sep 15
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%).
18 Aug 15
Interims – profit better than expected
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.
30 Jul 15
Bodycote (BOY LN) H1 decline | Centaur Media (CAU LN) Interims – profit better than expected | Findel (FDL LN) Reassuring AGM statement | Instem (INS LN) Trading in line | Minds + Machines Group (MMX LN) Domain sales growing, cash position strong | Skyepharma (SKP LN) Supportive GSK Q2 2015 results | Spectris (SXS LN) Downgrade to expectations
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30 Jul 15