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N+1 Singer - Centaur Media - Advertising offsetting good development progress

  • 29 Mar 17

Profits and cash for 2016 are slightly better than our expectations and notably cash collections have dramatically improved. Looking forward a deterioration in the advertising environment, both print and digital in January and February (total down 23%) is offsetting the momentum in events (+10% underlying 2016) and digital premium information (+19% U/L). By category the main pressure is in Financial, which management has plans to counteract with its continued strategic development. We assume this implies scaling the growth areas and curtailing structurally weak advertising driven products. Marketing (the largest unit) looks set for another strong year (achieved 6% U/L growth in 2016) and Legal (part of Professional unit) also appears to be building good momentum. The smaller Engineering and HR Professional unit businesses are seeing more mixed trading. Centaur has been going through a change process and has elected to sell the B2C orientated Home Interest unit. Given the work done to improve the business and its excellent performance we expect it to achieve a good price. In due course we would expect the proceeds to be reinvested in acquisitions to build the strongest units, namely Marketing and Legal. Overall the more volatile aspect of Centaur revenues, Advertising, is shrinking and will be below a quarter this year. While revenues should grow 5% in 2017 the mix effect means that we expect 2017 EPS expectations to drop by c28%, leaving the stock on a P/E of 11.8x and a yield of 6.5%. The shares were already factoring in a tough H1. We put our forecasts, TP and rating pending formal changes.


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