Centaur Media — Tough trading backdrop persists in H2

Centaur Media (LSE: CAU)

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Research: TMT

Centaur Media — Tough trading backdrop persists in H2

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.

Fiona Orford-Williams

Written by

Fiona Orford-Williams

Director, TMT

TMT

Centaur Media

Tough trading backdrop persists into H2

Trading update

Media

10 October 2024

Price

29.5p

Market cap

£43m

Net cash at 30 September 2024, excluding leases

£9.5m

Shares in issue

146.9m

Free float

85.7%

Code

CAU

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(1.6)

(23.8)

(20.2)

Rel (local)

(1.5)

(24.7)

(28.3)

52-week high/low

53.0p

30.0p

Business description

Centaur Media is an international provider of business intelligence, learning and specialist consultancy focused on the marketing services and legal sectors.

Next events

Trading update

January 2025

FY24 results

19 March 2025

Analyst

Fiona Orford-Williams

+44 (0)20 3077 5739

Centaur Media is a research client of Edison Investment Research Limited

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.

Year end

Revenue (£m)

Adjusted EBITDA* (£m)

EPS*
(p)

DPS**
(p)

P/E
(x)

Yield
(%)

12/22

38.4

8.1

2.5

1.1

11.8

3.7

12/23

37.3

9.7

4.2

1.8

7.1

6.1

12/24e

34.0

5.0

1.6

1.8

19.0

6.1

12/25e

36.0

5.9

2.0

1.8

15.3

6.1

12/26e

39.0

7.2

2.7

1.8

11.4

6.1

Note: *Adjusted EBITDA and EPS (fully diluted) are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. **DPS excludes FY23 special dividends.

Some positive elements

We have reduced our FY24 revenue forecast from £36.1m to £34.0m, with the reduction effectively dropping straight through to the adjusted EBITDA line due to the high operational gearing and the shift in mix away from the highest margin revenue streams. The trading update has positive elements in that Econsultancy clients are still on the roster, they are simply spending less money (activities and BIG27 are described in our July Outlook) and key brands such as MW Mini MBA and The Lawyer continue to trade well. Marketing Week’s subscription business is ahead, and the recent Festival of Marketing was up on the prior year. Our adjustments to FY25 and FY26 forecasts are consequent to these changes, delaying the full benefit from implementation of the BIG27 strategy announced earlier in the year.

Cash resource stays strong

Net cash at 30 September was £9.5m, up from the half-year figure of £8.9m (the group carries lease debt only). We expect some modest unwind of working capital benefit by the year-end, giving the group a significant buffer against the trading headwinds. Centaur also announced its new chair is Martin Rowland, who has considerable experience in both public markets and private equity.

Valuation: Reflecting trading and industry issues

Centaur’s share price is 34% down year-to-date, reflecting the current malaise in UK smaller stock valuations and across the wider media sector, as well as the trading-specific issues. On our new forecasts, the valuation remains well below UK and global peers. Parity across FY24 and FY25 (on P/E and EV/EBITDA) suggests a price of 39p, down from 51p in July, but still well above the current level. Closing that gap will require evidence that BIG27 can deliver on its objectives.

Exhibit 1: Financial summary

Year end 31 December, IFRS

£m

2022

2023

2024e

2025e

2026e

INCOME STATEMENT

Revenue

 

 

38.4

37.3

34.0

36.0

39.0

Other operating income

0.0

0.0

0.0

0.0

0.0

Cost of Sales

(14.1)

(13.7)

(13.0)

(13.2)

(13.9)

Gross Profit

24.2

23.6

20.9

22.7

25.1

EBITDA

 

 

8.1

9.7

5.0

5.9

7.2

Operating profit (before amort. and excepts.)

4.9

7.6

2.9

3.7

5.0

Amortisation of acquired intangibles

(0.5)

(0.1)

(0.1)

(0.1)

(0.1)

Exceptionals

(0.1)

(0.4)

(0.2)

0.0

0.0

Share-based payments

(0.8)

(1.1)

(0.3)

(1.1)

(1.1)

Reported operating profit/loss

3.5

6.1

2.4

2.6

3.9

Net Interest

(0.1)

0.0

0.1

0.1

0.1

Joint ventures & associates (post tax)

0.0

0.0

0.0

0.0

0.0

Exceptionals

0.0

0.0

0.0

0.0

0.0

Profit Before Tax (norm)

 

4.9

7.6

3.0

3.8

5.1

Profit/loss Before Tax (reported)

 

3.5

6.1

2.4

2.6

3.9

Reported tax

(0.9)

(0.8)

(0.7)

(0.8)

(1.1)

Profit After Tax (norm)

3.7

6.4

2.4

2.9

3.9

Profit After Tax (reported)

2.6

5.3

1.8

1.7

2.7

Minority interests

0.0

0.0

0.0

0.0

0.0

Discontinued operations

0.2

(0.5)

0.0

0.0

0.0

Net income (normalised)

3.7

6.3

2.4

2.9

3.9

Net income (reported)

2.8

4.9

1.8

1.7

2.7

Average number of shares outstanding (m)

144

144

144

144

144

EPS - normalised (p)

 

 

2.6

4.4

1.6

2.0

2.7

EPS - normalised fully diluted (p)

 

 

2.5

4.2

1.6

1.9

2.6

EPS - basic reported, continuing (p)

 

 

1.8

3.7

1.2

1.2

1.9

Ordinary dividend per share (p)

1.1

1.8

1.8

1.8

1.8

Revenue growth (%)

(1.9)

(2.8)

(9.0)

5.9

8.6

Gross margin (%)

63.1

63.3

61.7

63.2

64.3

EBITDA (IFRS) margin (%)

21.1

25.9

14.7

16.5

18.5

Normalised Operating margin (%)

12.9

20.4

8.6

10.2

12.7

BALANCE SHEET

Fixed Assets

 

 

45.9

49.3

49.0

49.2

49.6

Intangible Assets

43.8

44.7

44.9

45.1

45.3

Tangible Assets

0.4

2.2

2.9

3.4

3.8

Deferred tax

1.7

2.2

0.7

0.0

0.0

Other receivables

0.0

0.2

0.5

0.8

0.5

Current Assets

 

 

21.5

15.0

13.7

13.1

14.8

Stocks

0.0

0.0

0.0

0.0

0.0

Debtors

5.4

5.1

4.7

5.0

5.5

Cash & cash equivalents

16.0

9.5

8.7

7.7

9.0

Other

0.2

0.4

0.4

0.4

0.4

Current Liabilities

 

 

(18.5)

(17.9)

(17.3)

(17.8)

(19.0)

Creditors

(9.7)

(8.6)

(8.6)

(9.2)

(9.7)

Tax and social security

0.0

0.0

0.0

0.0

0.0

Short term borrowings

0.0

0.0

0.0

0.0

0.0

Other/ Lease liabilities

(8.9)

(9.3)

(8.7)

(8.7)

(9.3)

Long Term Liabilities

 

(0.0)

(1.3)

(0.7)

(0.7)

(0.5)

Long term borrowings

0.0

0.0

0.0

0.0

0.0

Other long term liabilities, including leases

(0.0)

(1.3)

(0.7)

(0.7)

(0.5)

Net Assets

 

 

48.8

45.1

44.6

43.8

44.9

Minority interests

0.0

0.0

0.0

0.0

0.0

Shareholders' equity

 

 

48.8

45.1

44.6

43.8

44.9

CASH FLOW

Operating Cash Flow

8.1

10.3

5.8

6.3

7.8

Working capital

0.1

(1.6)

(0.2)

0.2

0.8

Exceptional & other

0.2

(1.3)

(0.8)

(0.7)

(0.7)

Tax

0.0

(1.6)

0.3

(0.8)

(1.1)

Total Operating Cash Flow

 

8.4

5.8

5.1

5.0

6.7

Capex

(1.4)

(2.1)

(1.3)

(1.5)

(1.5)

Acquisitions/disposals

0.0

0.0

0.0

0.0

0.0

Net interest

(0.0)

0.1

0.1

0.1

0.1

Equity financing

(0.6)

(0.3)

(0.6)

(0.3)

(0.3)

Dividends

(1.4)

(8.9)

(2.6)

(2.6)

(2.6)

Other

(2.2)

(0.1)

(1.5)

(1.5)

(1.1)

Net Cash Flow

2.8

(5.5)

(0.8)

(0.9)

1.2

Opening net debt/(cash & short term deposits)

(13.1)

(16.0)

(9.5)

(8.7)

(7.7)

FX

0.0

(0.0)

0.0

0.0

0.0

Other non-cash movements

0.1

(1.0)

0.0

0.0

0.0

Closing net debt/(cash)

 

(16.0)

(9.5)

(8.7)

(7.7)

(9.0)

Source: Company accounts, Edison Investment Research

General disclaimer and copyright

This report has been commissioned by Centaur Media and prepared and issued by Edison, in consideration of a fee payable by Centaur Media. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2024 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

General disclaimer and copyright

This report has been commissioned by Centaur Media and prepared and issued by Edison, in consideration of a fee payable by Centaur Media. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2024 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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