XLMedia PLC Strategic and Trading Update (0730R)
February 26 2019 - 2:01AM
UK Regulatory
TIDMXLM
RNS Number : 0730R
XLMedia PLC
26 February 2019
26 February 2019
XLMedia PLC
("XLMedia" or the "Group" or the "Company")
Strategic and Trading Update
XLMedia (AIM: XLM), a leading provider of digital performance
marketing services, provides the following strategic and trading
update. The key elements include:
-- Investment in Publishing assets - The Group will increase
investment across its higher margin Publishing activities with
specific focus on growth opportunities in North America. It will
commit to invest materially, including an internal network
development plan of at least US$7 million in total over the next
three years.
-- Reduction of non-core Media activities - The Group has taken
the decision to materially reduce certain parts of its Media
activities which have lower profit margins and unstable revenues,
resulting in a substantial reduction in Media revenues.
-- Focus on sustainable growth - The Group intends to focus on
its Publishing expertise, responding to changing regulatory
environments and new compliance needs in the gaming sector and
digital marketing. The Group aims to deliver more sustainable and
high margin growth through improving the profile of its existing
sites and integrating the recently acquired assets
-- Trading update & impact of strategy change - Trading for
2019 has started in line with management's expectations although
still seeing operational and regulatory headwinds. However, the
strategic shift away from Media is expected to reduce 2019 revenues
by approximately US$30 million. This, together with increased
Publishing investment, will largely account for an expected
reduction in 2019 adjusted EBITDA of between US$6-7 million.
However, in the medium-term these changes are expected to deliver
higher profit margins and better quality of earnings.
-- Dividend and Buy Back - The Board remains committed to
maintaining a progressive dividend policy and seeks to continue to
pay out at least 50 per cent net profit by way of dividend
(adjusted for non-cash impairment). The Board remains committed to
the share buyback announced December 2018.
Strategic update
The Company currently uses two principal performance marketing
methods - Publishing and Media buying. Within the Publishing
division, XLMedia owns hundreds of informational and content rich
websites globally, which act as a conduit to channel users to our
clients. The Group's Media buying activity centres on creating and
deploying self-funded online media campaigns across a range of
platforms, utilising formats such as paid search, display, social,
mobile and in-app advertising, to drive traffic to both our own
sites and our clients' sites.
The Group has consistently invested in its higher margin
Publishing activities, extending its market reach beyond the gaming
sector to now include personal finance and other verticals, and
increasing its presence geographically. In FY2018, Publishing
accounted for approximately US$66 million (56%) of Group revenue
and US$52 million (77%) of gross profit and, as such, is considered
to be the main strategic driver of growth for the Group. Therefore,
management remains focused on improving the profile of its existing
sites, developing more assets targeting regulated markets and
products, and completing the integration of recently acquired
assets.
Furthermore, XLMedia has identified a number of Publishing
growth opportunities in North America and intends to capitalise on
its existing footprint in the personal finance market across the
U.S. and Canada. The Company plans to invest at least US$7 million
of cash on the internal development of publishing assets over the
next three years, aiming to establish a leading position in the
emerging U.S gaming market. The non-capitalised investment will
have a short-term impact on Group EBITDA.
In order to best capitalise on the opportunities available, the
Board has taken the decision to proactively reduce all the Group's
non-core, lower margin Media activities which are not complimentary
to its Publishing activities. The Media business is a significantly
lower margin activity compared to the Group's Publishing
activities. In FY2018, Media accounted for approximately US$47
million (40%) of revenue and US$15 million (22%) gross profit.
Current trading
2019 has started in line with management's expectations but the
Group continues to recover from the operational and regulatory
headwinds reported in 2018. The performance of the affected
Publishing assets continues to recover, albeit slowly, and the
integration of recently acquired assets remains ongoing.
To continue this focus on Publishing, the Board has made the
strategic decision to proactively cease its involvement in much of
its existing Media activities. This will result in a one-off
impairment of US$11-13 million, for the year ended 31 December
2018, mainly related to the intangible assets of acquired assets in
the Media division.
As a result of the proactive measures outlined above, management
now expects Group revenues to be reduced by approximately US$30
million and Group adjusted EBITDA to be reduced to a lesser degree
by US$6-7 million for the year ending 31 December 2019, reflecting
the forward trading for the Company. However, the Board are
confident that these steps will deliver higher profit margins with
much better quality of earnings in the medium and long-term.
The Board remains committed to maintaining a progressive
dividend policy and seeks to continue to pay out at least 50 per
cent of the adjusted net profit by way of dividend. The Board
remains committed to the share buyback announced in December
2018.
For further information, please contact:
XLMedia plc Ory Weihs, Chief Executive Via Vigo Communications
Officer Yehuda Dahan, Chief Financial
Officer www.xlmedia.com
Vigo Communications Jeremy Garcia / Fiona Tel: 020 7390 0233
Henson / Simon Woods www.vigocomms.com
Cenkos Securities plc (Nomad and Joint Tel: 020 7397 8900
Broker) Giles Balleny / Callum Davidson
www.cenkos.com
Berenberg (Joint Broker) Chris Bowman Tel: 020 3207 7800
/ Mark Whitmore / Laure Fine www.berenberg.com
The information contained within this announcement (the
"Announcement") is deemed by the Company to constitute inside
information as stipulated under the Market Abuse Regulations (EU)
No. 596/2014. Upon the publication of this Announcement via
Regulatory Information Service, this inside information is now
considered to be in the public domain.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
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contact rns@lseg.com or visit www.rns.com.
END
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