TIDMXLM
RNS Number : 8281B
XLMedia PLC
04 February 2020
XLMedia PLC
("XLMedia" or the "Group" or the "Company")
Business and Trading Update
XLMedia (AIM: XLM) provides the following update further to its
announcement of 20 January 2020 relating to the reduction in
ranking of a number of the Group's websites. The update addresses
further developments, immediate actions being taken and the impact
on the Group's future strategy.
The Company is continuing to work with Google to understand the
issues which have led to certain websites being demoted and is
working hard to resolve what it believes to be the key issues, with
a view to restoring the rankings of these online assets as quickly
as possible.
Sites impacted
Currently 107 sites have been impacted since the initial
announcement on 20 January. Of the sites impacted, over 84 are tier
3 or tier 4 sites, being sites which are typically legacy or of low
commercial value to the Company. The remining 23 sites are tier 1
and tier 2 premium sites. The sites that have been demoted by
Google are predominantly in the online casino vertical, and the
demotion activity by Google has not impacted the other verticals of
the business, such as personal finance.
The Company believes that it is possible that a certain number
of its tier 3 or tier 4 legacy sites may have had a collective
negative impact on the ranking of a broader pool of the Company's
sites, including its premium sites. The Company is therefore taking
steps to remove or de-index such sites, which are seen as most
likely to have been regarded by Google as having insufficient
content, with the expectation that it will assist in the re-ranking
of the premium sites. However, until these actions are completed
and some of the premium sites are successfully resubmitted, it will
not be possible to be certain that the issue will have been
resolved.
Strategy implementation and immediate actions
Further to the announcement relating to strategic changes on 19
December 2019, and as a direct consequence of the actions taken by
Google, the Company has decided to accelerate some of its proposed
strategic changes and refocus its activities on the sustainable
growth of its publishing assets. This will involve a focus on its
core and profitable tier 1 and tier 2 premium sites and a
significant reduction in its tier 3 and tier 4 sites and non-core
business activities.
As an immediate priority, the Company has identified the tier 1
and tier 2 premium sites that have been impacted and has
prioritised all efforts in getting these reinstated by Google and
has begun the process of removing a number of websites from its
online portfolio that are either old legacy sites, or that it
believes are not sufficiently compliant with current Google
guidelines. In addition, it has ceased certain activities which,
following the closure of the majority of the media activity in
March 2019, are no longer regarded as core to the future of the
business.
Going forward, the Company will allocate significant resources
to improving and expanding the Group's portfolio of tier 1 and tier
2 sites alongside both incubating and developing new sites.
Trading Update
Until there is clarity as to when the rankings of the demoted
tier 1 and tier 2 sites are fully restored, the Company is unable
to determine the full impact of Google's demotion of its websites.
As a result of the demotions however, the demoted tier 1 and tier 2
sites will see an immediate impact of lost revenues for the period
that the sites have reduced rankings. Management expects this to
represent a monthly reduction in Group revenues of between c$1
million and c$2 million (assuming only a minor fall in its repeat
revenues). In addition, management expects that any lengthy period
of demotion could impact the rankings once restored and that it may
take a period of time to re-establish the former high rankings.
The removal or de-indexing of tier 3 and tier 4 sites, and the
reduction in non-core activities, is expected to have a modest
impact on revenue of between $3 million and $5 million for the
financial year 2020.
As a number of these actions were included in the Group's
proposed strategic changes, some of the associate costs were
budgeted for during the period which will reduce the full impact on
earnings.
While currently under review and subject to confirmation with
the Group's auditors, it is expected that these issues will result
in a revaluation of the Company's assets and incur an impairment
charge.
Dividend
In order to accelerate a number of strategic initiatives,
alongside evaluating potential acquisition opportunities, no final
dividend is proposed for the 2019 financial year, with no dividend
expected to be proposed until further notice.
Further updates will be made as and when appropriate.
Stuart Simms, Group Chief Executive Officer commented:
"There is no question that we currently face operational
headwinds, but fundamentally, I firmly believe in the underlying
quality and sustainability of our business. However, I believe it
is now time to accelerate a number of strategic measures that will
create a short-term drag on revenue growth, but will ultimately
strengthen our business by creating a much stronger and more
transparent platform from which to grow.
"By proactively consolidating - and where necessary culling -
our considerable tail of legacy websites and focusing a greater
proportion of our efforts on monetising both tier 1 and tier 2
websites in addition to incubating new sites, we will significantly
improve the medium-term prospects of the Group.
"I feel it's important to reiterate that we continue to operate
a global portfolio of content rich websites that deliver
significant value for our users. This expertise remains a core
competence for our business which I fully intend to capitalise on
as management seeks to both enhance and expand our business over
the coming years."
The information contained within this announcement (the
"Announcement") is deemed by the Company to constitute inside
information as stipulated under the Market Abuse Regulation (EU)
No. 596/2014. Upon the publication of this Announcement via a
Regulatory Information Service, this inside information is now
considered to be in the public domain.
For further information, please contact:
XLMedia plc Stuart Simms, Group Chief Via Vigo Communications
Executive Officer Liat Hellman, Acting
Group Chief Financial Officer www.xlmedia.com
Vigo Communications Jeremy Garcia / Fiona Tel: 020 7390 0233
Henson / Fiona Norman www.vigocomms.com
Cenkos Securities plc (Nomad and Joint Tel: 020 7397 8900
Broker) Giles Balleny / Max Gould www.cenkos.com
Berenberg (Joint Broker) Chris Bowman Tel: 020 3207 7800
/ Mark Whitmore / Simon Cardron www.berenberg.com
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
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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