TIDMXLM
RNS Number : 8193T
XLMedia PLC
23 July 2020
23 July 2020
XLMedia PLC
("XLMedia" or the "Company" or the "Group")
H1 2020 Trading Update
XLMedia (AIM: XLM), a leading global digital performance
publisher, today reports on the performance of the Company in the
first six months of the 2020 Financial Year, and the progress it is
making on its business transformation.
The first half of the year, as previously reported, was impacted
heavily by a manual penalty being applied by Google to over 100 of
the Company's websites ("Google deranking") in January this year,
and the subsequent global slowdown caused by the Covid-19 pandemic.
For the first 6 months of 2020 XLMedia expects to report:
-- Revenue of approximately $27.5 million
-- EBITDA of approximately $3.5 million.
-- The Group's balance sheet remains strong, with cash balances
at the end of June of approximately $27.9 million.
As anticipated, monthly revenue is currently running around $2
million below the level being achieved before the impact of the
Google deranking, with the vast majority of this dropping through
to the bottom line. The Company believes that around half of the
revenue drop is directly associated with the deranking of these
predominantly Casino websites, with the remainder caused by the
impact of Covid-19 on the Sports and Personal Finance verticals and
the management decision to discontinue the media buying
operations.
The first quarter of the year was stronger than the second, with
revenue of $15.6 million, due to a normal period of trading before
the deranking in late January and the impact of Covid-19 not being
felt until the middle of March. A strong focus on cost management
and the recently announced reduction in employee numbers
contributed to the healthy cash position at the end of June.
Google deranking
The Google deranking in January significantly impacted the
search ranking of the affected websites, and therefore the ability
to generate new business; 23 of the impacted sites were premium
revenue generating assets. The Company has been, and will remain,
focussed on reranking these sites. For the last six months, the
Company has been raising the quality of the content on the sites to
make it more relevant and engaging, including user-generated
content, enhancing the offerings for a more targeted audience,
assisted by data science, and migrating to an outsourced platform,
which enables it to benefit from the accelerated innovation
provided by an open-source community. The managed reranking process
will begin in August, when the first sites are resubmitted to
Google. It is assumed that upon a website having the manual penalty
removed, it would take around six months for it to be delivering
50% of the original revenue level, and up to a further 12 months to
return to the level before the original deranking.
Covid-19
The Company's global workforce has been working remotely since
March 2020, with some staff only recently beginning to return to
the workplace as guidelines and regulations allow. Operationally,
the business has seamlessly implemented both remote and flexible
working measures, with no impact on short term productivity.
The altered working patterns and lockdowns caused by the
pandemic have in general benefitted websites dedicated to general
Casino and Gaming. However, unlike some of our competitors, who
have reported significant upside during the period, the Company has
been unable to take full advantage of this in the short term due to
the predominantly Casino deranking detailed earlier. XLMedia's
Sports and Personal Finance assets have been impacted by the global
shut down of sporting events and lower levels of activity in credit
card issuance and investments. Recently, the Company has seen
encouraging improvements in the performance of these assets, which
suggests the issue is temporary and not company specific.
Recent developments
XLMedia has announced a number of developments recently, which
evidence progress against the strategic priorities set out by the
Company since the change of leadership last year.
In June, the Company announced its intention to consider the
disposal of some or all of its Finnish casino assets. XLMedia has
no requirement to dispose of assets, but any disposals could
accelerate the rebalancing of the asset portfolio, with a greater
emphasis on regulated and high-growth markets and verticals. The
Company will now consider expressions of interest to assess how to
maximise shareholder value.
Also in June, Ken Dorward joined XLMedia as President, North
America. Ken's successful track record and deep knowledge of the
industry will help to expedite progress in North America, where the
Company sees the opportunity as very significant in both Sports and
Personal Finance.
In July, the Company completed a buy-out of the remaining
interests of the founders in its premium website, 101GreatGoals.com
. Although a small transaction in financial terms, the Company
believes that the simplification in control and operating structure
will accelerate the development of the website in current and
future geographies, including Europe and North America, where the
opportunity is significant and growing.
Also in July, XLMedia transitioned its Corporation Tax residence
from Cyprus to the UK. Although the Company continues to benefit
greatly from the people skills in both Cyprus and Israel, this
transition reflects the shift in senior management control, with
the CEO, CFO and COO now based in the UK.
The Company is being restructured internally to enable it to
deliver on the strategic priorities. This has reduced overall
headcount by around 70 and delivered ongoing annualised cost
savings of approximately $5 million. Most importantly, it is
creating an agile organisation capable of responding rapidly to
both challenges and opportunities.
Outlook
While financial performance in the first six months was
disappointing, XLMedia continues to make good progress on its
transformation agenda and the delivery of its strategic priorities.
Alongside this, the Company is prioritising removing the penalties
imposed by Google on some of its premium sites. Combined with
recent encouraging signs of increased activity in Sports and
Personal Finance, this would provide an increasing level of
confidence in the Company's ability to grow revenue and profit in
2021 and beyond.
XLMedia remains a strong business and a leader in its industry,
with a clear strategic vision and the operational and financial
strength to deliver it.
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, Chief Executive Officer ir@xlmedia.com
Iain Balchin, Chief Financial Officer
Kieran McKinney, Investor Relations
www.xlmedia.com
Vigo Communications Tel: 020 7390 0233
Jeremy Garcia
www.vigocomms.com
Cenkos Securities plc (Nomad and Tel: 020 7397 8900
Joint broker)
Giles Balleny / Max Gould
www.cenkos.com
Berenberg (Joint broker) Tel: 020 3207 7800
Chris Bowman / Mark Whitmore / Simon
Cardron
www.berenberg.com
Notes:
XLMedia is a leading global digital performance publisher.
Operating globally across a variety of verticals including online
gambling, personal finance, sports and technology, the Group uses
proprietary tools and methodologies to identify and target high
value clients for platform operators.
XLMedia has a clear transformation strategy, which will enable
it to shape the future of the performance publishing industry. As
previously communicated, the Company has set three Strategic
Goals:
-- Consolidation of publishing assets
o The Company will consolidate its range of publishing assets,
focusing its resources on a core set of premium sites in its chosen
markets. XLMedia will seek to build stronger relationships with
consumers through content-rich, engaging websites, underpinned by
intelligent market-leading technology which enhances the yield from
each interaction. This rebalancing of the portfolio will be
supported by organic investment, disposals and acquisitions.
-- Investment in US Sports and Personal Finance
o XLMedia has identified North America as a core target market,
where it has already established a solid foothold in Personal
Finance, led by content-rich websites which are gaining traction.
The Company will seek to further develop its Personal Finance
presence and significantly increase its investment in the
burgeoning US Sports market through partnerships and
acquisitions.
-- Further Investment in regulated markets
o The Company is seeking to generate an increasing proportion of
its revenue from more stable, regulated markets, both within
current serviced verticals, such as gambling and personal finance
and, over time, within additional target segments, where its core
skills and scale can provide competitive advantage.
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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