REG - XLMedia PLC - Interim results
For immediate release
24 September 2018
XLMedia PLC
("XLMedia" or the "Group" or the "Company")
Interim results for the six months ended 30 June 2018
Acquisitions and further diversification set foundations for the future
XLMedia (AIM: XLM), a leading provider of digital performance marketing services, announces its unaudited interim results for the six months ended 30 June 2018.
Financial highlights
· Revenues of $59.1 million (H1 2017: $67.9 million)
· Gross profit of $33.5 million (H1 2017: $35.2 million)
· Adjusted EBITDA of $20.9 million (H1 2017: $22.8 million)
· Profit before tax of $16.8 million (H1 2017: $19.5 million)
· Interim dividend of $6.5 million or 3.0040 cents per share (H1 2017: 4.0226 cents per share); and
· Strong balance sheet with $51.3 million of cash and short-term investments to be deployed in further acquisitions for future growth
· On track to meet profit expectations for the full year
Operating highlights
· Completed a series of acquisitions in the period totalling $45.8 million, including:
o Leading Finnish gambling related informational websites for $18.0 million
o WhichBingo.co.uk, one of the leading online informational portals and comparison sites for online bingo games in the UK for $10.5 million
o Three US personal finance informational websites for $5.9 million
o Shortly after period end, acquired Investorjunkie.com a leading US personal finance website for $5.8 million
· Solid performance from our Personal Finance assets, growing both in asset base and amount of clients.
· Preparation for launch into the significant future potential US gambling market
· Enhanced the Group's Asia-Pacific presence in the mobile apps vertical and increased revenues from new clients in the region
· Management have worked hard to mitigate previously reported regulatory headwinds and operating challenges and remain on track to deliver the year end market consensus profit number
Ory Weihs, Chief Executive Officer of XLMedia, commented:
"The Group produced a solid profit performance in the first half, albeit against a backdrop of regulatory pressures and challenging market conditions in the online gambling sector. However, we are now seeing positive signals and expect to meet profit expectations for the full year.
"Since the beginning of this year we have been focusing on implementing our strategy and executing acquisitions in order to accelerate growth, allocating over $45 million of capital for acquisitions. Our newly acquired assets perform as expected and we are confident they will deliver a strong return.
A webcast of our results presentation will be available on our website later today: https://www.xlmedia.com/investor-relations/webcasts/
XLMedia will be holding a presentation for private and retail investors at 4.00pm on Tuesday 25 September 2018. To register for the event, please contact Vigo Communications on xlmedia@vigocomms.com.
For further information, please contact:
XLMedia plc
Ory Weihs
www.xlmedia.com
Via Vigo Communications
Vigo Communications
Jeremy Garcia / Fiona Henson / Kate Rogucheva
www.vigocomms.com
Tel: 020 7390 0230
Cenkos Securities plc (Nomad and Joint Broker)
Mark Connelly / Callum Davidson
www.cenkos.com
Tel: 020 7397 8900
Berenberg (Joint Broker)
Chris Bowman / Mark Whitmore
www.berenberg.com
Tel: 020 3207 7800
Business review
The Group delivered a solid performance in H1 despite experiencing disruption in some regions in which we operate, in addition to discontinuing a number of underperforming activities. As a consequence, revenues for the six months ended 30 June 2018 were $59.1 million compared to $67.9 million in H1 2017.
Regulatory environment
Regulatory developments in the online gambling sector had an impact on our performance in the first six months of the year, including: the closure of the Australian online casino market at the end of 2017; uncertainty regarding the regulatory status of certain European markets, specifically Germany, where some operators suspended activity while others lowered marketing spend pending clearer guidelines; as well as changes to gambling advertising regulations in the UK.
At the beginning of H1 2018 we saw some decline in marketing campaigns in the UK in order to adjust to the implementation of new, more stringent UK gambling advertising guidelines.
Whilst these developments affected our performance, we believe this should lead to a clearer and more functional environment, and to long-term stability in the market and higher quality earnings for the Company.
EU GDPR regulation, which became effective in May 2018, is also applicable across a number of our territories. In preparation for this regulation and to ensure our compliance we have conducted a comprehensive preparatory compliance program. The program included mapping and evaluating our information gathering practices in all business segments and processes and an adjustment of our practices as required. We have implemented internal guidelines, policies and practices and are closely monitoring market developments on an ongoing basis to ensure our continued compliance with the regulation. The Group does not expect GDPR to have a material effect on performance.
Strategy
We continued to execute on our strategy and, during the period, completed a series of acquisitions for an aggregate consideration of $45.8 million. We continue to evaluate potential assets and targets and expect to accelerate this activity. As with previous acquisitions, our ability to both source and integrate at scale underpins our future aspirations and enables management to further diversify our operations.
The acquisitions we completed during the period were identified from a pipeline of opportunities, following a rigorous internal due diligence process. The Group adopts key criteria in identifying potential targets, including:
· complementary assets, adding diversity in geographies, customers and sectors with specific focus placed on personal finance and regions where gambling is fully regulated;
· active in additional sub-sectors - for example, in our personal finance arsenal of assets - adding complementary customers with potential cross-sales opportunities between these assets. The recently acquired Investorjunkie.com asset increased our customer base in the personal finance investment sub-sector allowing us to cross sell additional products; and
· demonstration of growth potential and benefits of scale for us once migrated onto our Palcon infrastructure and integrated into the Group. Recent Finnish acquisitions are expected to deliver improved profit margins once fully integrated.
We continue our strategy to diversify our revenues both geographically and by sector. In H1 2018 North America generated 19% of revenues (H1 2017: 28%), Scandinavia generated 35% of revenues (H1 2017: 26%), the UK generated 11% (H1 2017: 8%), other European countries generated 17% of revenues (H1 2017: 29%) and Asia generated 7% (H1 2017: 5%).
In terms of sector diversification: gambling accounted for 70% of H1 2018 revenues (H1 2017: 63%) and Mobile Apps accounted for 20% of H1 revenues (H1 2017: 24%). The increase in the proportion of gambling related revenue was mainly due to the Group's decision to discontinue certain lower margin media buying activities.
We believe that we have laid solid foundations and believe the Financial Services sector will be an important growth engine for the Group in the medium term, performing alongside our more traditional end markets.
Business Segments review
($'000)
Publishing
Media
Other
Total
H1 2018
Revenues
32,360
23,446
3,282
59,088
% of revenues
54.8%
39.7%
5.5%
100%
Direct profit
25,586
7,083
852
33,521
Profit margin
79.1%
30.2%
26.0%
56.7%
H1 2017
Revenues
29,809
33,895
4,225
67,929
% of revenues
43.9%
49.9%
6.2%
100%
Direct profit
24,863
9,964
346
35,173
Profit margin
83.4%
29.4%
8.2%
51.8%
H1 2018 showed increase in the publishing segment but a decrease in the media, which resulted in overall revenues of $59.1 million, a decrease of 13% (H1 2017: $67.9 million).
Publishing
Publishing revenues grew 9% in the period to $32.4 million (H1 2017: $29.8 million), driven by acquisitions. H1 performance was impacted by a reduction in activity in a number of specific territories, in addition to regulatory changes outlined above. Some of these issues included spamming and other attacks on our websites as well as technical issues. Concurrently, the Group has been focused on recovery steps with the majority of technical and attacks issues having been resolved by now. In addition, we have been developing additional revenue generating activities. In 2018 we acquired websites and domains for an aggregate consideration of $45.8 million and will continue to acquire and develop more assets.
Direct profit margins reduced slightly, as previously guided, to $25.6 million or 79% of publishing revenues (H1 2017: $24.9 million, 83%) mainly as a result of increased investment in content and integrating recently acquired websites. We continue to invest and develop our existing assets and optimise recently acquired assets in order to improve performance going forward.
Media
Media revenues decreased 31% to $23.5 million (H1 2017: $33.9 million). This was primarily driven by proactive measures to cease low margin activities, lower levels of mobile traffic within the gaming segment and previously announced gambling regulatory changes. We are focusing our efforts in other sectors in the mobile division including driving sales across Asia, most notably Korea, as well as in other sectors such as financial apps and e-commerce through our US activities. In the medium term we see growth potential in media activities for fully regulated markets both for gambling as well as for personal financial products.
Direct profit for the media segment decreased 29% to $7.1 million or 30% of revenues (H1 2017: $10.0 million, 29%).
Current Trading and Outlook
We have started the second half of 2018 well, buoyed by the impact of recent acquisitions and positive signs of recovery in a number of key segments and markets. Management has worked to continue the diversification of the Group's core operational activities, with continuous focus on setting strong foundations, and adding both scale and product diversity. We believe these measures and the investments made will underpin growth in the medium term.
The Board is therefore confident of meeting profit expectations for the full year and as such is declaring an interim dividend of $6.5 million or 3.0040 cents per share , to be paid in Pound Sterling (2.2728 pence per share) 2 November 2018 to shareholders on the register at 5 October 2018 . The ex-dividend date is 4 October 2018.
Financial review
H1 2018
H1 2017
Change
Revenues
59,088
67,929
-13%
Gross Profit
33,521
35,173
-5%
Operating expenses
16,243
16,028
+1%
Operating income
17,278
19,145
-10%
Adjusted EBITDA
20,883
22,893
-9%
Profit Before Tax
16,790
19,490
-14%
The first half of 2018 was impacted by the regulatory trends, a withdrawal from low margin activities and other SEO performance issues which resulted in revenues of $59.1 million, a decrease of 13% compared to the same period last year.
Gross profit was $33.5 million or 57% of revenues, representing a 5% decrease compared to the same period last year (H1 2017: $35.2 million, 52%).
Operating expenses during the first six months of the year were $16.2 million, an increase of 1% compared to the same period last year (H1 2017: $16.0 million). The increase in costs was not significant. As we are focused on meeting performance expectations we control expenses but will continue to proportionally increase our operational expenses base in order to support future growth.
Operating expenses included $1.0 million of research and development expenses, reflecting a decrease compared to the same period last year (H1 2017: $2.5 million). These expenses are in addition to investments in technology and internal systems developed during the period of $4.3 million (H1 2017: $1.7 million). Total R&D spend together with capitalised costs was $5.3 million compared to $4.2 million in H1 2017. As we progress and enhance our systems a bigger portion of the spend serves for future benefits and less for ongoing support of our systems. We see technology as a key driver to increasing revenues and profit for the coming years.
Adjusted EBITDA1 reached $20.8 million or 35% of revenues, reflecting a decrease of 9% relative to the same period last year (H1 2017: $22.9 million, 34%).
As a result of the reduced revenues and gross profit as compared to the same period last year, profit before tax decreased by 14% to $16.8 million (H1 2017: $19.5 million). Net income for the period was $14.1 million, reflecting a decrease of 9% (H1 2017: $15.5 million). Net income included non-controlling interest of $0.5 million.
As at 30 June 2018 we had $51.3 million of cash and short-term investments compared to $43.3 million as at 31 December 2017. The increase in cash reflects an increase of $13.4 million provided by operating activity, and an additional increase from share capital issuance of $42.6 million, offset mainly by investing $43.7 million mainly on acquisitions and $8.0 million of dividends paid out during the first half of 2018.
Current assets as at 30 June 2018 were $77.0 million (31 Dec 2017: $67.1 million) and non-current assets were $129.0 million (31 Dec 2017: $87.4 million). The increase in non-current assets is attributed mainly to acquisitions of domains and websites.
Total equity as at 30 June 2018 was $166.2 million, or 81% of total assets (2017: 76%). At the end of 2017 and during H1 2018 we drew down bank loans totaling $11 million. With our current pipeline of potential acquisition targets, we expect to have access to larger bank facilities to execute them. The strong balance sheet combined with cash and short-term investments of $51.3 million together with strong banking relationships ensures the Group is well positioned to continue to execute its strategic plan.
[1] Earnings Before interest, Taxes, Depreciation and Amortization and adjusted to exclude share based payments
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
30 June
31 December
2018
2017
Unaudited
Audited
USD in thousands
Assets
Current assets:
Cash and cash equivalents
41,976
38,416
Short-term investments
9,335
4,861
Trade receivables
17,776
18,950
Other receivables
6,769
4,665
Financial derivatives
1,128
200
76,984
67,092
Non-current assets:
Long-term investments
649
681
Property and equipment
1,419
1,230
Goodwill
30,052
30,052
Domains and websites
84,682
45,762
Other intangible assets
11,119
8,585
Deferred taxes
621
862
Other assets
455
244
128,997
87,416
205,981
154,508
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
30 June
31 December
2018
2017
Unaudited
Audited
USD in thousands
Liabilities and equity
Current liabilities:
Trade payables
9,926
9,813
Other liabilities and accounts payable
8,705
10,972
Income tax payable
10,708
8,573
Financial derivatives
162
1,425
Current maturity of long-term bank loans
5,475
2,500
34,976
33,283
Non-current liabilities:
Long- term bank loans
4,243
2,500
Income tax payable
252
1,825
Deferred taxes
42
42
Other liabilities
225
201
4,762
4,568
Equity:
Share capital
(*
*)
Share premium
111,911
68,417
Capital reserve from share-based transactions
1,766
1,227
Capital reserve from transactions with non-controlling interests
(2,445)
(2,445)
Retained earnings
54,720
49,167
Equity attributable to equity holders of the Company
165,952
116,366
Non-controlling interests
291
291
Total equity
166,243
116,657
205,981
154,508
*) Lower than USD 1 thousand.
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
Six months ended
30 June
Year ended
31 December
2018
2017
2017
Unaudited
Audited
USD in thousands
(except per share data)
Revenues
59,088
67,929
137,632
Cost of revenues
25,567
32,756
64,487
Gross profit
33,521
35,173
73,145
Research and development expenses
966
2,518
4,474
Selling and marketing expenses
3,724
2,742
6,263
General and administrative expenses
11,553
10,768
21,639
16,243
16,028
32,376
Operating income
17,278
19,145
40,769
Finance expenses
(589)
(148)
(2,113)
Finance income
101
493
689
Finance income (expenses), net
(488)
345
(1,424)
Profit before taxes on income
16,790
19,490
39,345
Taxes on income
2,738
3,981
7,474
Net income and other comprehensive income
14,052
15,509
31,871
Attributable to:
Equity holders of the Company
13,553
14,587
30,323
Non-controlling interests
499
922
1,548
14,052
15,509
31,871
Earnings per share attributable to equity holders of the Company:
Basic and Diluted earnings per share (in USD)
0.06
0.07
0.15
Weighted average number of shares used in computing basic earnings per share (in thousands)
214,466
198,357
198,739
Weighted average number of shares used in computing diluted earnings per share (in thousands)
217,854
201,004
202,331
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended
30 June
Year ended
31 December
2018
2017
2017
Unaudited
Audited
USD in thousands
Cash flows from operating activities:
Net income
14,052
15,509
31,871
Adjustments to reconcile net income to net cash provided by operating activities:
Adjustments to the profit or loss items:
Depreciation, amortisation and impairment
2,788
3,353
5,932
Finance (income) expense, net
(1,584)
1,350
2,813
Cost of share-based payment
774
338
419
Taxes on income
2,738
3,981
7,474
Exchange differences on balances of cash and cash equivalents
329
(1,313)
(1,545)
5,045
7,709
15,093
Changes in asset and liability items:
Decrease (increase) in trade receivables
1,174
(1,762)
(1,875)
Decrease (increase) in other receivables
(2,789)
1,047
(982)
Increase in trade payables
113
3,072
539
Increase (decrease) in other accounts payable
(2,459)
(72)
286
Increase (decrease) in other long-term liabilities
24
(5)
(27)
(3,937)
2,280
(2,059)
Cash paid and received during the period for:
Interest paid
(215)
-
-
Interest received
99
15
17
Taxes paid
(2,195)
(2,214)
(4,154)
Taxes received
556
305
305
(1,755)
(1,894)
(3,832)
Net cash provided by operating activities
13,405
23,604
41,073
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Cont.)
Six months ended
30 June
Year ended
31 December
2018
2017
2017
Unaudited
Audited
USD in thousands
Cash flows from investing activities:
Purchase of property and equipment
(421)
(120)
(388)
Payment for acquired business
-
(4,597)
(5,100)
Acquisition of and additions to domains, websites, technologies and other intangible assets
(43,756)
(4,825)
(16,160)
Proceeds and collection of receivable from sale of assets
150
150
300
Short- term and long-term investments, net
(4,964)
41
(1,595)
Net cash used in investing activities
(48,991)
(9,351)
(22,943)
Cash flows from financing activities:
Share capital issuance, net of issuance costs
42,618
-
-
Dividend paid to equity holders of the Company
(8,000)
(7,504)
(15,505)
Acquisition of non-controlling interests
-
-
(2,250)
Dividend paid to non-controlling interests
(499)
(881)
(1,804)
Proceeds from exercise of options
641
605
1,205
Repayment of long-term loan from bank
(1,250)
-
-
Receipt of long-term loan from bank
5,965
-
5,000
Net cash provided by (used in) financing activities
39,475
(7,780)
(13,354)
Exchange differences on balances of cash and cash equivalents
(329)
1,313
1,545
Increase (decrease) in cash and cash equivalents
3,560
7,786
6,321
Cash and cash equivalents at the beginning of the period
38,416
32,095
32,095
Cash and cash equivalents at the end of the period
41,976
39,881
38,416
Significant non-cash transactions:
Payable for acquisition of business
-
503
-
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: GENERAL
XLMEDIA PLC and its subsidiaries (The Group) are an online performance marketing companies. The Group attracts paying users from multiple online and mobile channels and directs them to online businesses.
The Group attracts users through online marketing techniques (such as publications and advertisements) which are then directed, by the Group, to its customers in return for a share of the revenue generated by such user, a fee generated per user acquired, fixed fees or a hybrid of any of these three models.
For further information regarding online marketing and the Group's business segments, see Note 3.
NOTE 2: SUPPLEMENTARY INFORMATION
(a) In January 2018, the Company issued 16,000,000 Ordinary shares in a placing to institutional investors at a price of 198 pence per Ordinary share. The total gross funds raised were approximately GBP 31.7 million (USD 44.2 million) and the related costs amounted to approximately GBP 1.1 million (USD 1.6 million).
(b) During the period the Group acquired additional assets for the publishing segment for total cash consideration of approximately USD 40 million.
(c) On March 13, 2018, the Company declared a dividend to its shareholders of USD 8 million ($0.04 per share).
(d) In January 2018, the Company granted 3,000,000 options to employees (including to the Company's CEO and other key management personnel), exercisable to 3,000,000 ordinary shares in an exercise price of GBP 2.0 per share. The options vest over a period of 4 years from the grant date and are exercisable for a period of up to 8 years.
The following table specifies the inputs used for the fair value measurement of the grant:
Option pricing model
Black-Scholes-Merton formula
Exercise price GBP (USD)
2.0 (2.85)
Dividend yield (%)
0
Expected volatility of the share price (%)
47.3%
Risk- free interest rate (GBP curve)
1.13%
Expected life of share options (years)
5.2
Share price GBP (USD)
1.9 (2.71)
The total fair value of the options granted was calculated at USD 3,413 thousands at the grant date (USD 1.14 per option)
NOTE 3: OPERATING SEGMENTS
(a) General:
The operating segments are identified on the basis of information that is reviewed by the chief operating decision maker ("CODM") to make decisions about resources to be allocated and assess its performance. Accordingly, for management purposes, the Group is organised into operating segments based on the products and services of the business units and has operating segments as follows:
Publishing
-
The Group owns over 2,300 informational websites in 18 languages. These websites refer potential customers to online businesses. The sites' content, written by professional writers, is designed to attract online traffic which the Group then directs to its customers online businesses.
Media
-
The Group's Media division acquires online advertising targeted at potential online traffic with the objective of directing it to the Group's users. The Group buys advertising space on search engines, websites, mobile and social networks and places adverts referring potential users to the Group's customers' websites or to its own websites.
Segment performance (segment profit) is evaluated based on revenues less direct operating costs.
Items that were not allocated are managed on a group basis.
(b) Reporting on operating segments:
Publishing
Media
Others
Total
USD in thousands
Six months ended 30 June 2018 (unaudited):
Revenues
32,360
23,446
3,282
59,088
Segment profit
25,586
7,083
852
33,521
Unallocated corporate expenses
(16,243)
Finance expenses, net
(488)
Profit before taxes on income
16,790
NOTE 3: OPERATING SEGMENTS (Cont.)
Publishing
Media
Others
Total
USD in thousands
Six months ended 30 June 2017 (unaudited):
Revenues
29,809
33,895
4,225
67,929
Segment profit
24,863
9,964
346
35,173
Unallocated corporate expenses
(16,028)
Finance income, net
345
Profit before taxes on income
19,490
Publishing
Media
Others
Total
USD in thousands
Year ended 31 December 2017:
Revenues
62,894
66,428
8,310
137,632
Segment profit
50,309
19,982
1,423
71,714
Unallocated corporate expenses
(30,945)
Finance expenses, net
(1,424)
Profit before taxes on income
39,345
(c) Geographic information:
Revenues classified by geographical areas based on internet user location:
Six months ended
30 June
Year ended
31 December
2018
2017
2017
Unaudited
Audited
USD in thousands
Scandinavia
20,594
17,910
38,250
Other European countries
16,380
19,407
41,621
North America
11,337
18,887
29,665
Oceania
1,039
2,145
3,493
Asia
3,856
3,395
10,940
Other countries
2,600
922
3,766
Total revenues from identified locations
55,806
62,666
127,735
Revenues from unidentified locations
3,282
5,263
9,897
Total revenues
59,088
67,929
137,632
NOTE 4: SUBSEQUENT EVENTS
On September 23, 2018 the Company announced a dividend distribution to its shareholders of USD 6.5 million (USD 0.03 per share).
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.ENDIR BRGDCDGDBGIX
Recent news on XLMedia
See all newsREG - AIM XLMedia PLC - Cancellation - XLMedia PLC
AnnouncementREG - XLMedia PLC - Result of General Meeting and Cancellation
AnnouncementREG - XLMedia PLC - Cancellation Update & Notice of General Meeting
AnnouncementREG - XLMedia PLC - Proposed Cancellation
AnnouncementREG - XLMedia PLC - Holding(s) in Company
Announcement