The iSentia Group Ltd (ASX: ISD) share price will be in focus today after the company revealed its results for the half-year period ending December 31 2016. Below is a summary of the results.
- Revenue of $79.6m, up 5%
- EBITDA (operating income) of $20.5m, down 13%
- Underlying NPATA of $12.4m, down 17%
- Earnings per share of 6.2c, down 17%
- Dividends per share of 3.1c , down 17%
- King Content full year EBITDA loss forecast at $3m
This was a tough half for a business that continues to be valued as a growth stock on around 22x annualised earnings per share, although it has guided for H2 2017 EBITDA growth to be "double digit" and revenue growth in the mid-to-high-single digits.
The business also continues to retain some attractive qualities in particular its core media intelligence and value added services (VAS) business in Australia and New Zealand that both delivered solid revenue growth, but flat earnings. Still their exposure to the widening digital future and rise of social media could see growing demand for their services.
The Asia businesses also delivered some decent results, although the piecemeal expansion strategy into this region remains high risk and a work in progress.
The lowlights include the predictable admission of worsening guidance for its struggling King Content business with the group now expecting an FY 17 EBITDA loss of $3 million. This compares to guidance given after the initial downgrade at its November AGM for King Content to deliver a $2 million loss in H1 2017 but a "positive contribution" for the full year. ISentia's management team appear to have been fleeced in agreeing to a deal to buy King Content for up to $48 million including earn outs, which don't seem likely to be met.
Partly as a result of the acquisition net debt now stands at $56.4 million, which compares to half-year operating EBITDA of $20.6 million.
Given the problems I'm not a buyer of the stock at current valuations, as I would prefer to look to other tech stocks with less debt, successful acquisition strategies and a long track record of growing profits as a public company. One business that comes to mind is MNF Group Ltd (ASX: MNF).
