Conduit Share Discussion Threads

[markie7] 28/11/2012 16:15

Morning Comment, CP 80.0p, TR -14.0%, Market Cap £49m
Weak Interims Driven by Insight Revenue Decline
Event
Key Results:
• Revenue +2% to £37.2m vs N1Se £39.8m. Negative organic growth after adjusting for acquisitions
• PBT -10% to £4.4m vs N1Se £5.9m
• Net Debt £2.0m vs N1Se £1.3m
• DPS +20% to 1.0p vs N1Se 0.9p
Divisions:
• Health: revenue in-line with N1S £11.0m and £2.6m EBIT
• Communications: slightly behind on revenues at £20.7m vs N1S £21.2m with EBIT in-line at £3.1m
• Insight: revenues £5.5m vs N1S £7.6m and EBIT breakeven vs N1S £1.8m
Guidance:
"While the market remains volatile on the back of continuing macro-economic pressures and we therefore naturally remain cautious, the Group will look to build on its first half revenue increase during its historically stronger second half. The Group's current new business pipeline is healthy and based on historic conversion levels, the Group expects to deliver full year Headline PBIT at around the prior year level". This is just £10.4m vs N1S of £11.8m and includes the acquisition contribution announced today and the annualising effect of previous acquisitions.
Small Acquisition of 75% stake in JPM Digital Solutions (Health) for £1.2m announced. Pro-forma multiple is 8x PBT. Historic pro-forma revenues £0.6 and PBT £0.2m.
Impact on Earnings & Valuation
We expect EBIT to head down towards the £10m mar given H1 and risk of Insight not performing in H2. Our Comms profit expectation looks achievable and Health is also on track.
N+1 Singer View
Assuming c£10 EBIT and a 4x EV/EBITDA the stock is worth c65p. Previous support from Havas stake story is likely to wane as there has been no further activity and trading is weak. We cut rating to Sell.
One medium term positive is that Insight contribution is becoming negligible and therefore earnings resilience may improve.

[madengland] 28/11/2012 12:40

Indeed chaps. When was the last time Don Ego impressed?

[markie7] 28/11/2012 12:23

it is a clear downgrade - saying this year will be in line with last year - when mkt expectation was 15% higher.

[funkmasterp12] 28/11/2012 12:17

What an obtuse set of results! Talk about complicating matters. They've spun it very well but it does read like a "warning" of sorts to me.

SP has been over-inflated since the Havas activity so if this re-traces to 70p I wouldn't be surprised to be honest.

[daz] 28/11/2012 08:26

OT - difficult to judge without knowing more details, especially of the deferred payment. The initial consideration of £1.2m for 75% values the entire business at £1.6m or 8 times the pre-tax profits of £0.2m. They don't mention the tax payable or if there are unused tax losses but on a normal 30% tax rate, it values historic post tax profits at about 11 times. That is steep for the sector but they also don't allude to any expected growth rates but I would guess that there is scope to increase earnings under Creston who can presumably market their offering to more clients.

The announcement does say it will be mildly earnings enhancing this year, so that must mean this years profits will be higher and the companies have worked together so CRE must know what they're taking on.

So overall difficult to tell but it could be OK but strategically a further move into healthcare is I think a good thing as an ageing population in western economies means this sector ought to do better than most.

[darlocst] 28/11/2012 08:15

Investec oomment:

Interims: 1H figs suggest tough conditions (as peers) and 3 specific CRE agency issues. Guidance cut - FY13E PTP now expected in line with last year (£10.4m) so -13% vs our f/c £11.9m (other brokers £11.7/£9.7m). Implies ex 1H one-off non cash tax credit FY adj. EPS c. 12p (13.6p vs other brokers 13.4p/13.9p). Downgrade implies flat PTP for 4 years despite shift to international/digital (35%/45%). Valuation - on downgraded numbers, CY13E P/E is c. 7x and adjusted (full liability) EV/EBITDA c. 5x. Macros unhelpful - Sept tough (as peers) but Oct better and pitches on-going (1H new biz c. £3m).

[old tyke] 28/11/2012 08:07

cost of the acquisition looks fairly ludicrous - anyone with better knowledge of the meeja sector like to pass judgement?

[madengland] 28/11/2012 07:51

Whats the consensus Riv, 13.61p, so 10% a drift. Are you sure he means a 4p.....and even if it does, safer places to earn 5% imo (try HICL). But good luck mate. This looks like Don Ego is making another acquisition for him and BB to pay themselves right royally.....more of the same CRE imo. Synergies, what ever happened to em Don?

[rivaldo] 28/11/2012 07:43

Not bad results at all in this environment - on track for around 12.4p EPS, which at the current share price makes CRE pretty cheap.

Plus an earnings-enhancing acquisition today too.

Digital revenues increasing nicely, and much less Alembic consideration payable too - though of course that's a two-edged sword.

A P/E of 6.5 or so, with a strong Balance Sheet - and on track for a 4p dividend, which would be a 5% yield.

[madengland] 28/11/2012 07:43

DE continues on the old strategy of acquisitions.......guess that will earn him a big salary again this year. Question is whether the acquisitions will ever deliver impressive earnings growth and share price growth for holders - the widely trumpeted synergies that the strategy don't seem to deliver on. Was pondering buying back in if the results were impressive. They ain't. Maybe a chance in a few months when looking cheaper. GL

[old tyke] 28/11/2012 07:42

I think you are being a bit -ve: the order book is up, and (although there is 'rebalancing') they would have not increased the int div so much if they wanted to have a proper warning

[spooky] 28/11/2012 07:36

Full year PBIT expected to be around last year's level, that would appear to be a warning, i assume there will be downgrades anyone care to disagree ?

[gretel1921] 23/11/2012 13:57

steady stream of buys today

[markt] 22/11/2012 17:46

....well DM is no longer the renum. committee chairman.....so that's a step forward imho...

[markt] 22/11/2012 14:02

Anyone know what the 'mkt expectations' are for the forthcoming results ?

[funkmasterp12] 12/11/2012 13:43

Yep, that 100k "buy" was indeed a Ruffer sell.

[markie7] 09/11/2012 11:22

Nelson Bostock are a PR firm, not an ad agency - so being plastered everywhere will benefit the media agency and the ad agency. Sure the PR account will be pretty hefty, but lets not get carried away

[funkmasterp12] 09/11/2012 10:56

I'm not sure, the last 100k "buy" I saw go through was actually an institution sell. I think CRE is geared up for decent interims but it's an H2 weighted business and there's been no news from Havas (who incidentally put out pretty strong results last week).

Am still out here and I feel the price will go back to 75p ish levels on the next results, though based on nothing but historical trend and gut feel. Didn't know Nelson Bostock had the EE account though - they must have spent a truckload on that!

[rivaldo] 09/11/2012 09:46

Nice 100k buy at 85.5p. Havas perchance?!

CRE's Nelson Bostock are behind the EE 4G campaign. It's been plastered across all the media for the last week or two and must have cost EE an absolute fortune.

[madengland] 07/11/2012 18:40

Well gretel, its been undervalued since I can remember. It goes from extremely undervalued, to undervalued (thats the peaks). Interesting last couple trades, whats going on there I wonder. I am in no hurry to buy, just wondered if anyone had a take on results, think the next few days may see a better buying opportunity, but who knows. It is always an easier decision if CRE is at 70p than 85p

[gretel1921] 07/11/2012 17:12

Undervalued,
buy!!

[madengland] 07/11/2012 11:44

Its all very quiet on here......any feels for the results approaching? Was considering moving a few quid back this way now that the Havas thing has settled. Riv - are you still out there....any predictions for results? Cheers, MadE

[markt] 26/10/2012 13:39

If you dont like my posts, then perhaps you should just click on the filter button....

(if you show that any data in my previous post is not factual....I will remove that data)
----

Is your post a case of 'bad news' or 'bad information' ...."shoot the messenger" ?!