H1 results reflect the progress 7Digital Group PLC (LON:7DIG) has made over the last year and the initial impact of the transformative 24-7 acquisition, with exit monthly recurring revenues (MRR) up 113%. The step change in revenues forecast in H2 looks underpinned and the integration of 24-7 has started, key to moving to positive cash flow in H218 – a target reiterated by management. We expect this to trigger a re-rating of the shares, which trade on 4.1x FY18e EBITDA, a fraction of its B2B video streaming peers.
Strong client momentum and 24-7 deal
Revenues increased 9%, or 17% before foreign currency translation effects. Despite the consolidation of one month of 24-7, the cost base decreased 4% enabling a 36% reduction in EBITDA losses to £1.7m. While this acquisition was the main contributor to the 113% increase in the annualised exit MRR to £11.5m, the group has also made solid organic progress. £5m of new business was won in H1 from strategically significant customers across a range of sectors. Furthermore, the high-quality MQA audio format supported by 7digital, the only B2B service to do so, is gaining momentum. It is now supported by over 80% of global music labels, spurring interest across the sector for HD audio streaming services.
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