Cliq Digital’s (DE:CLIQ) strategy to focus its marketing investment on higher ARPU European markets achieved another year of strong revenue growth in FY16, and with a steady marketing efficiency coefficient, this converted to a doubling of net profit. Momentum remains strong and management expects another year of double-digit sales and profit growth. The shares trade in line with peers on FY18 P/E; however, evidence that the group can maintain its marketing effectiveness as it grows could drive further upside.
Doubling of net profit in FY16
FY16 was another year of significant operational and financial progress for Cliq Digital (CLIQ). The group’s strategy to focus its marketing investment in higher ARPU European markets resulted in a 17% increase in revenues, and with a similar marketing efficiency coefficient (the Cliq Factor) as that delivered in FY15, this led to a 2.2pp expansion in the EBIT margin and a 73% increase in EBIT. Net debt reduced by €4.3m to €10.6m and the gearing effects of a flat finance charge meant that EPS more than doubled to €0.43.
Double-digit profit growth expected in FY17
Cliq Digital has built up considerable experience converting mobile audiences to paying customers for its portfolio of digital products. Marketing investment across its affiliate network is the key driver of revenue growth and in FY17 management plans another increase in marketing spend, which it expects to drive double-digit revenue and profit growth. Revenues and EBIT increased by 11% and 43% respectively in Q1, putting it comfortably on course to achieve this goal. In addition, CLIQ is investing in its own direct media buying capabilities as well as the commercialisation of its mobile payments services. Investment in these areas may impact EBITDA margin progression to a degree in 2017, but longer term should support margin expansion and generate new content marketing opportunities.
To read the entire report Please click on the pdf File Below