Edel AG's (DE:EDLG) interim results show continued progress, particularly at Optimal Media where there was ‘significant’ progress in sales and earnings, buoyed by the continued resurgence of vinyl. Only the first few weeks of the new deal with Universal Music will have been included.
Kontor New Media also made good progress and has been expanding its reach, while the books offering also performed well. The record label had less positive trading, with no major break-out hits released. The group is majority family-owned with limited market liquidity, which partly explains the modest rating. The shares trade at a discount to global entertainment content and publishing companies and carry an attractive yield.
Forecasts revised upwards
Revenues in the six months to end March were up 5%, with EBITDA up 9% and EBIT +15% on the comparative period. This was above market forecasts (only one set of numbers is in the market) and these have been revised up for FY17e, FY18e and FY19e. The current year EBITDA estimate is raised from €15.5m to €16.3m; for FY18e the revision is from €16.2m to €16.8m, up 5% and 4% respectively. Top-line growth of 4% is anticipated for this year and next, with 3.5% for the following year.
Investing in product and capacity
Management intends to take advantage of the favourable conditions to invest a further €22m in Optimal Media. The Universal Music contract in manufacture and distribution, launched in February 2017, has good scope for expansion. With some manufacturers of CDs and DVDs struggling, there are plenty of opportunities for Edel to continue to build share, even if the overall market for CDs and DVDs is in decline. By being an efficient, scale producer of quality product, Edel should be able to grow at good margins.
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