Reworld Media (PA:ALREW) has posted strong preliminary FY16 numbers, with EBITDA of €4.4m – well ahead of earlier guidance of around €3.3m and our estimate of €3.5m. This demonstrates the positive impact of the strategy to grow the digital aspects of the media brands and the improving performance of TradeDoubler. Our FY17 and FY18 forecasts are broadly unchanged and show a continuing positive trajectory as the brands gain traction. The market valuation is at an 18% discount to peers, more on a DCF basis.
Progress across brands and performance
Both media brands and media performance (described in our initiation note) contributed positively to the FY16 headline results. Across the business, digital now accounts for 71% of revenues. Digital revenues within media branding grew by 30% year-on-year and now account for 17% of the segment (FY15: 13%), with this growth sufficient to offset the 4% decline in print sales. The digital element of media brands moved EBITDA positive, delivering a 5% margin for FY16, while the print margin slid from 5% to 4%, reflecting the industry decline in print advertising revenues. Media performance, in the form of TradeDoubler, is showing the first benefits from the earlier realignment of costs, moving back into profit in H216. The moves to broaden the technical aspects of the offer to include greater levels of targeting and retargeting should help lift the achievable gross margin. TradeDoubler has also helped drive the group’s internationalisation, with over half of revenues now generated outside France, with the UK the second largest market.
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