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I originally recommended shares in UK-focused business information, events and marketing services group, Centaur Media (LSE:CAU) in October 2009 at 44p on t1ps.com – the website I founded in my bedroom and edited until September 2012 ( delivering an average gain per tip of 42.7%). But Centaur has been a rocky road – with the shares hitting highs of 73p in early 2011 then, as the UK economic environment bleakened, falling to lows of 28.5p in June of this year. Currently trading at 50.75p, in the following article I review the company’s results for its year ended 30th June 2012 – which were released on September 13th – and take a fresh look at the investment case…
The results for the year to 30th June showed an adjusted pre-tax profit of £8 million on revenue of £65.6 million, generating earnings per share of 4.2p – this up from 3.4p in 2011. Revenue was down from £68.3 million the year before – reflecting the impact of discontinued activities and the closure of lower margin events activities, partly offset by the impact of acquisitions. On an underlying basis, revenue growth was 2% – including print revenues down by 5%, but digital revenues up 7% and events revenues up 6%. Divisionally, revenue was increased in the ‘Business Information’ and ‘Exhibitions’ divisions (and by 6% and 10% respectively on an underlying basis), whilst it was down in the ‘Business Publishing’ division (though by just 1% on an underlying basis). Each increased its underlying profitability as various restructuring initiatives showed through.
At the year-end net debt totalled £7.2 million though the company has subsequently completed an acquisition of global digital marketing and e-commerce community focused, Econsultancy.com Ltd, for an initial £12 million and further performance related consideration of up to £38 million, based on EBITDA performance in the year ending 31 December 2015 and payable in 2016.
In the results statement Centaur noted “continued growth in its operations in the new financial year, although July and August are traditionally a quieter period across all three divisions and the economic backdrop remains uncertain. Centaur continues to see the benefits of the restructuring flowing through”.
Earnings per share are expected to grow to more than 6p for the current year, with 7.5p+ forecast for the year after. The dividend is expected to rise from 2.25p for the year recently ended to 2.4p this time and then on to 2.6p. The shares have been strong recent performers – recovering from 29p at the end of July to the current 50.75p – and there may well be some more to come as the rating remains unchallenging. However, I have continuing reservations on the UK economy and together with Centaur’s increased debt position, I would be looking to bank the mild gain here and re-investing elsewhere.
You may well say that the yield is 4.7% rising to 5.1% and that this is attractive. Yup I take that on board but for a company in debt operating in an industry facing structural as well as cyclical challenges I would need a greater yield to offset the clear risks. That is why I’d sell now, bank a small gain and move my cash elsewhere.
If you are looking for an idea of where to move I flagged up a company operating in a clear growth sector with net cash and offering a far greater yield as the first of 10 stocks to buy for yield on my newly launched website, the Nifty Fifty 48 hours ago.
There will be one new investment idea per working day on N50 for at least the next three weeks.
To access the website ahead of today’s investment idea or for more details click here
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