XLMedia earnings fall as it switches focus to higher-margin publishing

Digital performance marketing services provider XLMedia reported a 14.4% fall in revenue to $117.9m in its final results on Tuesday, which the board said was impacted by “operational challenges” in the year.

The AIM-traded firm said it was pursuing a “proactive shift” to higher-margin activities and sustainable revenue growth going forward.

Publishing revenues grew 4.6%, while media revenues decreased 29% and other revenues decreased 41%.

The company’s gross profit was 7.1% lower in the year ended 31 December at $67.9m, with the board reporting improved gross profit in the second half compared to the first, with gross profit in the latter part of the year up 2.7% at $34.4m.

Publishing division profit increased 3% to $51.7m, while adjusted profit in its media segment fell 23% to $15.3m.

Adjusted EBITDA was 6.9% lower year-on-year at $43.9m, with the board once again reporting improved adjusted EBITDA in the second half - up 9.8% to $23m - with a greater proportion of revenues generated from higher-margin publishing activity.

Adjusted profit before tax fell 10.8% to $35.1m, with XLMedia reporting a loss of $9.9m relating to a reduction in media activity.

XLMedia’s adjusted earnings per share decreased 9% to 13 cents.

The board declared a final dividend of $8.4m, or 4.0182 US cents per share, to be paid in sterling at 3.0419p.

That would make a total dividend of 7.0222 cents per share for the year, down from 7.7331 cents in 2017.

XLMedia said it had a “strong” balance sheet, with $41.1m working capital and total equity of $166.8m, representing 85% of total assets.

Cash and short-term investments as at 31 December were $47.6m, up from $43.3m year-on-year.

“2018 has been a challenging year but our business is built on strong foundations giving us the confidence to cease low margin activities and concentrate on the higher margin publishing division, returning the business to growth,” said XLMedia chief executive officer Ory Weihs.

“Looking ahead, the group will be prioritising internal investment across its publishing activity to further build its asset base organically, in particular, in the North American gambling and personal finance verticals.”

Weihs said that, while the company continued to assess strategic acquisition opportunities, it anticipated the bulk of its mid-to-long term asset growth to come from organic asset development.

“Our focus remains firmly on improving operational excellence and further developing assets organically to maximise shareholder value.”