XLMedia – very positive first-half Trading Update should spur a lot more investor interest, especially with a ‘fair value’ of 98p

Mark Watson-Mitchell
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XLMedia – very positive first-half Trading Update should spur a lot more investor interest, especially with a ‘fair value’ of 98p

This morning XLMedia (LON:XLM) issued a very positive Interim Trading Update for the six months to end June.

Having undergone a quite significant reorganisation of its websites and corporate structure, the group is starting to show through impressively.

This £79m capitalised group, which is a leading global digital publisher, owns and operates websites across a wide variety of industry verticals, including sports betting, gambling, personal finance and more.

It attracts players through online marketing techniques and directs them to gambling operators.

In return the company receives a share of the revenue generated by such players, a fee per player acquired, fixed fees or a mixture of these three income streams.

Obviously, this business model is predominantly performance-based and it aligns itself with the interest and success of the gambling operators.

The company, which is based in Henley-on-Thames, uses a variety of business intelligence tools, in order to track the flow of traffic to its customers and in seeking to identify and target high value consumers for platform operators.

It also uses these tools to analyse the quality and conversion of such traffic into revenue, in order to improve the group’s return on investment, as well as providing high quality services to its affiliates.

The group’s assets, technology, and data are the three components that helps it to continuously deliver highly valuable, engaging, timely, and relevant content to hundreds of millions of customers worldwide.

Examples of some of its websites

The group owns content-rich websites in 18 languages, which alongside its in-house technology and exclusive data makes it one of the strongest players in the industry. 

Each one of the group’s top-ranked websites features an array of informative, premium content.

‘Money Under 30’ is a personal finance portal specializing in financial advice for young adults to make informed decisions about money management.

‘The Dough Roller’ is a leading personal finance site dedicated to guiding users in their investments and securing financial independence.

‘Investor Junkie’ is a leading popular investment education website providing information and reviews of various investment channels and financial products.

‘Young and Thrifty’ is a personal finance site assisting Canadians with their earnings and savings by giving users the tools for easy budget management and investing.

‘Greedyrates’ is one of Canada’s most popular credit card comparison and personal finance site, offering users rich and broad financial information.

‘WhichBingo.co.uk’ is the largest independent online bingo review site in the UK.

‘Nettikasinot.com’ is one of the largest casino review sites that the group operates.

‘Freebets.com’ is one of the leading and trusted UK sports betting affiliate sites, giving users access to bookmakers’ free bet offers and promotions. The team behind the site have significant experience in the online and offline betting industry.

‘101 Great Goals’ is a global football media news publisher with updates on live streaming information, football news, and betting tips.

Excellent client list

The Group has a very impressive and diverse list of global clients, such as 888 Holdings, mr green, Ladbrokes, Paddypower, betway, Unibet, betsson, William Hill, netmarble, souq.com, traveloka, and product madness amongst hundreds of others.

Interesting international shareholders

There are some 262.59m shares in issue, which at last night’s closing price of 30p values the group at £78.78m.

The group’s biggest shareholder is Moise Mitterand, boss of Les Nouveaux Constructeurs, the real estate development business, with 73.48m shares, representing 27.98% of the XLMedia equity.

Grupo Bethia SA, based in Chile, has a 15.16m share stake in the group, some 5.77%. Bethia provides investor and management services, focussing upon the retail, transportation, agriculture, finance, wine real estate and equestrian business sectors.

Larger institutional investors include BlackRock, Henderson Global, Canaccord Genuity Wealth, Fidelity, River & Mercantile, and Santander Asset amongst many others.

Just one of the group’s founder directors, Ory Weihs, has a meaningful stake, with 8.14m shares, 3.10% of the equity.

Today’s Interim Trading Update

For the six months to end June the group expects to report a 38% jump in revenues to $44.5m ($32.2m), while its EBITDA could leap 59% to $10.5m ($6.6m).

Following a quite significant reorganisation of the group and boosted by its newest vertical, US Sports, it has traded very well in the first half year.

US Sports accounted for a substantial 68% of revenue, some $30.2m.

The Group’s European Sports vertical was solid, with a revenue of $3.8m.

While the restructured gaming and bingo vertical saw revenues drop to just $8.4m ($12.5m), at which level it is now stabilising on its reduced cost base, but still continuing to generate cash,

The group’s personal finance vertical saw a severe fall in revenues to $0.8m ($6.6m). This side of the business is now being reorganised to improve performance and revenues.

Analysts View

Simon Strong, analysts at the company’s broker Cenkos Securities, has rated the group’s shares as a Buy.

He stated that the first half results were substantially ahead of expectations, with the strength of the sports betting revenues more than offsetting weaknes elsewhere within the Group.

For the current year to end December his estimates are out there for $69.8m ($66.5m) revenues, with a $16.7m ($11.0m) adjusted pre-tax profits, that would generate 5.6c (5.0c) of earnings per share.

For the coming year he sees a good lift-upwards in revenues to $78.4m, with $19.5m profits and 5.7c per share in earnings.

Conclusion – DCF model shows a 98p ‘fair value’

There has been a great deal of mergers and acquisitions activity in the US sports betting sector over the last couple of years. 

As sports makes up 68% of the group’s revenues it should do extremely well from the growth potential as more States legalise sports betting. 

The group, which now operates in 21 US States and one in Canada, will spread its net even wider. 

Ohio, which is the seventh most populated state, is now expected to permit sports betting from January next year. 

That just has to be good news for XLMedia.

That is when this group’s scalability will really start to show through, as the Cenkos estimates for the coming year clearly indicate.

The group’s earnings are expected to grow significantly over the next three years.

Certain discounted cash flow models indicate that the group’s shares are 68.4% undervalued, suggesting a 98p ‘fair value’, which is impressive.

Less than a year ago the group’s shares were trading at 66.5p, they have since dipped to a low in early March of 24.3p. 

At last night’s 29.5p they are looking ready to show an upward price push, especially after this morning’s Trading Update.

FireAngel Safety Technology Group – broker’s target price of 27p leaves significant upside after today’s Trading Update

Mark Watson-Mitchell
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FireAngel Safety Technology Group – broker’s target price of 27p leaves significant upside after today’s Trading Update

Smoke alarms may well be proving their worth during this summer heat period.

Also showing some heat is the FireAngel Safety Technology Group (LON:FA.) whose business is home safety products, such as smoke and carbon monoxide detectors and accessories.

The first-half year’s trading

The group, which sells its products through distributors and retailers to the retail, trade do-it-yourself, fire and rescue service and utilities markets, this morning announced its Trading Update for the six months to the end of June.

The company performed strongly in its first half, better than even its own Management expectations, despite the impact of additional inflationary costs showing through.

It is now looking to get back into profits, positive cash generation and greater sales.

Supply chain disruptions eased across the Period and in Q2 2022, the Company sold a total of approximately 1.4 million units, against a supply-constrained total of 1.0 million in Q1 2022, with 581k products sold in June 2022 alone. 

Furthermore, in Q1 2022, all standard freight from Asia was booked for the balance of the year offering greater certainty of supply.

The group, however, is expecting to better margins coming to the fore in the current quarter and then going forward, especially as the supply of components has eased in the latter part of the first half.

Executive Chairman John Conoley stated that:  

“I am pleased that the Company has delivered solid growth and ended the first half ahead of the Board’s expectations, thereby making good progress against our strategy for improved performance.

“Despite all challenges so far, management action has preserved Company progress in the half, and we are still on track to meet our full year market expectations. The Board continues to expect a materially positive EBITDA performance for FY2022, along with a cash generative second half, thanks to strong product demand driven in part by continued regulation.

Analyst’s estimates

The group’s joint broker, Singer Capital, is looking for the group to end the year at close to break-even, while expecting larger sales next year to push it into significant returns.

For the current year, after this Update, Singer’s analyst Greg Poulton, is estimating £55.7m (£43.5m) sales revenues, with an adjusted pre-tax break even (£3.5m loss), 

The year to end December 2023 is seen by Singer as bringing in £62.0m sales, £3.5m profits and 2.1p earnings per share. 

Poulton rates the group’s shares as a Buy, with a Target Price of 27p per share.

Now that we know that the group has both its component supply and its pricings in a better frame, it gives the market more confidence in how the company is seeing its prospects.

That will soon shine through onto its share price, which closed last night at 11.4p

Considering that Singer Capital is so positive and going for a 27p price aim, FireAngel’s shares look to be heading a great deal higher.

FCA confirms new Consumer Duty for financial services

Natasha Doris
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FCA confirms new Consumer Duty for financial services

The Financial Conduct Authority (FCA) announced the introduction of a new Consumer Duty on Wednesday, which is set to raise the standards for how financial firms treat customers.

The Duty will reportedly allocate higher and clearer standards of consumer protection across the financial services industry, with the move coming as part of the FCA’s transformation into a more assertive, data-led regulator.

According to the FCA, the new regulations will require financial firms to end rip-off charges and fees, make it as easy to cancel or switch products as it was to purchase them, and provide customer support in an acceptable timeframe so clients don’t give up and hang up on service representatives before receiving an answer to their question.

The Duty will also mandate that financial services provide timely and clear information for customers to understand products and offerings in full, rather than bury key information in long listings of terms and conditions that few consumers have the time to completely read.

In addition, the FCA confirmed businesses would need to focus on the diverse needs of their customers at every stage and interaction, including those in vulnerable circumstances.

Companies will reportedly have 12 months to implement the new regulations for products and services currently offered to customers, with an extension for closed book products 12 months later to give businesses time to bring older products up to the new rules.

“The current economic climate means it’s more important than ever that consumers are able to make good financial decisions. The financial services industry needs to give people the support and information they need and put their customers first,” said FCA executive director of consumers and competition Sheldon Mills.

“The Consumer Duty will lead to a major shift in financial services and will promote competition and growth based on high standards.”

“As the Duty raises the bar for the firms we regulate, it will prevent some harm from happening and will make it easier for us to act quickly and assertively when we spot new problems.”

Lloyds, Rio Tinto and the European Earnings Season with Alan Green

UK Investor Magazine
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Lloyds, Rio Tinto and the European Earnings Season with Alan Green

We record this Podcast in the midst of earnings season with updates from blue chips companies flooding in from Europe as well as across the pond.

The earnings picture has been mixed, but notably better than investor sentiment would suggest. We discuss upcoming rate hikes from the Fed and market positioning ahead of their decision tonight. 

In the current earnings season, US companies have consistently beaten on revenue but there have been misses on profitability. 

We focus on Lloyds and Rio Tinto who both provide attractive dividends, but are being impacted in different ways but the current macro environment.

We finish by providing updates on two junior resource companies in Power Metal Resources and GreenX.

Visit the UK Investor Magazine Video section here. 

Rio Tinto profits slide on climbing inflation, reports 2nd-highest interim dividend on record

Natasha Doris
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Rio Tinto profits slide on climbing inflation, reports 2nd-highest interim dividend on record

Rio Tinto shares fell 2% to 96.9p in late morning trading on Wednesday on the back of largely flat production in HY1 2022, with the first iron ore delivered from its Gudai-Darri project and the commencement of operations at the underground Oyu Tolgoi mine.

Rio Tinto confirmed a consolidated sales revenue drop of 10% to £29.7 billion against $33 billion year-on-year.

The mining company reported an underlying EBITDA of $15.6 billion, alongside free cash flow of $7.1 billion and underlying earnings of $8.6 billion after taxes and government royalties of $4.8 billion.

The group also noted a post-tax profit slide of 28% to $8.9 billion from $12.3 billion across HY1 2022, linked to movement in commodity prices, higher energy prices and rising rates of inflation on operating costs and closure liabilities.

“We remain focused on delivering on our long-term strategy, with a steady improvement in operating performance and some notable advances in our growth agenda,” said Rio Tinto CEO Jakob Stausholm.

“We continue to strengthen our partnership with the Mongolian government following commencement of underground mining at Oyu Tolgoi, delivered first iron ore from the Gudai-Darri mine and approved early works funding at the Rincon lithium project.”

“Market conditions were good, albeit below last year’s record levels. The market environment has become more challenging at the end of the period.”

Rio Tinto announced its second-highest interim dividend on record, confirming a HY1 payment of $4.3 billion, representing 267c per share.

GSK raises guidance on Speciality Medicines 44% revenue growth

Natasha Doris
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GSK raises guidance on Speciality Medicines 44% revenue growth

GSK shares gained 0.4% to 1,762.1p in late morning trading on Wednesday after the pharmaceutical company announced a 19% AER sales climb to £6.9 billion in Q2 2022.

The group reported a 44% growth in Speciality Medicines revenue to £2.7 billion, alongside a 9% rise in Vaccines revenue to £1.7 billion and a 5% General Medicines revenue increase to £2.5 billion.

GSK highlighted a total continuing operating margin of 16% and an adjusted operating margin of 29%.

The company noted a total EPS fall of 40% to 20.8p and an adjusted EPS rise of 23% to 34.7p.

GSK mentioned an adjusted operating profit rise of 22% to £2 billion, along with a total operating profit of £1 billion against £1.2 billion year-on-year, following higher re-measurement charges for contingent consideration liabilities, partly offset by increased profits on turnover growth of 13% at CER and a rise in milestone income.

The firm announced a Q2 2022 continuing cash generation from operations of £1.6 billion and a free cash flow of £300 million.

The company added its balance sheet was strengthened after its demerger and listing of Haleon on 18 July, through a dividend of over £7 billion from the group.

Guidance FY 2022

GSK reported an expected sales growth between 6% to 8%, revised from 5% to 7% for FY 2022, with an adjusted operating profit climb between 13% to 15% from its previous estimation of 12% to 14% at CER.

The pharmaceutical giant said it projected an adjusted EPS rise of 1% lower than its operating profit.

GSK confirmed a dividend per share of 16.2p for Q2 2022, with no change anticipated in the expected dividend of 61.2p per share for FY 2022.

“This is GSK’s first set of results as a newly focused biopharma company, and we have delivered an excellent second quarter performance, with strong growth in Specialty Medicines, including HIV, and a record quarter for our shingles vaccine Shingrix,” said GSK CEO Emma Walmsley.

“With this momentum in sales and operating profit growth, we have raised our full-year guidance and are confident in delivering the long-term growth outlooks we set out for shareholders last year.”

AIM Movers: Parsley Box leaves a bad taste and musicMagpie margins fall

Andrew Hore
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AIM Movers: Parsley Box leaves a bad taste and musicMagpie margins fall

More bad news from Parsley Box (LON: MEAL), which floated at 200p at the end of March 2021 and has fallen to 12.25p, down 30% on the day. Trading is tough and gaining new customers become more costly due to lower response rates. First half revenues slumped from £14m to £9.6m. Marketing spend is being reduced and that will help to offset lower revenues. Even so, finnCap has reduced its full year revenues forecast to £19m and the expected loss increased to £4.6m. The loss is set to continue next year. Cash could be running out by the end of 2024.

musicMagpie (LON: MMAG) fell into loss in the six months to May 2022. The refurbished technology seller increased its consumer technology revenues, while disc media and books revenues fell 24% to £25.3m. That change in product mix meant that gross margins declined. Rental revenues remain a small part of the business, but they are growing strongly. Net debt was £3.3m at the end of May 2022. A full year pre-tax profit of £2.8m is forecast. The shares fell 10% to 45p. The April 2021 placing price was 193p.

Lower carbon fuel alternatives developer Quadrise Fuels International (LON: QFI) has signed a framework agreement with MSC Shipmanagement Ltd of Cyprus. QFI will carry out proof-of-concept tests for its fuels on MSC’s commercial container vessels. The ultimate plan is to supply all the company’s vessels. The Quadrise share price rose 13% to 1.5675p.

Subsea cable protection services provider Tekmar Group (LON: TGP) has won a £1.6m contract for windfarms in China. The share price improved 11.1% to 12p. There is no news concerning the strategy review and offer process.

Secure payments technology provider PCI Pal (LON: PCIP) beat expectations in the year to June 2022. Revenues were £11.9m, compared with the previous expectation of £11.5m. finnCap has reduced its loss forecast to £2.9m. Annualised recurring revenues are 43% higher at £11m. Monthly cash breakeven is possible this year. There is no news concerning the patent dispute with Sycurio (previously Semafone). The share price rose 8.4% to 64.5p.

FireAngel Safety Technology (LON: FA.) says interim trading was ahead of budget with revenues 15% higher at £25.6m and the loss will be lower than expected. The home safety products supplier expects to generate cash in the second half. Supply chain problems have eased. Lower margin products are being sourced in China, while progress is being made with the development of a new generation smoke alarm with Techem Gmbh. The share price improved by 6.1% to 12.1p.

Investing in Farmland with Landex

UK Investor Magazine
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Investing in Farmland with Landex

We were thrilled to be joined by LandEx CEO Kamel Belkadhi to explore the investing in Farmland and their Landex investment platform providing investors with access to a range of Farmland options.

Farmland provides a sustainable investment opportunity with a high yield and diversifies a portfolio away from traditional stocks and bond.

LandEx CEO Kamel Belkadhi outlines how their platform works and the benefits for investors. We also discuss their upcoming round on Seedrs which can be found here.

Download Landex Apple App Here

Download Landex Android App Here

British American Tobacco revenue climbs 3.7% on New Category growth

Natasha Doris
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British American Tobacco revenue climbs 3.7% on New Category growth

British American Tobacco shares dipped 0.1% to 3,465.5p in early morning trading on Wednesday following a 3.7% revenue climb to £12.8 billion in HY1 2022, led by New Category growth.

British American Tobacco highlighted a 45% expansion in its New Category sector to £1.2 billion in revenue, with a 2.1 million increase in non-combustible product consumers to 20.4 million.

The company reported 14.6% of group revenue was sourced from non-combustible products, representing a 2.2% growth from FY 2021.

“I am very proud that our continued New Categories growth momentum is driving Faster Transformation, with revenue growth of 45% in the first half of 2022, on top of 51% growth in FY2021,” said British American Tobacco CEO Jack Bowles.

“We are delivering both strong operational performance and transforming the business.”

Its vapour revenue climbed 48%, with an extension in Vuse global category share leadership to the number one US product in the sector.

Glo revenue rose 44%, with Glo hyper volume expanding its share gains across Europe, while Modern Oral revenue grew 37% on the back of Velo sales with continued volume share leadership across the continent.

British American Tobacco reported its New Category losses reduced by over 50% to £222 million.

The tobacco group announced a 0.6% rise in combustible revenue and a price/mix increase of 4.8%, along with a 0.1% value share uptick in Cigarettes.

British American Tobacco mentioned £1.5 billion in Quantum savings delivered six months ahead of scheduled, with an expected delivery in excess of £1.5 billion by the end of FY 2022.

However, the group mentioned a £957 million impairment charge linked to its exit from the Russian market following the invasion of Ukraine in late February this year.

The company highlighted an adjusted operating profit increase of 4.9% to £5.6 billion, including an adverse transactional FX impact of 1.5%.

Meanwhile, the firm noted a 0.9% rise in adjusted operating margin and an adjusted diluted EPS growth of 5.7% to 163p.

British American Tobacco confirmed an operating cashflow conversion of 77% on the back of strong continued cash generation.

FY 2022 guidance

The company said it was confident in its FY 2022 outlook, despite macro-economic headwinds.

“From an innovation perspective, the second half promises to be exciting. We are launching our new glo system proposition, hyper X2, and a new consumables range in the THP category, where we are enjoying strong growth,” said Bowles.

“In addition, we continue to build on our international leadership position in Vapour, expanding our portfolio with the launch of Vuse Go, our new disposable Vapour platform. This will be scaled-up and rolled out into a number of new markets following our successful UK pilot launch in the first half of 2022.”

“We are not immune, of course, to the increasing macro-economic pressures, exacerbated by the conflict in Ukraine. However, we are well positioned to navigate the current turbulent environment due to our powerful brands, operational agility and continued strong cash generation.”

British American Tobacco highlighted a dividend of 217.8p per ordinary share of 25p for the end of calendar year 2021.

The dividends were scheduled to be paid out in equal quarterly instalments in May 2022, August 2022, November 2022 and February 2023.

The first payment was issued on 4 May 2022, with the additional three payments scheduled for 17 August, 10 November and 2 February for shareholders on the London Stock Exchange.

Lloyds benefits from higher interest rates as mortgage book grows

UK Investor Magazine
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Lloyds benefits from higher interest rates as mortgage book grows

Lloyds added to the list of recent positive updates by FTSE 100 companies as the bank said it was thriving in the higher interest rate environment while their mortgage book jumped.

Despite putting aside £377m provisions for bad debts, the surge in net interest income to £6.1bn in the six month to June 2022 helped drive underlying profit of £3.7bn.

“Lloyds has stepped onto the half-year court fighting. Half year results show a serious improvement in net interest income, as rate rises and accelerated UK consumer activity boosted performance, with the difference between what Lloyds earns in interest on loans and the amount it pays in interest on deposits, moving in its favour,” said Sophie Lund-Yates, Equity Analyst at Hargreaves Lansdown.

“Impairment charges look large on paper but were in fact rather benign in nature. This, combined with the improved efficiency profile bodes well for future returns. The framework is set for much improved profitability too, which increases the chasm between expectations and the group’s valuation, potentially setting the scene for further buybacks.”

Lloyds highlighted a plethora of positive moves in key metrics including an enviable increase in net interest margin to 2.77% from 2.5% in the same period a year ago.

Lloyds mortgage book rose £3.3bn to £296.6bn as overall loans rose to £456.1bn. Total deposits also grew as the bank enjoyed inflows from customers.

The banking group’s outlook was particularly encouraging as the group said they expect net interest margin to rise further and capital regeneration to in excess of 200 basis points.

“In February we announced an ambitious strategy to transform our business, generate a stronger growth trajectory and enable the Group to deliver higher, more sustainable returns,” said Charlie Nunn, Lloyds Group Chief Executive.

“While the world has changed significantly since February, our strategic focus remains clear and disciplined. Our strong financial performance demonstrates the resilience of our business model and customer relationships, and has enabled us to enhance guidance for 2022.”

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