RNTS Media — Update 14 February 2017

RNTS Media — Update 14 February 2017

RNTS Media

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RNTS Media

Strong momentum to continue into FY17

Trading update

Media

14 February 2017

Price

€2.2

Market cap

€252m

Net debt (€m) at September 2016

111

Shares in issue

114.5m

Free float

61%

Code

RNM

Primary exchange

FRA

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(7.4)

(15.0)

1.1

Rel (local)

(8.6)

(23.0)

(23.0)

52-week high/low

€3.40

€1.49

Business description

RNTS Media has two complementary mobile ad tech platforms at its core: Fyber and Inneractive. Their supply-side platforms help app developers and publishers overcome the challenges of a fragmented ecosystem by consolidating a wide range of advertising demand onto one platform. RNTS is one of the world’s largest independent groups in this space.

Next events

Q1 results

April 2017

FY16 results

July 2017

Analysts

Bridie Barrett

+44 (0)20 3077 5757

Fiona Orford-Williams

+44 (0)20 3077 5739

Dan Ridsdale

+44 (0)20 3077 5729

Katherine Thompson

+44 (0)20 3077 5730

RNTS MediaRNTS Media is a research client of Edison Investment Research Limited

RNTS Media’s FY16 preliminary update points to pro forma (PF) FY16 revenue growth of at least 65%, in line with its recently raised guidance and our forecasts. RNTS reached EBITDA break-even during Q4, as expected. Contingent on planned financing, FY17 guidance for revenue growth of 30% and EBITDA profitability of over €3m has been introduced, a clear signal of ongoing strong momentum; we leave forecasts unchanged.

Year end

Revenue
(€m)

EBITDA
cont (€m)

EBIT
cont (€m)

PBT cont** (€m)

PBT
reported (€m)

EV/sales
(x)

12/14

64.0

0.7

(1.5)

(2.0)

(10.8)

5.6

12/15

81.1

(13.7)

(15.2)

(18.6)

(40.3)

4.3

12/16e

170.0/215.0*

(10.2)/(5.1)*

(13.7)

(23.7)

(32.9)

2.1/1.6*

12/17e

275.0

3.9

(0.4)

(7.9)

(14.9)

1.4

Note: *Pro forma. **PBT is normalised, excluding amortisation of acquired intangibles, discontinued operations, exceptional items and share-based payments.

FY16 prelims: In line with forecasts

RNTS has deferred the publication of its full year results to July 2017 following a change of auditor. The release of these strong preliminary results, shortly after this announcement, provides us with comfort that this is a capacity issue rather than a trading one. PF FY16 revenues increased by at least 65% to more than €215m, in line with our forecasts, and PF EBITDA break-even was achieved in Q4 as per the company’s recently increased guidance, with a full-year adjusted EBITDA loss of less than €6m achieved.

FY17 guidance points to ongoing strong momentum

RNTS increased revenue guidance twice during FY16 and the preliminary results point to ongoing strong momentum, with Q4 growth of approximately 40%. This momentum has clearly continued into 2017, with management providing revenue guidance for FY17 of over €280m (c 30% y-o-y growth) and EBITDA of over €3m. This is broadly in line with our forecasts, which we leave unchanged.

Valuation: Reflects leading growth rates

As a network effect business, valuation in this industry tends to differentiate based on scale, growth and profitability. RNTS, which has made three strategic acquisitions over the last two years, is now one of the fastest growing ad tech companies in the sector. The FY17 EV/gross sales rating of 1.3x, while at the top end of sector peers (average ad tech rating of 0.6x), is aligned to those that offer similar revenue growth rates (although higher EBITDA margins) such as Criteo and The Trade Desk. While the group continues to invest in its technology stack and sales capacity, the two platforms at its core are scalable and, with break-even reached, we expect the strong top-line growth should start to translate to an expanding EBITDA margin profile. Evidence of this as well as ongoing strong momentum would further underpin its current rating. Putting in place additional funding this quarter to satisfy the earn-outs for the acquisitions of Inneractive and Heyzap and to provide the means to execute its strategy is the next key hurdle for the group.

Financial summary

Exhibit 1: Financial summary

 

 

€000s

2014

2015

2016e

2017e

Year end 31 December

 

 

Pro forma

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

64,024

81,076

170,000

275,000

Cost of Sales

(39,641)

(56,739)

(122,055)

(199,083)

Gross Profit

24,383

24,337

47,945

75,918

EBITDA - continuing

 

685

(13,740)

(10,175)

3,939

Operating Profit (before amort. and except.)

(1,546)

(15,196)

(13,675)

(402)

Intangible Amortisation

(2,292)

(2,469)

(3,315)

(2,700)

Exceptionals

(3,439)

(2,915)

(3,373)

(1,837)

Other

(3,021)

(16,305)

(2,500)

(2,500)

Operating Profit

(10,298)

(36,885)

(22,863)

(7,439)

Net Interest

(495)

(3,397)

(9,998)

(7,500)

Profit Before Tax (norm)

(2,041)

(18,593)

(23,673)

(7,902)

Profit Before Tax (FRS 3)

(10,793)

(40,282)

(32,861)

(14,939)

Tax

215

2,348

0

0

Profit After Tax (norm)

(1,484)

(16,245)

(23,673)

(7,902)

Profit After Tax (FRS 3)

(20,173)

(37,934)

(32,861)

(14,939)

Average Number of Shares Outstanding (m)

114.5

114.5

114.5

114.8

EPS - normalised (c)

 

(1.3)

(14.2)

(20.7)

(6.9)

EPS - normalised fully diluted (c)

(1.2)

(13.6)

(18.1)

(5.8)

EPS - (IFRS) (c)

 

(17.6)

(33.1)

(28.7)

(13.0)

Dividend per share (c)

0.0

0.0

0.0

0.0

Gross Margin (%)

38.1

30.0

28.2

27.6

EBITDA Margin (%)

1.1

-16.9

-6.0

1.4

Operating Margin (before GW and except.) (%)

-2.4

-18.7

-8.0

-0.1

BALANCE SHEET

Fixed Assets

 

173,152

160,814

215,766

234,723

Intangible Assets

159,729

157,929

211,881

231,180

Tangible Assets

674

2,195

3,195

2,854

Investments

12,749

690

690

690

Current Assets

 

51,423

119,737

111,060

106,473

Stocks

556

408

408

408

Debtors

17,246

25,214

54,400

88,000

Cash

21,078

79,123

41,260

3,073

Other

12,543

14,992

14,992

14,992

Current Liabilities

 

(33,518)

(47,067)

(73,329)

(97,166)

Creditors

(24,606)

(47,067)

(73,329)

(97,166)

Short term borrowings

(8,912)

0

0

0

Long Term Liabilities

 

(19,042)

(89,253)

(139,253)

(139,253)

Long term borrowings

(2,869)

(88,572)

(138,572)

(138,572)

Other long term liabilities

(16,173)

(681)

(681)

(681)

Net Assets

 

 

172,015

144,231

114,243

104,778

CASH FLOW

Operating Cash Flow

 

(13,723)

(10,884)

(13,099)

(5,824)

Net Interest

N/A

(1,041)

(9,998)

(7,500)

Tax

N/A

(690)

0

0

Capex

N/A

(6,321)

(4,600)

(4,635)

Acquisitions/disposals

N/A

(10,455)

(60,167)

(20,227)

Financing

N/A

0

0

0

Dividends

N/A

0

0

0

Net Cash Flow

N/A

(29,391)

(87,863)

(38,187)

Opening net debt/(cash)

2,553

(9,297)

9,449

97,312

HP finance leases initiated

0

0

0

0

Other

(11,803)

10,645

0

(0)

Closing net debt/(cash)

 

(9,297)

9,449

97,312

135,499

Source: RNTS Media accounts (historical numbers), Edison Investment Research (forecasts)

Edison, the investment intelligence firm, is the future of investor interaction with corporates. Our team of over 100 analysts and investment professionals work with leading companies, fund managers and investment banks worldwide to support their capital markets activity. We provide services to more than 400 retained corporate and investor clients from our offices in London, New York, Frankfurt and Sydney. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by RNTS Media and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison, the investment intelligence firm, is the future of investor interaction with corporates. Our team of over 100 analysts and investment professionals work with leading companies, fund managers and investment banks worldwide to support their capital markets activity. We provide services to more than 400 retained corporate and investor clients from our offices in London, New York, Frankfurt and Sydney. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by RNTS Media and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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