Rising costs largely explain the slump in pre-tax profits at video search engine group, Blinkx – as competition in the online advertising market continued to intensify. Management failed to provide any guidance on current trading, or on the full-year outlook – leaving little scope for share price upside.
With competition ramping-up, Blinkx's sales and marketing costs rose to $32.5m (£21m) from last year's $24.4m. There were also exceptional costs, totalling $4.7m, from last year’s acquisitions of online media and technology business, Burst, and online advertising company, Prime Visibility Media Group (PVMG). What’s more, margins at those two businesses are lower than at Blinkx’s legacy operations – meaning that the group’s gross margin slipped to 53 per cent from 65 per cent.
Still, the online video advertising market is still expected to grow at 30 per cent a year, yet Blinkx exploits less than 10 per cent of the total advertising interactions across its footprint – suggesting plenty of growth potential. Burst and PVMG are eventually expected to help the group tap into that potential.
Broker Canaccord Genuity expects cash profits of $16.2m in 2013, giving EPS of 2.1¢ (2012: $10.5m/2.3 ¢).
BLINKX (BLNX) | ||||
|---|---|---|---|---|
| ORD PRICE: | 45p | MARKET VALUE: | £163m | |
| TOUCH: | 45-45.3p | 12-MONTH HIGH: | 161p | LOW: 39p |
| DIVIDEND YIELD: | NIL | PE RATIO: | 65 | |
| NET ASSET VALUE: | 34¢* | NET CASH: | $38.4m | |
| Year to 31 Mar | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2008 | 6.55 | -16.3 | -6.30 | nil |
| 2009 | 13.9 | -9.33 | -3.19 | nil |
| 2010 | 33.7 | -8.91 | -2.94 | nil |
| 2011 | 66.1 | 6.14 | 2.39 | nil |
| 2012 | 114 | 1.93 | 1.10 | nil |
| % change | +72 | -69 | -54 | - |
Ex-div:- Payment:- *Includes intangible assets of $78.5m or 22¢ per share £1=$1.58 | ||||
