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RhythmOne feels the beat as ad platform takes off

The rebranded Blinkx's flagship advertising platform has attracted top brands and publishers
November 16, 2016

It's been a long road to redemption for Blinkx, now called RhythmOne (RTHM). The digital advertising group's shares plummeted in 2014 after a Harvard professor raised questions about its operations and profits suffered due to industry doubts about the efficacy of online ads. But management has refocused on growth areas and rolled out technology to match, enabling it to more than halve the group's adjusted operating loss to $6.3m (£5.1m) in the reported period.

IC TIP: Hold at 37p

RhythmOne now focuses on mobile, video and 'programmatic' or automated advertising. Sales of the latter surged 45 per cent year on year, meaning revenues from these core offerings accounted for more than four-fifths of total turnover, up from 69 per cent in the prior comparable period. Operating expenses also shrunk by about a quarter, reflecting a cost-cutting drive.

The group's flagship platform, RhythmMax, connects advertisers to an audience of more than 440m people. Management bolstered its reach by partnering with dozens of brands and ad-tech groups, including Ford and Facebook's LiveRail platform. Its efforts have already paid off: RhythmOne posted adjusted cash profits in both August and September.

Broker Numis upgraded its forecasts and now expects a smaller adjusted pre-tax loss of $6m this financial year, giving a loss per share of 1.6¢, swinging to profits of $0.5m and 0.1¢ in FY2018 (compared with losses of $19.8m and 4.4¢ in FY2016).

RHYTHMONE (RTHM)
ORD PRICE:37pMARKET VALUE:£150m
TOUCH:36.5-37.3p12-MONTH HIGH:41pLOW: 16p
DIVIDEND YIELD:NILPE RATIO:NA
NET ASSET VALUE:36¢*NET CASH:$69m**

Half-year to 30 SepTurnover ($m)Pre-tax profit ($m)Earnings per share (¢)Dividend per share (p)
201591.4-79.3-19.8nil
201680.7-10.5-2.7nil
% change-12---

£1=$1.24 *Includes intangible assets of $59.3m, or 15¢ a share **Includes $57.6m in marketable securities