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RhythmOne: 'It feels like we’re back'

A major restructuring programme has helped the advertising specialists move back into a cash profit position

RhythmOne (RTHM) seems to have put the worst of its problems behind it. A major restructuring programme has seen the digital advertising specialist dispose of a number of smaller 'non-core' businesses, invest $5m (£3.9m) in mobile, video and programmatic product development, and acquire a rewards platform, Perk. This helped send adjusted cash profits into positive territory in the second half of the financial year. Broker Numis thinks this return to profitability will continue and has forecast adjusted pre-tax profits of $8.7m and adjusted EPS of 1.8ȼ in the year to March 2018, swinging from losses of $4.7m and 1.1ȼ, respectively, in the reported period.

IC TIP: Hold at 47p

"It feels like we're back," said chief executive Brian Mukherjee. RhythmOne's core products (which will contribute all of the group's ongoing revenues) reported volumes and prices up 87 per cent and 69 per cent, respectively. Management has also cut $12.8m of costs from these continuing operations, which helped narrow net losses to $14m, from $76m in the year to March 2016. The group is no longer burning through cash, which suggests that more acquisitions could be in the pipeline.

RHYTHMONE (RTHM)

ORD PRICE:47pMARKET VALUE:£233m
TOUCH:47-47.8p12-MONTHHIGH:50pLOW: 16p
DIVIDEND YIELD:nilPE RATIO:na
NET ASSET VALUE:37ȼ*NET CASH:$75.2m**

Year to 31 MarTurnover ($m)Pre-tax profit ($m)Earnings per share (ȼ)Dividend per share (p)
201319816.74.8nil
201424717.63.2nil
2015215-24.8-5.2nil
2016116-77.2-22.9nil
2017149-14.9-4.5nil
% change+28---

Ex-div: na

Payment: na

*Includes intangible assets of $86.5m, or 17ȼ a share

**Includes marketable securities of $55.9m

£1=$1.29