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Baltic Classifieds displays promise

The online listings group has reported strong revenue growth - though half-year results were weighed down IPO costs
Baltic Classifieds displays promise
  • Jobs & services division expanding rapidly
  • Covid-19 could hit group's clients

Since listing in July, the online advertising group Baltic Classifieds (BCG) has enjoyed strong traffic to its sites and healthy revenue growth. IPOs are an expensive business, however, and profits have been hit by mounting costs. 

Baltic Classifieds is not a familiar name to most UK investors. With a market value of over £1bn, however, it is a major presence in north east Europe, operating 12 online classifieds portals across Estonia, Latvia and Lithuania. The group has four business units - automotive, real estate, jobs and services, and generalist - all of which reported revenue growth. 

Jobs and services is currently the smallest division but is growing particularly fast. Revenue more than doubled over the past six months, as labour shortages caused the employment market to swell. The group now expects the division’s revenue to be “significantly ahead” of previous guidance, and that further Covid restrictions are unlikely to hamper the group's growth estimations.

Listing in London hasn't been cheap, though, and the group’s expenses shot up from €13m (£11m) to €22.7m year-on-year, driving a pre-tax loss. Around €8.8m of costs arose from the summer listing, while another hefty chunk relates to an acquisition the previous year, suggesting profits will stand more of a chance next year.

The group has also managed to reduce its borrowings by over €120m. Net debt now stands at just over two times adjusted cash profits - still fairly high, but a significant improvement on the previous year’s multiple of six. 

It’s still early days for Baltic Classifieds, and the Omicron variant is breeding uncertainty across its core divisions. Nevertheless, forecasts suggest analysts are optimistic. FactSet consensus EPS estimates stand at 4.23p for the year to April 2022, and 5.12p the year after. A dividend is slated for the autumn of 2022, but the current valuation is not yet tempting. Hold.

Last IC View: n/a

BALTIC CLASSIFIEDS (BCG)  
ORD PRICE:214pMARKET VALUE:£1.07bn
TOUCH:214-216p12-MONTH HIGH:264pLOW: 165p
DIVIDEND YIELD:NILPE RATIO:N/A
NET ASSET VALUE:64₵*NET DEBT:23%
Half-year to 31 Oct**Turnover (€m)Pre-tax profit (€m)Earnings per share (₵)Dividend per share (₵)
202020.40.39-0.10nil 
202125.0-7.64-1.60nil 
% change+22---
Ex-div:n/a   
Payment:n/a   
*Includes €409m or intangible assets, or 82₵ a share. **Baltic Classifieds listed in July 2021. £1=€1.18