Baltic Classifieds settles into listed life

It is still early days for Baltic Classifieds (BCG), the online advertising group that listed last July and serves Lithuania, Estonia and Latvia. Its first set of annual results contain some encouraging news, however – even though the shares have lost more than a third of their value since the IPO. 

Revenue is up 21 per cent year on year, fuelled by impressive sales growth from the group's jobs and services arm. Sales in this division almost doubled to €9.8mn (£8.3mn) as a result of pent up demand in the employment market. However, the biggest segment – auto – grew more slowly, reflecting “modest growth” in the used car market. 

Indeed, there are a number of question marks over Baltic Classifieds’ growth trajectory. While the group’s adjusted Ebitda grew by 19 per cent to €39.3mn in 2022, it fell by 7 per cent when IPO and historical acquisition costs are taken into account. Management estimated that the war in Ukraine suppressed its Ebitda margin by 1 per cent, concentrated around the first four weeks of the invasion.

Management expects the group’s margins to remain flat next year as it wrestles with rising costs, and analysts at Peel Hunt predict a 2-3 per cent fall in Ebitda. They have also reduced their target price from 270p to 190p.

There are some treats for shareholders. The company has announced its first dividend of 1.4₵, and has also promised to buy back shares now its net leverage is below two times. Nevertheless, the coming year looks set to be tricky for advertising, as companies are forced to tighten their belts. Baltic Classifieds has forecasted revenue growth of 15 per cent, but its auto and generalists divisions look vulnerable. Hold. 

Last IC View: Hold, 214p, 15 Dec 2021