LADbible owner LBG Media seeks international growth

If you have any kind of social media account, chances are you’ve come across a LADbible video in your feed at some stage. LBG Media (LBG), the group behind this ubiquitous content, claims to have a global audience of more than 450mn across all major social platforms and its own website. 

However, it doesn’t exactly make money from the videos themselves. Instead, it leverages its massive audience – which is primarily made up of young adults – by creating branded content to share with them. Its clients include Nike (US:NKE), Disney (US:DIS) and betting group Entain (ENT), among others. It's worth noting that 55 per cent of group revenue was from indirect revenue streams, where social media platforms such as Facebook or YouTube place ads on LBG content.

LBG’s revenue progress suggests that this model is working, but it has struggled in regions outside of its home market, most notably in Australia and New Zealand. In the fourth quarter of last year, it announced it would centralise its social and web operations in the UK, while appointing a third-party partner for commercial activity in Australia and New Zealand.

The company has been clearly aware of the need to expand beyond its traditional (male and British) target audience, and to this end acquired a female-focused US video brand in October. Management said the purchase helped it to achieve adjusted Ebitda growth of 10.8 per cent in its last financial year.

Analysts at Peel Hunt estimate 5 per cent revenue growth for LBG in FY2024, with group Ebitda margins expanding from 26 per cent to 28 per cent. The shares currently trade on an undemanding 11 times forward earnings for this year, which certainly looks tempting. 

However, we’d like to see greater evidence of sustainable international growth before buying in. Hold.

Last IC view: Hold, 73p, 12 April 2023