There is something rather unsettling about shopping for a pair of trainers online and then being faced with advertisements for the same trainers on every website you visit. But there’s no denying that it is an effective form of marketing. That’s probably why such programmatic advertising – which uses a complex set of algorithms to allow companies to buy ad space in real time – now attracts 78 per cent of digital advertising expenditure.
For RhythmOne (RTHM), this industry change has been both a blessing a curse. The group has its own programmatic platform, known as RhythmMax, which reported a 25 per cent year-on-year increase in revenues in the six months to September 2017. But dwindling demand for traditional online advertisements sent overall like-for-like revenues down 5 per cent to $63.4m (£47.2m).
Management isn’t concerned. Programmatic ads now make up the majority of group sales and the two recent acquisitions have brought in a host of programmatic customers, equivalent to $51.2m of revenue in these numbers. Meanwhile, the proposed purchase of YuMe – which is expected to complete by April – is forecast to help lift revenues to $487m by FY2019.
However, broker Numis has trimmed guidance for the year to March 2018 due to unexpected delays in the integration of RadiumOne. Pre-tax profits and EPS are now expected at $4.2m and 8.1ȼ, respectively (from losses of $4.7m and 9.2ȼ in FY2017).
| RHYTHMONE (RTHM) | ||||
| ORD PRICE: | 216p | MARKET VALUE: | £107m | |
| TOUCH: | 219-225p | 12-MONTH HIGH: | 500p | LOW: 216p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 371ȼ* | NET CASH: | $39.3m | |
| Half-year to 30 Sep | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (ȼ) | Dividend per share (p) |
| 2016 | 66.8 | -10.3 | -26.9 | nil |
| 2017 | 115 | -8.3 | -16.6 | nil |
| % change | +72 | - | - | - |
| Ex-div: | na | |||
| Payment: | na | |||
| *Includes intangible assets of $103m, or 209ȼ a share £1=$1.34 | ||||
