Before its 2017 share price surge, XLMedia’s (XLM) exposure to the uncertain online gambling industry kept investors at bay. Today, those who stuck with their scepticism while revenues and the share price soared last year will be feeling rightly smug. Tighter regulation forced management to halt operations in Australia, while uncertainty in Germany and the UK stunted demand for marketing on the group’s gaming websites. First-half adjusted cash profit slumped 9 per cent to $20.9m (£15.8m) as a result.
But management insists that a tighter regulatory environment, counter-intuitively, is a good thing for XLMedia as it increases the reliability of the main source of revenue, while acquisitions should help the group diversify into new sectors and geographies. We remain sceptical. In the first half of 2018, 70 per cent of revenues came from the gambling industry, up from 63 per cent during the 2017 half-year. Meanwhile, the group spent at least $28.5m (out of a total $45.8m acquisition outlay) on new gaming websites, including a Finnish gambling information website and WhichBingo.co.uk.
Still investors can take solace from the fact that the dividend continues to be well supported by the balance sheet, with operating cash inflows more than covering the $6.5m half-year payout, despite a costly change in the value of the group’s assets.
| XLMEDIA (XLM) | ||||
| ORD PRICE: | 104p | MARKET VALUE: | £229m | |
| TOUCH: | 103-105p | 12-MONTH HIGH: | 224p | LOW: 86p |
| DIVIDEND YIELD: | 4.9% | PE RATIO: | 10 | |
| NET ASSET VALUE: | 75ȼ* | NET CASH: | $51.3m** | |
| Half-year to 30 Jun | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (ȼ) | Dividend per share (ȼ) |
| 2017 | 67.9 | 19.5 | 7.0 | 4.02 |
| 2018 | 59.1 | 16.8 | 6.0 | 3.00 |
| % change | -13 | -14 | -14 | -25 |
| Ex-div: | 4 Oct | |||
| Payment: | 2 Nov | |||
| *Includes intangible assets of $41.2m, or 17ȼ a share | ||||
| **Includes $9.3m of short-term investments £=$1.31 | ||||
