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Tremor issues profit warning

The video advertising group is refocusing away from its performance division
Tremor issues profit warning

Tremor International's (TRMR) shares fell by as much as 18 per cent following the release of its first-half results, before recovering, after it was revealed that the video advertising group had fallen to a pre-tax loss.

IC TIP: Sell at 135p

Tremor, which is the result of an April merger between the companies formerly-known as Taptica (renamed Tremor in June) and RhythmOne, cited “continuing weakness” in its performance advertising arm. Performance revenues, which made up 29 per cent of overall turnover, fell 41 per cent from $72.1m (£57.8m) at last year’s midway point to $42.3m, although RhythmOne’s estimated second-quarter contribution of around $50m helped to offset performance’s woes.

While measures are being taken to stabilise the high-margin performance wing, management is taking steps to reduce the overall business’s exposure to performance advertising, and is focusing the group on video and branding. It is also imposing “stringent accounting policies” to RhythmOne - this, combined with performance’s troubles, will see the group fail to match full-year 2019 expectations for profitability, according to the company. 

The group is also having to deal with litigation brought by Uber (US:UBER) against Taptica in June in relation to the promotion of the taxi platform’s mobile app. Taptica had been retained by advertising agency Fetch Media to promote the app – Tremor says that revenues here are immaterial, and it considers Uber’s claims to be without merit.

House broker FinnCap lowered its forecasts, and now expects full-year 2019 pre-tax profits and earnings per share of $52.6m and 42.2¢, respectively, which it expects to rise to $69.3m and 49.1¢ in 2020.

TREMOR INTERNATIONAL (TRMR)  
ORD PRICE:135pMARKET VALUE:£206m
TOUCH:130-139p12-MONTH HIGH:377pLOW: 74p
DIVIDEND YIELD:nilPE RATIO:5
NET ASSET VALUE:232¢*NET CASH:$66.5m
Half-year to 30 JunTurnover ($m)Pre-tax profit ($m)Earnings per share (¢)Dividend per share (¢)
2018**14414.20.163.98
2019145-3.3-0.05nil
% change+1---
Ex-div:na   
Payment:na   
£1=$1.25 *Includes intangible assets of $211m, or 173¢ a share **Taptica dividend