Enero Turns The Corner After Posting Positive Half-Year Results

Enero CEO Matt Melhuish has described the group’s half-year results to the end of Devember 2015 as pleasing, the first time the Australian-listed network has come out with a positive assessment since renaming the group from Photon.

In his true modest style, Melhuish has underplayed the performance with the group reporting a three per cent revenue increase, but a staggering 57 per cent increase in EBITDA.

Melhuish, the M in the group’s flagship creative shop BMF, said that Enero had a three-stage plan of remedial, reliable and reimagined. “We see ourselves as being squarely in the middle of the reliable phase,” he said.

Part of the group’s reliability may well stem from the fact that 75 per cent of its stock is now owned by six institutional investors.

“Our investors know the company’s plan and are all adopting a long-term view,” Melhuish added.

Enero’s positive result came largely on the back of a strong performance in the UK and Europe, where it increased revenue on a constant revenue basis by 13.1 per cent and EBITDA by 63.9 per cent. A favourable currency exchange boosted the impact of the improved Pound-based businesses.

The Australian business had a disappointing revenue result, dropping 21.8 per cent, but managed to largely maintain margins dropping from 15.0 per cent to 14.4 per cent.

The group also has a modest war-chest with $34 million in the bank and no debt. However having been burnt by irrational exuberance in past purchases, any acquisitions will likely be modest and more carefully thought through.

Shares in the group ahead of the announcement were trading at 86 cents with a “strong buy” recommendation from a consensus of brokers. The group is a vastly stripped down entity from its former days as Photon now comprising a handful of companies including BMF (who announced it had won the Dulux account yesterday), Naked, Frank PR, The Leading Edge, Hotwire PR and Precinct. It has offices in Australia, the UK and the US.

Its market capitalisation is $73 million compared to the only other Australian listed communications network STW (recently merged with WPP), which has market capitalisation of $328 million. To give an idea of scale, REA Group has a market capitalisation of $1.5 million and APN Outdoor Group’s is $900 million.

The full annoucement to the ASX is below:

Results for half year ended 31 December 2015

Enero Group Limited (ASX: EGG) today announced its results for the half year ended 31 December 2015.

Summary:

 Net Revenue up 3% and Operating EBITDA up 57% on prior period.

 Improved Operating EBITDA margin to 12.6%.

 Net profit after tax to equity holders $3.7m.

 Improvement in earnings demonstrating squarely in the “Reliable” phase of Group strategy.  Enero Group CEO, Matthew Melhuish said: “We are pleased to report significant improvements in our group financial performance. A more stable revenue base, increased margin and a number of new business wins were key highlights for the first half. Our UK and European operations were particularly strong. Progress is being made with the USA market but will require further time and investment”.

Financial performance: A$ million

Net Revenue Operating EBITDA1 Net profit after tax to equity holders2 Operating EBITDA Margin

Notes:

1HFY2016 1HFY2015

Variance

Operating EBITDA is net profit before interest, tax, depreciation, amortisation, impairment, loss on sale, commercial settlements and restructuring costs. Operating EBITDA is the primary measure used by management and the directors in assessing the performance of the Group. It provides information on the Group’s cash turnover excluding significant transactions and non-cash items which are not representative of the Group’s on-going operations or cash flow.
In the prior reporting period, net profit after tax includes significant items of $0.6m. Refer to attached results presentation for detailed analysis.
The results announcement and attached presentation includes the following measures used by the Directors and management in assessing the on-going performance and position of the Group: Operating EBITDA, NPAT before significant items and NPATA before significant items. These measures are non-IFRS and have not been audited or reviewed.

Business operating performance:

Net Revenue was up 3% and Operating EBITDA was up 57% on the prior year. The Operating EBITDA margin increased to 12.6% due to a more stable revenue base and appropriate cost control. International markets now represent 60% of the Group’s net revenue and 69% of the Group’s Operating EBITDA.

Refer to the results presentation for further details on operating business performance.

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