There has been a pre-close Trading Update from DigitlaBox (DBOX) this morning where I hold the shares and have covered the company here a few times now.
Being a relatively (as yet) small player in the Digital Mobile Media space where it generates advertising income from its online assets such Entertainment Daily and The Tab, the final quarter was always going to be a tough ask in the current climate.
As it is, the company has faired well enough, given the headwinds that have hit the economy, where advertising pressure has inevitably emerged. This was also compounded by firstly, the passing of the Queen in the Autumn and then the first ever winter World Cup.
The company had obviously enjoyed a very strong first half as previously cited, so it’s a shame that the current climate has had an impact on the full year outcome.
That said, DBOX is actually very close to the broker forecast numbers with a now expected EBITDA positive of £1.12m on revenue of £3.7m against the forecast £1.2m which is up on last years £1.03m.
The numbers are an interesting comparative, as it is worth remembering that last year saw a couple of very positive upgrades on numbers, so the performance for the year just ended looks ok and acceptable to me, where importantly margins according to Panmure Gordon have increased positively.
This, the broker points out in a note today, has come out at 30.3% against a previous 28.1% which is a good result in an industry context, whilst net cash is also strong, cited as being over £2.4m with gross cash standing at £2.8m.
The shares have, as I write, not surprisingly been hit, trading down by around 15% at a current mid-price of 7.5p, which looks overdone to me.
Looking at that price, the shares trade on a PE of 9, which given the net cash position and market cap of under £10m, looks very good value for a medium-longer term play in a growth market, particularly given the capital light model and ability to generate high levels of cash.
The big unknown as yet in the near term, is what the expectations are for the year now in progress given consumer belt tightening, as Panmure Gordon had previously pencilled in revenues of £4.5m and EBITDA at £1.5m with EPS of 1p.
The broker will update on forecasts come the results, so it looks likely those numbers could be reigned back a bit, although the recent acquisition of the Poke should provide some positive contribution, so perhaps those numbers could be achieved.
Even allowing for a short-term hiatus on revenue though, the medium to longer term prospects remain very attractive to me, particularly given industry anticipated trends for mobile advertising.
The other acquisition aside the Poke which has yet to be completed is TV Guide, which was due to be signed off a few months back.
CEO James Carter explained to me earlier this morning that the delay has been caused by slower than expected progress from TV Guide’s own tech development in order to get it up to a level that is acceptable for DBOX to take it on.
Completion is nevertheless expected in the next few months, where it appears DBOX wants to have the future asset in the right place in order to add value.
Panmure Gordon concludes, “Digitalbox is well positioned in the attractive mobile media content market and has been making progress through some very tough conditions over the last few years (the pandemic and the war/related effects). We expect that the business will continue to prosper in the medium term as the fundamentals of the market, its content product and approach to optimisation deliver growth. The management team have proven they can acquire and improve the performance of media businesses and over time we expect greater scale through a combination of acquisitions and organic growth. The near term remains tough, but we remain confident about Digitalbox’s prospects”.