News blog
Independent Media Distribution
- BY: Andrew Hore |
- POSTED: 09/09/2008 |
Independent Media Distribution, which is an online distributor of adverts, continues to trade strongly.
The strength of the UK business has helped to offset the costs of investment in new products and building up new operations in Germany, Spain and France. The market size in these three countries is double the UK and Ireland and IMD will cover 60% of the whole European market. IMD doesn’t intend to enter any new markets in the medium-term.
Revenues grew 14% to £3.76m in the six months to June 2008. Profits increased from £425,000 to £629,000. The underlying UK profits doubled before the £225,000 loss from new operations – mainly Germany in the first half. It is taking time to convince German post production businesses to switch to the digital delivery of adverts.
IMD is also investing in developing new products, such as Legato, which is a data information system for the internet and mobile phones. It is similar to the company’s CARIA software which is used in the TV industry.
Cash generation is strong and net debt has fallen to £366,000. IMD is already moving into a net cash position.
The interim dividend is more than doubled from 0.33p to 0.7p a share. Assuming that the final dividend of 0.7p a share is at least maintained, then IMD’s total dividend will be more this year than in 2005 – the year before the board reduced the dividend to conserve cash.
Chief executive Simon Cox reckons it cost around £5m to develop the UK TV advert distribution business and bring it into profit. The new European operations all use the UK’s technology infrastructure so he believes each new territory will cost around £1m to develop to breakeven. It will take a couple of years to reach that point.
There will be more start-up costs in the second half, particularly from France which is just getting going. The original forecast for this year was costs of £400,000. This didn’t include France and that is the main reason it has been increased to £750,000. A full year of costs from France could increase the figure to nearer £1m next year.
This the main reason behind Landsbanki’s cut in its 2008 profit forecast from £1.6m to £1.1m. The broker is also cautious about the outlook for advertising market in the second half.
IMD has seen some weakness in the TV market but a deal with a rival has helped the radio advert delivery business. IMD is dependent on adverts changing rather than overall spend. They don’t even have to be new adverts because it is still asked by advertising agencies to resend old adverts if they are broadcast again at a later date.
IMD shares improved 1.5p to 39p a share, valuing the company at £13.3m. The share price, which is 6% lower than six months ago, has held up reasonably well when compared with Aim in general.
The shares are trading on 17 times forecast earnings but this is after the costs of building up the new businesses in Europe. The benefits of this investment will show through in a couple of years. A total dividend of 1.4p a share would put the shares on a yield of 3.5%.
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