Another profit warning as Isentia sinks its King Content brand

The Isentia microphone at a press conference. Treasurer Scott Morrison speaks during a door stop outside Parliament House. Picture: Getty Images

Isentia, the market leading Australian media monitoring group, has issued another profit warning after deciding to fully write down the value of its troubled content marketing business, King Content, and is shedding staff.

In a guidance update, the company says full year revenue is now expected to be $155.1 million, down from the consensus estimates of $162 million.

Underlying EBITDA (earnings before interest, taxes, depreciation, and amortisation) is expected to come in at $41.5 million, compared to consensus estimates of $44 million.

Content Marketing is expected to report a 30% drop in revenue to $14.2 million and an EBITDA loss of $4.4 million compared with a profit of $3.6 million to year before.

The latest announcement by Isentia closes a chapter on the company’s content marketing business, the relatively new practice of creating online content for sharing on social media.

The company bought King Content in 2015 from founder and CEO Craig Hodges. The deal was worth $48 million, depending on hitting a number of targets over five years.

In 2016, content marketing represented 7% of iSentia’s earnings but the business lost revenue momentum due to poor decisions on strategy, business development and client retention.

The company’s shares last traded at $2.22, down from a 12-month high of $4.14.

“While it is disappointing to have to provide this lower earnings update for FY17, looking forward, we have put in place a number of initiatives to improve operating performance across the business,” says CEO John Croll.

The guidance numbers:

However, Croll says the challenging competitive environment in the first half has improved with Isentia winning back 50 clients from competitors in Australia in the second six months of the year.

In February, Isentia said its content marketing unit’s performance was disappointing, with revenue falling 11% and an EBITDA (earnings before interest, tax, depreciation and amortization) loss of $2 million.

Today Isentia announced it has decided to fully write down the value of the King Content, meaning a non-cash impairment charge of $37.8 million in the 2017 financial year.

“The King Content brand is being discontinued and its operations fully integrated into Isentia under the Isentia brand,” says Croll.

“We have closed the King Content New York and Hong Kong offices and will continue to service our US clients out of the UK and our Hong Kong clients out of Singapore.

“We have further cut the ongoing headcount in the content marketing business.”

The full integration of the King Content brand will deliver cost savings, the company says.

Croll says the board of directors and management are confident in the market positioning and growth potential for Isentia.

“Our focus now is on leveraging our core business where we have a significant market share, and enhancing and broadening our products as we deliver the most comprehensive media intelligence and insights to our customers in FY18,” he says.

The company is focusing on client wins and aggressively protecting copyright in Australia and any misuse of Isentia content by competitors.

“The performance issues experienced during FY17 are being addressed and shareholders can expect to see positive changes through FY18,” says Croll.

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