Centaur Media – not just a lower body in marketing and an upper body in law

This international provider of business information, training and specialist consultancy services has some big expansion plans in hand, writes Mark Watson-Mitchell. 

This company’s appointment last week of Investec Bank as joint broker with N+1 Singer interested me, especially considering its sub-£50m market value. 

Taking into account that Centaur Media (LON:CAU) is flush with some £8.3m cash in the bank, it cannot be taking on another broker to help to bail out its balance sheet.

So, I take the view that this now international provider of business information, training and specialist consultancy services has some big expansion plans in hand.

It appears to be stepping up its game somewhat – also taking on Edison Investment Research to help to create reports to attract investors, both professional and private, to the group’s shares.

Good equity participants

It already has an impressive little list of institutional holders in its equity. 

There are almost 147m shares in issue, with large holders including Aberforth Partners (24.45%), Harwood Capital (Oryx International Growth Fund Ltd) (13.12%), Artemis Investment Management (11.62%), Chelverton Asset Management (7.97%), Gresham House Asset Management (7.77%), Quaero Capital (Argos Funds) (7.69%), and Herald Investment Management (3.10%).

Graham Sherren, one of the group’s founders, holds 5.64% of the stock.

The group, which has three offices, in London, Portsmouth and New York, will be announcing its results for the year to end-December on Wednesday 17 March.

With two broking houses and Edison on board I am looking forward to seeing what CEO Swag Mukerji has to say about the group’s progress last year and how its outlook is seen for this current year and then going into the future.

An important eye on the legal sector

The first side of the group’s business is The Lawyer, which is an award-winning website and magazine with all the breaking stories, commentary and data on the global legal sector. 

The company claims that 93% of the London-based Top 50 UK and Top 50 US law firms are corporate subscribers. It believes that 26% of its subscribers visiting the site each month are Partner, General Counsel or above. 50% of its subscribers visit the website with a daily or weekly digital habit.

Using its editorial and in-house research teams it presents a comprehensive collection of Market Reports, giving users benchmarking, performance, resourcing, strategic and growth opportunity identification facilities.

It also offers tailor-made analyst-grade research for clients.

Promoting and handling events is a natural extension of its business – such as legal conferences, summits, roundtables and awards events.

The Lawyer’s Drafting Contracts e-learning course is aimed at associate level private practice and in-house legal teams and gives students the opportunity to learn through its dedicated online portal.

It also has a unique database which tracks every single litigation case from 15 UK High Courts, allowing users to assess market share, spot new business opportunities and build key relationships.

A mass of data on the marketing sector

The second main division of the group is Xeim, its business unit serving the marketing sector. 

This takes in MarketingWeek, a digital platform that is an unrivalled authority on the marketing industry. Like The Lawyer, its platform leads to considerable depths of research, data, information and news about the sector.

It too handles events, ranging from physical to online, like The Festival of Marketing. As well as Mini MBA, which is an online marketing course.

The group also has Econsultancy, a platform that accelerates the performance of customers’ marketing and ecommerce through digital marketing transformation delivered as online training, insight and essential information.

Influencer Intelligence is the group’s market-leading data intelligence search and measurement platform for influencer and talent-led marketing campaigns, providing data-driven information, tools and proprietary analysis. The influencer marketing industry is forecast to be worth more than $15bn in 2022.

Key markets to show growth

Overall, the story of Centaur Media is one about having some strong brands in key markets, like the legal and marketing sectors, which can provide some strong organic growth potential.

The group is cash generative, with growing events, digital and paid-for content platforms. Its management aims are to build robust recurring revenue streams (ARR again – yes!) which will support its growth and the seizing of opportunities.

Research analyst’s view

Edison’s analyst Fiona Orford-Williams forecasts that the 2020 results will show a fall in revenues from £38.4m to £32.2m. However, its pre-tax loss will be sliced from £2.3m in 2019 to just £0.4m down last year.

Going forward, Orford-Williams is already going for £36.1m of current year sales, with £2.7m profits, worth 1.7p in earnings. Then for next year she has pencilled in £41.5m and £5.5m respectively, giving earnings of 3.1p per share.

My view

Those estimates give an underwriting to the current 33p share price, while not taking into account the management hopes of a £45m turnover for 2023, and an accompanying 23% EBITDA margin aim.

In under two weeks (17) Mukerji may well be outlining more of what his management plans are for the group. 

In the meantime, taking a small initial position in the shares cannot come to too much harm, while the upside could soon become visible and entice a bigger position being taken.

I now set a very easy 41p target price.