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Zinc Media – emphasises EBITDA profit for "first time in recent years", so why are the shares materially lower?...

By Steve Moore | Thursday 16 March 2017


Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.


The results announcement for its half year ended 31st December 2016 from the former Ten Alps plc, now Zinc Media Group (ZIN), emphasises “decisive action taken” and “for the first time in recent years, the company reported a profit at the adjusted EBITDA level”. So why are the shares more than 9% lower, heading towards 1.20p, on the back of the release?

Well firstly, “adjusted EBITDA” does not mean bottom-line profit and cash generation. The Income Statement shows £0.074 million of adjusted EBITDA evolving to an overall £0.49 million loss and the Cash Flow Statement that, after particularly a £2.60 million net working capital outflow, there was a £3.25 million net cash outflow before new financing. Also there still remained a net current liabilities position (£0.53 million), with also £4.30 million of non-current liabilities.

Additionally, continuing operations revenue was down from £10.2 million to £9.2 million – explained as being “mainly due to lower TV revenues in the first half and management's expectation that the TV division will be more second half weighted than usual in the current year”. It is added “with management no longer distracted with the loss making non-core publishing businesses, we believe we are primed to build the business into one of the UK's leading independent TV production companies”.

Hmmm. I note though that the company has previously been “on track” to generate profit… and then didn’t - and the latest-announced numbers don’t exactly reassure!

Additionally, the highly respected Luke Johnson has stepped down as a non-exec “due to his numerous other time consuming commitments in other businesses”. I currently continue to avoid.


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