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7digital – 2017 “better than market expectations”… but it’s talking “adjusted LBITDA”!

By Steve Moore | Friday 9 February 2018


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.


A Year End Trading Update from 7digital Group (7DIG) includes “revenue for 2017 is expected to be up 52% at £17.3m” and “losses at adjusted LBITDA level are expected to be significantly reduced from the previous period and be better than market expectations”. The shares have nudged ahead to 5p – though I note this still well down from start of 2017 levels…

This is with the above noted progress including “a major transformation” with the “acquisition in June of 24-7 and, with it, the contract to supply services to MediaMarktSaturn throughout Europe has cemented our market leading position as a business-to-business platform in the rapidly growing market for streamed music and radio services”. The company adds this “led to a profitable H2” and “operational restructuring has already begun… the board is pleased to report good progress towards its goal of profitability in the current financial year”.

Researcher Edison had been looking for an adjusted LBITDA of £1.7 million on revenue of £19.1 million. Thus, even including that “contracted and billed revenues for the period were in fact £18.6m… £1.3m is to be recognised in Q1 2018”, there was still something of a revenue miss. Additionally “LBITDA” and the company’s noted talk of “profitable” and “profitability” is bullshit earnings – the noted £1.7 million adjusted LBITDA comparing to a forecast net cash outflow before new financing of more than £3 million.

Additionally, whilst reporting current “good progress”, “goal of profitability” is very different to delivery of it – and indeed reality is actually the net cash generated. However, nothing on this is provided and thus, ahead of the further results detail, I presently continue to avoid.


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