Catena seeks ‘fewer but larger acquisitions’

7 February 2019

Catena Media chief executive Per Hellberg has insisted the affiliate giant is not ready to turn its back on M&A opportunities after the company’s financial results revealed a slowdown in organic growth towards the end of 2018.

Catena announced today (February 7) that the group’s revenues for 2018 increased by 55% year-on-year to €105m (£92/$119m), helped by a 36% increase in sales to €27.3m in the final quarter. Earnings before tax and deductions increased by 47% to €47.8m in 2018.

Hellberg (pictured) said in December that he was hopeful the company’s medium-term goal of generating EBIDTA of €100m by 2020 could be achieved with “the current business”, and without necessarily brokering more acquisitions.

Following more than 30 deals in a relatively short corporate lifetime, Catena’s flurry of M&As appeared to grind to a halt after the company announced it had snapped up Forex industry news website in July last year, just days after completing a €16m takeover of sports news and lead-generator ASAP Italia.

In today’s report, Hellberg stated: “The process of transitioning from a distinct acquisition strategy to an increased focus on organic growth is progressing and the results have already been favourable, with clear indicators that we are on the right path.”

However, the latest figures showed that organic growth, including acquisitions but excluding paid revenue, fell from 27% in the third quarter to 15% in the final three months of the year, bringing the average for the year down to 23%.

By 4.30pm local time on the Stockholm Nasdaq exchange, Catena’s share price had slipped by just over 5%.

Under a sub-heading in today’s report entitled ‘fewer but larger acquisitions’, Hellberg said: “Focusing on organic growth does not mean that Catena Media will not make any acquisitions. We will make acquisitions in 2019.

“They will, however, be fewer and more strategically critical to the company’s future growth. We will focus on those bringing growth with clear synergies or adding something new to the organisation, like new technologies or skills.”

He added: “You could say we want to achieve more with existing products. The acquisitions we have made needed to be better integrated into our business model and we needed to reorganise and prepare for the next growth phase. That process is now in full swing.

“The organic growth strategy has three main components: Streamlining proprietary, established brands, growing geographically and adjusting the company’s cost structure. We are already seeing positive effects from having fewer, better and larger brands rather than several smaller ones.”

Hellberg also underlined some key highlights, including Ask Gamblers having almost doubled sales in 2018, better cost management and encouraging expansion in markets such as Japan and the US.

Catena outlined its lofty US ambitions after the Supreme Court overturned a ban on sports betting last year, and Hellberg indicated today that the company is ready to build on its “flying start” in the market.

“The number of states seeking to regulate online gambling is increasing faster than anticipated,” he said.

Catena added that search revenue had accounted for €89.9m of turnover in 2018, with paid revenue contributing €14m and subscription revenue providing €1.1m.

Sales derived through revenue-share arrangements comprised 49% of total turnover for the year, whilst revenues from cost-per-acquisition agreements contributed 39%. Fixed fees and subscription revenue generated 11% and 1% respectively.