Team Internet demonstrated resilience in its H1 earnings despite facing ongoing challenges in the online marketing sector. As the company moves into the typically stronger second half of the year, it is expected that its efforts in product innovation, vertical integration, and international expansion will increasingly drive growth and improve margins. Trading at 8.2 times FY24 earnings, Team Internet is still valued significantly below its peers, according to unchanged earnings estimates. Analysts at Edison believe this presents an attractive opportunity, given the company’s strong track record, growth prospects, and robust cash generation.
In H1, Team Internet reported gross revenues of $409.7 million, marking a 3% year-on-year increase. Excluding the $10.7 million contribution from Shinez, which was acquired on 29 April, revenues were essentially flat. The ongoing weakness in the advertising market, particularly in the Search segment, continued to impact Online Marketing. However, since this is the company’s lowest-margin business, net revenues (gross profit) still saw a 7% year-on-year increase to $97.7 million, with gross margins improving by 80 basis points. EBITDA grew by 4% to $46.6 million. The company’s net debt stood at $109.9 million, influenced by the Shinez acquisition and an 87% operating cash conversion rate. Nonetheless, cash conversion is expected to normalise to nearly 100% in H2, leading to a projected reduction in net debt to $66 million by year-end, which also accounts for the payment of an inaugural interim dividend of 1p.
Team Internet’s strategic initiatives remain on course and are anticipated to begin contributing to its financial performance in FY25. The P&L estimates have largely been maintained from the net revenue/gross profit level downward, although gross revenue projections have been trimmed by around 4.5%, aligning more closely with consensus forecasts. While a swift recovery in click rates is not expected, events like the Olympics and the US elections are likely to provide support to the online advertising market during the seasonally stronger H2. Strategic moves such as the vertical integration of Tonic or Vergleich ads on Shinez content, the expansion of Vergleich beyond Germany, and the launch of new products, alongside competitive and efficiency improvements in the Online Presence segment, are expected to contribute positively to the company’s future growth.
Team Internet’s ability to maintain earnings resilience in a challenging environment, coupled with its forward-looking strategic initiatives, positions the company well for growth in the coming periods. Despite market headwinds, its current valuation presents an attractive opportunity for investors, backed by a solid track record and strong cash flow prospects.
Team Internet plc (LON:TIG) – formerly CentralNic – is a global internet solutions group headquartered in London. Leveraging world-class technologies and industry leading teams, they have been transforming the way organisations, brands, publishers and consumers connect and thrive online.
