Member Info for iWantThatOne

Thank you to sellers and/or shorters for giving investors the chance to make serious money! The current sp bears no relation to the health and prospects of the business and will at some point find the right level. There is no need to raise equity capital, so the temporary trough in sp is not a major concern. A new CEO will be appointed soon and I’m sure we’ll get an end-of-year trading update within a month or so that gives a sensible overview of how everything is looking.

UK investors are required to issue a TR-1 when they drop below 4% and then 3%, and we haven’t seen those yet. The last TR-1 seemed to indicate it was a UK domiciled LT entity, so I’m puzzled why we haven’t seen those TR-1s. Confusing!

And to those who say “you can’t get 10x EBITDA for DIS….”. Zeus did a peer group comparison for Online Presence in a research note last year. They had the following EV/EBITDAs:

GoDaddy 16.3x

Verisign 15.1x

Squarespace 24.9x

Ionos 9.5x

Of course they would. Comparison plus remaining Search is forecast to produce $42m EBITDA in 2025. They are literally open to offers for the various parts of the business right now. Added together, these will be worth >>100p.

G_G_G, you say you don’t believe a buyer would seek to buy DIS for $190m (10x EBITDA) when they can buy the entire company for the same amount. Well they can’t, can they? If they offered $190m for the whole company the Board would say no. The buyer could start buying in the open market at the current 55p but their relentless purchases would push up the sp. Eventually, if they could buy 30% of shares in this way (NB: they couldn’t) then they’d be obliged to make an offer for the whole company. The Board could refuse. And so on. So let’s be clear - the current sp and mcap bears no relation to what DIS could be sold for.

Edison have produced an updated research note:

“The deeply discounted rating of 5.1x FY25e EPS is understandable given the recent Search downgrade cycle. However, in our new FY25 forecasts DIS and Comparison account for c 75% of group EBITDA. DIS is robust and cash generative, and the group has received repeated approaches for this business. Comparison has good prospects to continue its strong, operationally leveraged growth trajectory. We believe the current share price overly discounts the qualities of these businesses. Management remains committed to delivering shareholder value through selling divisions as well as continued share buy backs and dividend payments. “

As it happens, I have sent a long email to the company today raising a number of issues I’d like them to address in the forthcoming full year results - gross margins, expenses, the market landscape, capex and the rate of DVM growth. I’m positive we were led to believe gross margins would revert to 90% post-integration yet Paul Larbey has intimated we’re at 78%! I’ve invested tens of thousands on the basis of this detail. An Investor Day would help bring clarity to all this.

G_G_G, I understand you’re well underwater here and sick of the people running the company but let’s stick to facts. They have not “been on a spending spree”, building up debt. Shinez is the only recent acquisition, and debt has always been part of the mix here. As for the analysts’ reports, why not accept that OP could be sold for 10xEBITDA? That’s at the low end of what its peers are worth. I suggest if hasn’t been sold for that before because the Board wasn’t open to offers. Now it is. And that’s what I think will eventually happen. OP will be sold; the cash will repay debt in the residual OM business (now debt-free); the “conglomerate discount” will be removed; and a new streamlined, focused OM will be valued properly against its peers. Add that lot up and it’ll be worth well over 100p - assuming the company can navigate its way through the Google changes. (And to suggest they don’t understand search is literally absurd - that’s been their business for years).

This fall is way overdone. The DIS segment of the business is worth a “conservative” $190m, according to Zeus (10x EBITDA) - that’s more than the current mcap at the current SP. I actually think a sale of DIS plus a successful rework of Online Marketing could see a value well above 125p but it’d take until next year.

Zeus has just issued a new research note. It concludes:

Valuation: We conservatively value the EBITDA for the DIS and Comparison businesses at EV/EBITDA multiples of 10x FY25, despite expectations for 16% EBITDA growth in 2025, and the Search division at 3x, despite expectations for a recovery from FY26. Adjusting for net debt and dividing by the latest share count provides a valuation per share of 128p. We see significant value in Team Internet, even when ascribing little value to the Search division. We believe the value of the Group should be relatively resilient given that the earnings downgrade has been isolated to the division valued at the lowest earnings multiples.

And I note they’ve had repeated offers for the DIS (Online Presence) segment and that a comprehensive review of potential asset sales is still underway. I’ve long said that sale of the OP business will create a lot of value, so watch that space.

So with forecast EBITDA this year of $60-68m, that puts a share price of 100p at around 5x EBITDA. And 80p 4x, obvs.

Now trading at 5.4x historic EBITDA and 4.7x forward EBITDA. Seems crazy.

I think Management felt they were between a rock and a hard place with the forecasts. Go too high and they risk missing and being slaughtered, like YE23. Go too low and they may appear uninspiring. Feels like most people think the latter is where we are now. If Bundling is such a growth area it really needs to get a move on.

FarherTed, you don’t know what contractual clauses applied to the 111 contract. These staff will have some medical training perhaps but are unlikely to be able to be redeployed elsewhere in the business in clinical roles (some will - this is mentioned in the RNS). They will go on consultation and, once inability to be redeployed is confirmed, they will be paid redundancy. Exceptional costs, not operational. Perfectly standard procedure. Get over it.

Cannacord Genuity have issued a new research note today titled”Renewals improve visibility”. They conclude:

Impact on forecasts: The renewals replace contracts with a similar value per annum but add visibility across a multi-year period. We make no changes to our forecasts. Valuation: Trades on a FY25E/26E EV/sales of just 0.1x which unfairly assumes a profitable, cash generative business goes bust, in our view. Instead, today's renewals provide evidence that Totally is well-placed for a recovery in momentum as customer budgets unlock. The upcoming publication of the NHS 10-year plan, expected in spring 2025, will likely be a key driver of this. We maintain our BUY rating and 20p price target.

Why was this news not put out in an RNS? It seems a meaningful release that could well drive new sales, so worth proper communication, I’d have said. Ultimately we need more sales of course. Despite the drop in SP again, the share sales do seem to be moderating and there are more buys - or is that just wishful thinking?!

When you have to lay off a significant number of people who work on a specific contract with specific skills they’re exceptional costs. It’s just like a reorganisation of any other business.

I think things are more nuanced than “deal does not go through, Kestrel bad”. There are many things that could be going on in the background - eg potential new purchasers making it known that they are waiting in the wings. Or other investors saying if the deal doesn’t go through we’ll buy Online Presence off you for a good sum. Or the Comparison segment going at such a gallop that 125p now seems a little cheap. Or the legal action with Shinez complicating matters - how do you allow for a potential clawback of possibly tens of millions in a deal of this nature? So many moving parts. Having said that - let’s get it done.

Worth reiterating that the Board clearly saw the business growing to perhaps £95m revenue and £4.5m EBITDA in FY26 from April onwards. That must be true for the non-renewal of the 111 contract to now leave them back where they are this year, ie c£85m and £3.5m respectively.