Enero Group Ltd: Reaping the Benefit of Macro Tailwinds & Finetuning

Business model
Key businesses in the group include Hotwire, focused on communications for technology companies globally, BMF a creative, campaign focused, agency in Australia, Orchard, delivering digital campaigns and marketing automation in Australia and the US and, OB Media, a programmatic marketing platform delivering targeted advertising to potential on- line customers. In FY21, the largest revenue segments were 26% from technology related businesses and 21% from online media. Retainers (recurring revenue) from clients comprised 54% of revenue with project-based revenues the remaining 46%. Client retention is high with almost one-third of Enero’s clients with the group for six years or more and 78% with the company for more than two years. Nearly half of operating EBITDA came from the US (48%), with Australia contributing 33% and UK & Europe 19%.

FY21 result evidence of a sector and company turnaround
Enero grew net revenues by 18.3% to $160.6m, and from continuing businesses +14%, and improved EBITDA margin from 11% to 22% through growth in higher margin businesses and improved cost management. Underlying net profit after tax was $22.8m, up 76.7% on the prior year. Non-cash and non-recurring items totalled $23.2m after tax. Through the course of FY21, Enero sold the Frank PR agency for an accounting loss of $9.9m, closed 12 dormant foreign subsidiaries and recognised non-cash currency reserve losses of $13.1m. EGG acquired a specialist technology sector marketing business in the UK for £3.5m and deferred payments over 3.5 years to be integrated with Hotwire. The company noted that the first six weeks of FY22 continued to deliver strong year-on-year revenue momentum and that organic and inorganic opportunities will remain the focus for FY22.

EGG is delivering on digital marketing opportunities globally
Despite ongoing COVID-related uncertainty, Enero has delivered strong organic and acquired growth and strengthened the suite of services on offer with continuing strength in technology related business one of the tail-winds for advertising and marketing. EGG’s geographic diversity and technology focus have delivered dividends. Based on consensus EBITDA for FY22, Enero is trading around 30% below the median EV/EBITDA of its listed Australian peers.