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The comments on this page are some of the thoughts that I had when considering this company and not a recommendation to take an action or to refrain from taking an action.

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Commentary On XLMedia plc

Title: XL Media – Keep Hoping For A Resolution To The Google Derank.
Company: XLM - XLMedia plc
Share Price Then: 24p
Author: Ian Smith
Date: Tue 05 May 2020
Comments: It has been a while now since Google deranked XL Media’s casino related marketing sites which happened on Jan 18 and was reported on Jan 20.

The full year results released on the 24 of April does not say a lot about if and when this issue will be resolved, beyond the management is of course optimistic.

In my mind it is not certain that this issue will be resolved as Google has a policy and if XL Media's sites fall foul of that policy then that is pretty much it.

I understand that in the past the group went for quantity of web sites over quality and this is believed to be the major part of the problem and Google might be sympathetic if the company reduced the number of sites it has to a much lower number.

Then again Google may not be.

But the report also says that 20 sites account for 50% of the revenues, which means that the other 50% in part at least probably dribbles in from many of the low grade legacy sites that are being discontinued.

The annual report takes a whopping $81m impairment for the loss of the value of the deranked and legacy sites, the question for me is that is this correct accounting now but next year we will see these assets inflated by say $50m or are they now recorded at their true value?

Taking this impairment out the company still made around $20m before tax.

The deranking is reported as causing a drop in revenue of between $1m and $2m per month. If sustained this would seem to suggest that the company would be just about breaking even.

My real worry is that the over the last couple of years the group has reduced the scope of its activities to what was its most profitable area, affiliate marketing and may be finding that it is not as easy as it seems.

The company has been fond of acquisitions but the risk of this is that the management get excited by the deals and found that they have bought aging assets rather than developing new sites that reflect the current users’ expectation.

By aging I mean both the site itself as it has becomes well known and liked or disliked by a large proportion of its potential users and the whole concept of the site has aged.

Worryingly I have looked at some of the company’s premium sites and the advertising is very in your face and a lot of the content looks to me like it could be almost computer written.

So do we have a company whose time has passed?
ItemCurrent PeriodPrevious Period
Period12 Months12 Months
Adjusted Earnings
Adjusted EBITDA£33m£43m
Statutory Profit(£60m)£32m
Adjusted Profit
Total Debt
Net Debt
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