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Results: iSentia Group Ltd (ASX:ISD) shares plunge 39% lower

The iSentia Group Ltd (ASX: ISD) share price has been one of the worst performers on the market this morning with a 39.5% decline to 49 cents. Investors have been hitting the sell button after the media monitoring company released its full-year results for FY 2018.

For the 12 months ended June 30, iSentia reported an 11.6% decline in statutory revenue to $137.1 million and a 31% decline in earnings before interest, tax, depreciation and amortisation (EBITDA) to $28.6 million. During the period the company completed its exit from its content marketing business with an EBITDA loss of $4.5 million. Net profit was $1.2 million compared to a loss of $13.5 million a year earlier, and earnings per share came in at just 0.64 cents.

This exit means the company is left with its core Media Intelligence business. It posted revenue of $132.6 million and EBITDA of $33.1 million in FY 2018, down 5.8% and 27.9% on the prior corresponding period. This was, however, in line with guidance of between $32 million and $36 million.

Management has blamed the soft result on tough operating conditions in the ANZ region where 74% of its revenue was generated. The poor performance in the ANZ region offset growth in Asia and was caused by pricing pressure, reduction in traditional media volumes, and customer churn. The company is attempting to balance these factors with a focus on its core value proposition of providing a comprehensive service to its customer base.

But that doesn’t look likely to be a quick fix. Management’s guidance for FY 2019 is for revenue in the low to mid $120 million range and EBITDA in the low to mid $20 million range. This would mean a decline of approximately 8% and 33%, respectively, based on this year’s Media Intelligence result.

But things may finally improve in FY 2020 if the company’s FY 2019 priorities are a success. Its priorities for the year ahead include a number of strategic initiatives which aim to restructure sales and account management teams, deliver annualised gross cost savings of almost $11 million, and rollout its Mediaportal product across Asia.

Should you invest?

Although iSentia’s shares touched on an all-time low of 49 cents this morning, I wouldn’t be a buyer until it becomes clear that the decline in earnings has come to an end.

Instead of iSentia I would consider information technology sector peers such as Bravura Solutions Ltd (ASX: BVS) or Hansen Technologies Limited (ASX: HSN).

Alternatively, these mid cap growth stars could be great options for investors.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Bravura Solutions Ltd and Hansen Technologies. The Motley Fool Australia has recommended iSentia Group Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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