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iSentia share price tumbles 12% lower on half year update

The iSentia Group Ltd (ASX: ISD) share price has started the week in a disappointing fashion.

In afternoon trade the media intelligence company’s shares are down 12% to 25 cents. This follows the release of its half year results this morning.

How did iSentia perform in the first half?

For the six months ended December 31, iSentia reported a 9.1% decline in revenue over the prior corresponding period to $56.5 million. Double digit revenue growth in South East Asia was offset by lower revenue in ANZ due to a period of increased competitive tension. Ongoing challenges in North Asia also weighed on its top line.

The company reported positive progress with its Transformation program, leading to a $5.2 million reduction in total costs.

This led to the company reporting underlying EBITDA of $10.5 million for the half, down 4.5% on the prior corresponding period.

On the bottom line the company reported a net profit after tax and amortisation (NPATA) of $3.6 million. This compares to a loss of $19 million a year earlier due to the $22.3 million write-down of intangible assets.

The company’s managing director and CEO, Ed Harrison, appeared pleased with the way iSentia handled its revenue challenges.

He said: “The first half of FY20 has been another transformative period for the company. Despite revenue challenges in some markets, we were able to maintain profitability and increase operating margins due to the increased flexibility of our cost base. Our SaaS platform, Mediaportal remains the most widely used media intelligence platform in the AsiaPacific region with over 36,000 users, highlighting the critical nature of our software and managed services.”

Operating cash conversion remained strong in the first half. Operating cash flow was $3.9 million, reflecting lower revenue, an increase in taxation, and the reversal of timing benefits in the prior period.

Instead of paying dividends again, the company has focused on reducing its debt. It reduced its net debt by $9.7 million during the half to $31.4 million.

Outlook.

Management warned that the media intelligence market has remained competitive in Australia in the second half of FY 2020. And while the performance in South East Asia has continued to be strong, the North Asia market is still challenging.

The company is currently assessing the impact of the coronavirus outbreak on its Asian operations, including on the demand for media intelligence in the region, its sales pipeline, and the ability of staff to deliver product and managed services.

At this stage, the outbreak has not had a material impact on the business, but the situation is being closely monitored.

For now, iSentia has reaffirmed its FY 2020 guidance for EBITDA in the range of $20 million to $23 million (pre AASB16).

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. 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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