Crowd Media Holdings Limited (ASX: CM8), based in Victoria, Australia, is a global media and marketing company operating through two primary business segments. The Mobile Division, which is dedicated to the creation of content such as applications (apps), games and music in around 60 countries covering 30 languages; and the Digital Marketing Division (Media) that collaboratively works with brands and online influencers (over 10,000 worldwide) to deliver branded content to the vast and rapidly advancing millennial and Generation Z markets.
Crowd Media has built an extensive network of partnerships with a wide range of mobile carriers and some of the largest agencies, brands and media companies, globally.
New Contracts Signed- First Cannabis Sector Client
On 12 August 2019, the company informed the stakeholders to have signed its first Cannabis and CBD oil sector client, Elixinol Global Limited (ASX: EXL), on board through its Media division. The agreement includes two initial Insertion Orders and the Media division would assist Elixinol in acquiring new customers for its Organic Hemp Oil products via the company’s popular and proven digital influencer strategy which encompasses both Paid Social and Digital Influencer marketing. The agreements have been signed and campaigns have already been executed successfully.
Elixinol Global is engaged in the manufacturing and distribution of pharmaceutical products including industrial hemp and medicinal cannabis based dietary supplements and skin care products. Recently, the company disclosed its Q219 business and cash update on 30 July 2019, posting a revenue of $ 9.9 million, which is 19% higher than $ 8.3 million recorded in Q218.
Australia is among the few countries that have welcomed, although gradually, the legalisation of medicinal cannabis in February 2016 while cannabis for recreational purposes still remains debatable. Since then, the traction in Australian cannabis market has lured several businesses to engage in R&D, production and commercialisation of medicinal cannabis to capitalise on the booming opportunities. The Australian cannabis market is burgeoning and anticipated to grow to ~AUD 55 billion by the end of 2025, thereby presenting a compelling business and expansion opportunity for Crowd Media Holdings.
With that backdrop, the agreements are sure to augur well for Crowd Media Holdings which has also recently launched a revamped media kit (now live at https://tinyurl.com/CM8June2019), to better reflect its shifting focus to the large and growing digital influencer and social media marketing sector.
The Australian contract follows the one-month pilot agreement reached with a leading Europe-based digital wealth company, Moneyfarm in the first week of June 2019. Under the agreement, the company’s Media division was contracted to assist Moneyfarm in the promotion of its investment services.
In addition to the above, the company earlier entered into new 3rd party agreements in May 2019, also for the provision of its digital marketing services for international brands from distinct sectors- a leading travel website, Expedia; popular kids TV series PJ Masks; a Europe-based Fintech challenger bank, N26; and an Italian pasta brand, Pasta Garofalo.
The majority of the new agreements showcase Crowd Media’s ability to service brands across multiple languages and across digital media platforms like Instagram, Facebook, Snapchat and YouTube.
Strategic Review Update
On 7 June 2019, the company provided the market with an update of the strategic review of different aspects of its business, first announced in mid-April 2019. Following the strategic review and the expense reduction program in the last half, Crowd Media Holdings formulated and adopted a couple of aggressive cost-cutting initiatives to achieve annualised cost savings of ~$ 3.5 million and direct the company towards profitability again.
The streamlining and cost reduction initiatives being taken up by the company are briefed as follows-
- The management expects a consistent positive EBITDA and operating cashflow from 1 July 2019 with a focus on reducing debt.
- Changes to CEO and Board remuneration implemented to conserve cash.
- Group Revenue for FY19 expected to be $ 24.6 million (FY18 $ 38.6 million) down 36% and underlying FY19 EBITDA loss expected to be $ 4 million including bad debt provisions of $ 1.6 million.
- Redundancies have been implemented that would save the company over $ 1.4 million in annualised costs effective 1 July 2019 with total of $ 3.5 million annualised cost savings in FY19.
- Employee headcount has also been reduced by 34% to 48 in Q1 FY20 from 73 in Q1 FY19.
The company’s Crowd Media division continues to flourish amidst increasing prospects and a strong sales pipeline with revenues for FY19 expected to be around $ 1.7 million, up 240% on $ 0.5 million in FY18.
As for the Mobile division, which includes Q&A & Subscriptions, the revenue for FY19 is expected to be slightly lower, around $ 23 million as compared to $ 38 million the prior year. This may be attributed to the material head winds witnessed by the Mobile division in FY19 due to regulatory changes and material bad debt provisions. However, Crowd Media Holdings also added that the outlook for the same appears brighter with receding headwinds and emerging new social distribution channels and new territories including soon to be launched Indian service. Besides, consumer demand continues to grow for these services.
Board Renumeration and Leadership Changes
At the beginning of August 2019, Crowd Media Holdings announced the appointment of Ms Laura Newell as the Company Secretary, replacing Ms Sophie Karzis, who would remain on the Board in her existing position as Non-Executive Director. Also, under the latest restructuring and Board renumeration changes, Crowd Mobile’s CEO agreed to 50% of his salary to be paid in the form of Crowd Media shares for FY20. Further, the Chairman and Board also agreed for 25% of their fees to be paid in Crowd Media shares for the next financial year.
Crowd Media Holdings’ market capitalisation stands at circa AUD 4.24 million with ~ 249.25 million shares outstanding. On 12 August 2019, the CM8 stock settled the day’s trading at a market price of AUD 0.017, with approximately 513,440 shares traded. In addition, CM8 has delivered a positive return of 6.25% in the last three months’ period.
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