Digital Globe Services tanks after Time Warner-Comcast merger delay

20th Mar 2015 11:01

Shares in online marketing group Digital Globe Services crashed after interim operating profits fell 78% due to delays in completion of the mega-merger between two key clients, Comcast and Time Warner.Revenue grew 4% year-on-year to $18.4m despite the 24% decline in revenues from the pair of US cable and satellite giants from Comcast and Time Warner, which together represent 39% of group interim revenues.An increase in lower-margins affiliate lead sales led to gross profit slipping 11% to $5.6m before increased investment in staffing numbers and technology combined to knock adjusted earnings before interest, tax, depreciation and amortisation down to $0.5m from $2.3m in the same period the year before.House broker N+1Singer substantially downgraded full year forecasts for the AIM-listed provider, with adjusted EBITDA estimates for the current year slashed to $2.6m from $7.7m, with 2016 more than halved to $4.1m.Chief executive Jeff Cox said the group continued to invest to support its strategy of diversifying into other markets and geographies and made encouraging progress on these fronts.The diversification strategy for DGS, which provides customer-acquisition and digital marketing services from offices in London, Bermuda, Netherlands, USA and Ireland, saw a major new client in the shape of one of the largest wireless carriers in the US and revenue outside the US grown "materially".Cox added that, while first-half revenue growth and profitability were hit by the delays resulting from the merger and the investment programme, the third quarter had provided encouraging business volumes in new geographies, activities and verticals."In the second half of 2015, we expect to maintain year over year revenue and deliver gross margin approaching that of the first half of 2014 with EBITDA margin percentage returning to the double digits."