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Monday, July 14, 2008

Centaur Says "Carry on as Normal" despite feeble share price

Centaur issued a trading statement last week which although promising results in line with city expectations, also warns of tougher times ahead. Centaurs share price has taken a terrible hammering in recent months, dropping from a 52 week high of 150 to around 60p. This despite year on year growth in earnings, largely driven by cost savings.

The challenge for Centaur is that their business is heavily advertsing dependent and there has been little aggregate revenue growth in the last four years. As a small stock in market cap terms, there is not much liquidity in the shares and little prospect of the city sentiment turning favourable to media companies in the near future.

Their strategy seems to be, sweat the share on the market leading brands, do more online. Both necessary but by no means sufficient actions to get back on to the front foot. Centaur continues to use the language of the cycle, arguing that lowering the cost base and winning share means it will be well placed for growth when the recovery comes. But what if there is no recovery in magazine advertising? What then?

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