Isentia will ‘aggressively’ protect copyright in ANZ following poor FY17 results, says John Croll

Isentia CEO John Croll has listed “aggressively protecting copyright across Australia and New Zealand” as a key initiative for the 2017/18 financial year, following the announcement the media monitoring firm would axe the King Content brand and close its New York and Hong Kong offices.

Addressing shareholders after the announcement, Croll said while he was “disappointed” with FY17 and King Content’s results, the company would now focus on leveraging its core business.

Isentia axed the King Content brand following poor performance

“The board and the management remain confident in the marketing position and growth potential for Isentia,” he told shareholders.

“Our focus is now on leveraging our core business where we have a significant market share, in enhancing and broadening our products as we deliver the most comprehensive media intelligence and insights to our customers in FY18.”

Croll said the company’s key initiatives for FY18  would be a focus on churn reduction through client wins, leveraging product enhancements, and “aggressively protecting copyright in ANZ”.

The comments come as Isentia remains locked in a legal battle with Meltwater, after the media monitoring firm company sued Meltwater for what is claimed was ‘free riding’ and breaching of contract.

Isentia alleges Meltwater’s Shasank Mohapatra, along with his wife and associates, provided the Australian company’s print monitoring services including “Slice” and “Mediaportal” to their clients, in breach of their Isentia contract.

Isentia and competitor Meltwater are in legal trouble.

Meltwater agreed not to access Isentia’s services following court proceedings in late June, however Isentia lost its court application for disclosure of documents from its competitor a few days later.

Today, Croll said: “Meltwater have got until the 1st of September to file their defence so really it’s a situation that we will wait until that is filed and we’ll be taking that on.

“We are confident in our position but we’ll let the courts take their process.”

Commenting on Isentia’s FY17 revenue results, Croll said he expects revenue to be $155.1m with EBDITA profits at $41.5m, based on preliminary unaudited financial accounts.

He said ANZ revenue increase was at 1% and Asia had a revenue increase of 16%, but content marketing was down 30% year on year to $14.2m.

Croll added King Content had increased its expected operating losses to $1.4m, bringing its total loss to $4.4m, compared to a profit of $3.5m the year before.

“As a result of the financial performance of King Content during FY17, the board has decided to write down the value of the business. This is expected to result in an impairment charge of $37.8m in FY17.”

Last year, Isentia’s King Content reported revenues of $20.5m, and EBITDA profits of $3.5m. 

However, in February this year, Croll said the performance of King Contentthe content marketing agency it acquired in 2015 for $48m – was disappointing and would have knock-on effects for the business’ future performance.

Content marketing reported an 11% revenue decline and an EBITDA loss of $2m for FY17 H1.

Looking to FY18, Croll said the company had reorganised its sales roles in its business and was focusing its ANZ growth on current low penetration of insights products.

Responding to a question from Deutsche Bank about “consistent lack of visibility” around King Content, Croll said Isentia had to eliminate its losses to build a “very strong plan” for the first quarter of FY18.

Croll: “The board and the management remain confident in the marketing position and growth potential for Isentia”

“The redundancies have already been taken up, we’ve taken the headcount to about 62 in that business when it was up over 100 at its peak.

“Those changes have already been made to the business. The New York business office is closed, the Hong Kong office is closed and we’re just servicing those clients out of those areas.

“The old client contract had a basis on amplification or using other people’s platforms to push that content, so it was more paid advertising.”

He said new contracts were focused on strategy and building content, without “onerous charges” to amplify content.

However, Croll admitted King Content was not making money currently.

Asked by one shareholder about how they could be confident in Isentia’s ability to forecast King Content’s profits, Croll said:

“We’ve obviously changed the management group in the King Content business completely.

Under Matt Stanton, he’s done a complete review of the business and we’ve taken the actions from that time to close the New York office, which was the largest loss-making office and support those clients out of New York from the UK business.

“We’ve done the same in Hong Kong and we’ve taken the head count down to 62 so I can understand your question but the scenario of what we have in that business is very different now from where we’ve been before.”

Isentia did not comment on whether Stanton, King Content’s CEO, would remain in his role.

James Orlando, Isentia’s new chief financial officer, who joined in late June replacing Nimesh Shah, said today’s changes were a “challenging activity”.

The changes come just one month after Orlando’s appointment as chief financial officer

“I’ve been impressed with the team John has built, the products developed, the technology underpinning our core business.

“John and the team have been quite open minded to looking across the business and taking a review of the business and getting our facts straight before we make too many pronouncements on the outlook for the future.

“While this is a challenging time right now, I’m excited to be part of the company while we take on the next horizon,” he said.

Prior to the ASX opening today, Isentia’s share price stood at $2.22, valuing the company at $444m. In the first few minutes of trading, the share price plummeted by nearly 20%, wiping more than $80m off the company’s market capitalisation.

At 2:30pm it stood at $1.66, valuing the company at $332.40m. At market close it stood at $1.76 with a market cap of $352m.


Get the latest media and marketing industry news (and views) direct to your inbox.

Sign up to the free Mumbrella newsletter now.



Sign up to our free daily update to get the latest in media and marketing.