Israeli digital advertising company Matomy Media Group (LSE:MTMY); (TASE:MTMY) is restructuring, including 40 layoffs, 10% of its staff. The company currently has 400 employees, half of them in Israel, and most of the layoffs will be in Israel.
Led by CEO Sagi Niri, Matomy announced that as part of its restructuring, the company would focus on "activities with the most potential for sustained growth and profits, and will abandon a wide range of other activities outside its core business, and which are not part of the company's long-term strategy."
The measure is designed to focus on long-term strategic activities in order to ensure the company's sustained growth and a positive effect on its profit margins and generating of cash, while significantly improving its cost structure and cutting fixed and variable costs. Matomy's market cap is NIS 480 million.
Matomy plans to complete its exit from most of its non-core activities before the end of the third quarter this year, and expects to post insignificant costs in the short-term relating to the company restructuring. The company added that the restructuring was slated to achieve a leaner and more flexible cost structure. "It will therefore have an immediate effect on overall profitability, and the generating of operating cash flow. These actions are projected to reduce the operating cost structure by over $10 million a year," the company added.
The company share price responded yesterday to the news with a 1.7% rise, and is currently unchanged today, reflecting a NIS 480 million market cap. Niri said, "Matomy has to stay agile and develop quickly in response to changes in the industry. With a sharp focus, we are consolidating our strengths and generating most of our revenue through the technological platforms we own. This is an essential and strategic stage, albeit not an easy one, towards ensuring Matomy's leading position in the market. We expect it to have an immediately significant positive effect on our profit margins."
This measure was preceded last month by the replacement of Matomy CEO Ofer Druker by Niri, who was CFO and COO, initiated by activist hedge fund Brosh Capital, which owns 7% of Matomy's shares. Brosh asserted that Druker's management was aimless and lacked a strategy, and that management was not taking responsibility for this. Druker founded Matomy a decade ago. Under his management, the company became an influential factor in digital advertising. Matomy's revenue totaled $277 million in 2016, 2% more than in 2015, but the company posted an $11 million net loss in 2016, compared with a $7 million net profit in 2015.
Druker also led Matomy's acquisitions of MobFox, Media Whiz, Team Internet, and Optimatic. The company held its IPO on the London Stock Exchange in 2014 at a value of $350 million, after money, and then also registered for trading on the Tel Aviv Stock Exchange (TASE).
Matomy's share has lost half of its value since its IPO. In early 2015, the share price dropped off sharply, following a profit warning published by the company. At this stage, the company is finding it difficult to make the transition to mobile advertising based primarily on video, from advertising in announcements and flash clips, the previously usual practice.
The leading shareholders in Matomy are the Publicis Groupe advertising firm (24%); entrepreneur and advertising tycoon Ilan Shiloah, who has advised the company since its inception (12%) (Shiloah recently resigned as company chairman and as a director); the Viola Group fund (9.8%), whose current chairman, Harel Beit-On, represents the Group on the board; and Brosh, led by Amir Efrati (7%).
Published by Globes [online], Israel Business News - www.globes-online.com - on May 9, 2017
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