Great set of results for the core business with GTN demonstrating pricing power and expanding margins. This augers well for the full year with revenues to February comping 20% up on prior year.
I was a little skeptical when I first heard about the drones bolt on, but hearing Bill’s vision during the latest call was interesting.
GTN has already spent 2.5m capex on the drones. The revenue model is similar to the core business, where the light show would be provided to event organisers for free and GTN would receive revenue from an advertisement integrated as part of the show.
Bill alluded to the possibility of achieving 100K in advertising revenue per show with attributable costs circa 30K. He said there was the potential to put on 100 shows per annum across the 4 geographies. That would be a contribution margin of 7m.
It’s an interesting opportunity, for minimal capital outlay, in an adjacent but nascent industry, where GTN has demonstrated competence. For a business that is likely to generate 6m+ in net profit this year this could have a material positive impact.
The business is currently trading on approximately 10% free cash flow yield with management demonstrating a commitment to shareholders with a dividend in place and a share buyback program.
Interesting little opportunity in one of the lesser watched corners of the market.
GTN Price at posting:
51.5¢ Sentiment: Buy Disclosure: Held
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