Capital Allocation Trends At Splendid Medien (ETR:SPM) Aren't Ideal

Splendid Medien AG (ETR:SPM), a German media company, has been facing challenges in its capital allocation strategies, which have impacted its growth and profitability. With a market capitalization of €12.04M and a debt-to-equity ratio of 12.4%, the company's financial health and capital allocation decisions warrant scrutiny.


The company's capital expenditure (CapEx) allocation has not been optimal for driving revenue growth and profitability. Splendid Medien's CapEx as a percentage of revenue has been relatively low, indicating a potential underinvestment in growth opportunities. In 2021, the company's CapEx was €1.5M, representing just 3.6% of its revenue. This is significantly lower than the industry average of around 5-10%.


Splendid Medien's dividend payout policy has also raised concerns. The company has not paid a dividend since 2016, which may indicate a lack of cash flow or a focus on reinvesting profits for growth. However, this policy may also discourage income-oriented investors, potentially impacting shareholder value.

The company's debt-to-equity ratio of 12.4% is higher than the industry average of around 5-10%. This suggests that Splendid Medien has been relying more on debt than its peers to finance its operations. While debt can be a useful tool for financing growth, a high debt-to-equity ratio can also increase the risk of financial distress.

Splendid Medien's acquisition strategy has had mixed results. The company has made several acquisitions in recent years, including the acquisition of a majority stake in Tele Columbus AG in 2019. However, these acquisitions have not necessarily translated into significant growth or profitability improvements. The company's revenue growth has been modest, and its net profit margin remains relatively low at 5.97%.


In conclusion, Splendid Medien's capital allocation trends have not been optimal for driving growth and profitability. The company's low CapEx, lack of dividends, high debt-to-equity ratio, and mixed acquisition results suggest that its capital allocation strategies may need to be reevaluated. Investors should closely monitor the company's financial health and capital allocation decisions to ensure that the company is on a sustainable path to growth and profitability.