eServGlobal released a positive H118 trading update indicating that core business orders were ahead of internal forecasts and reiterated its target of achieving EBITDA break-even for the full year. With H1 revenue guidance of €3.6m/A$5.7m, the majority of these bookings will be recognised in H2, indicating a heavy H2 weighting for the year (c 70%). HomeSend continues to expand rapidly (59% top-line growth), and remains the key value driver for the stock. We leave our forecasts unchanged at this stage; H118 results are due by the end of August.
eServGlobal |
FY18 core business outlook maintained |
Trading update |
Software & comp services |
3 August 2018 |
Share price performance
Business description
Analysts
eServGlobal is a research client of Edison Investment Research Limited |
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eServGlobal released a positive H118 trading update indicating that core business orders were ahead of internal forecasts and reiterated its target of achieving EBITDA break-even for the full year. With H1 revenue guidance of €3.6m/A$5.7m, the majority of these bookings will be recognised in H2, indicating a heavy H2 weighting for the year (c 70%). HomeSend continues to expand rapidly (59% top-line growth), and remains the key value driver for the stock. We leave our forecasts unchanged at this stage; H118 results are due by the end of August.
Year end |
Revenue (A$m) |
EBITDA* |
EPS* |
DPS |
P/E |
Yield |
10/16 |
21.6 |
(7.0) |
(3.88) |
0.0 |
N/A |
N/A |
10/17 |
10.8 |
(11.7) |
(3.53) |
0.0 |
N/A |
N/A |
12/17** |
12.2 |
(15.2) |
(4.17) |
0.0 |
N/A |
N/A |
12/18e |
19.0 |
(0.4) |
(0.84) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. **14-month period.
Of the €7.7m/A$12.2m of new orders received in H118, only €1.2m/A$1.9m have been recognised as revenues in H1. H118 revenues are expected to be €3.6m/ A$5.7m, which implies H218 revenues of €8.4m/A$13.3m to reach our FY18 estimates. However, significant progress has been made towards the FY18e target for operational EBITDA break-even (€11.5m/A$18.2m): H118e revenues combined with bookings to be recognised in H218 (c €4.1m) represent 67% of the target.
As previously flagged, eServGlobal has continued its cost rationalisation process within the core business – opex will be €2.2m/A$3.5m lower than the comparable FY17 period. Management reports a number of ongoing conversations with regards to potential corporate activity.
The HomeSend JV has separately reported its FY17 accounts, which show 59% y-o-y revenue growth to €6.7m, with EBITDA losses growing c 6% to €6.4m as the company continues to invest for growth. Of the two significant imminent contracts announced in October 2017, one was successfully closed during H118 and is expected to go live in September, while the other remains a live opportunity.
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