reports
- Katherine Thompson
eServGlobal - Core business update
Delays in closing contracts in the core business resulted in a revenue shortfall for eServGlobal in FY17, although some of these have now been signed and will contribute from FY18. Continued efforts to reduce the cost base should reduce the break-even revenue level to c €12.5m/A$19min FY18, which the company is aiming to achieve through focusing on additional sales to its existing customer base. eServGlobal participated in the recent HomeSend funding round, marginally increasing its stake to 3...
Update: H116 results in line
eServGlobal has reported H116 results in line with its recent trading update and confirmed that it continues to expect to report a small positive EBITDA for FY16. Once approved, the proposed fund-raising and debt restructure should strengthen the company’s balance sheet and provide funds to support the growth of the core business.
Update: FY16 guidance maintained
Management has reiterated its target of breaking even at the EBITDA level for FY16. Two material contract wins confirmed that the anticipated recovery began towards the end of Q216, following a weak Q116. While this means that the company now expects to report an EBITDA loss in H116, the combination of cost-cutting and revenue recovery provides confidence that break-even can be achieved for the full year. We have revised our forecasts to reflect H116 performance, reducing our revenue and EBITDA ...
Flash note: Major contract win confirmed
eServGlobal has brought recent negotiations for a major PayMobile contract to a successful conclusion, signing a five-year contract worth €6m. This supports current year revenue guidance and potentially marks the start of a recovery in the company’s fortunes.
Update: Restructured core business
eServGlobal’s FY15 results reflect the impact of the restructuring programme undertaken to reduce the cost base and streamline the sales and implementation process. With a materially lower cost base and high margin deals in the pipeline, the company is targeting revenue growth and EBITDA and operating cash break-even in FY16. Evidence that the core business is winning new business and starting to generate cash will be the key to share price upside from this point.
Update: Core business contract delays
Delays in signing new contracts in the core business drive a downward revision to revenue guidance for FY15; this combined with cost overruns on some current projects results in guidance for an EBITDA loss in FY15 compared with previous guidance for positive EBITDA. Cost reductions from recent restructuring combined with signing the delayed contracts in FY16 should result in positive EBITDA in FY16. We have revised our forecasts to reflect the new guidance, with cuts to forecasts for FY15-17.
Update: Risk of H2 miss increases
eServGlobal has confirmed that it intends to invest €3.5m in HomeSend’s planned €10m capital raise, maintaining its 35% stake. The core business has seen a slower pace of contract wins, increasing the risk that the company does not meet its FY15 revenue and EBITDA targets. To fund short-term working capital and the HomeSend investment, the company is looking to raise up to £5m, potentially via a loan. We leave our forecasts unchanged, pending a further update from the company in October.
Initiation: Supporting mobile money in the developing world
eServGlobal’s core business provides software to support domestic mobile top-up and mobile money services. Recent restructuring has materially cut the cost base and should position the business to better respond to customer demand. For international remittances, eServGlobal’s participation in the HomeSend JV alongside MasterCard and BICS has the potential to generate significant upside to the share price.
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