Revenues affected by write-down of older projects
Some older projects which have been experiencing delays are likely to be written off, leading to FY14 revenues substantially below expectations. These projects pre-date the implementation of more rigorous customer acquisition policies and consequently this should be a one-off adjustment. However, until there is more clarity on the ‘base effect’ that this adjustment will have on FY15 and beyond, we withdraw forecasts.
Blur Group Plc (LONDON:BLUR) has announced that a number of older projects started in 2013 and early 2014, but which have been experiencing delays, are likely to be written off meaning that contrary to its previous expectations, 2014 revenues will be substantially below forecasts. Blur Group's auditors, KPMG, and the FRC are in the process of reviewing the recognition of these historical contracts which may result in a delay to the release of FY14 results. Management does not give any indication of the size of the potential write-down however, with a trade receivables balance of £4m at the interims and accrued revenues of £3m, there is potentially £7m of balance sheet risk.
The projects in question pre-date managements’ change in strategy to focus on enterprise-class customers, the more rigorous policies put in place since Q214 to ensure the credit quality of exchange users and the change to more conservative revenue recognition policies. As such, this should be a one-off adjustment to 2014 figures and management continue to target cash-flow breakeven by Q116. However, until we have more clarity on the size of the write-down and the ‘base effect’ impact that it will have on our estimates for 2015 and beyond, we are withdrawing forecasts. The company reported a net cash balance of $17.4m at the end of December.
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