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 forecasts but continuing to forecast a return to positive EBITDA in FY16.
H116 trading update confirms FY16 outlook
Eservglobal Ltd (AX:ESV) generated revenues of €5.5m (A$8.3m) in H116 and expects to report an EBITDA loss of €4.5-5m (A$6.8-7.6m). Sticking to its target of reaching EBITDA break-even for FY16 implies revenues of A$20.9-22.5m and EBITDA of at least A$6.8-7.6m in H216. With roughly one-third of H216 revenues contracted, this leaves c A$11.6m of new business to be signed from existing and new customers in H216. We have revised our forecasts to reflect the lower end of guidance, with a very small positive EBITDA in FY16 of A$0.1m rising to A$2m in FY17 (6.1% margin).
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