Eservglobal Ltd (AX:ESV): 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.
Trading update confirms contract slippage
As previously flagged in the September update, the company confirmed that new contract signings are taking longer to close than expected and are likely to slip into H116. The company has released new financial guidance for FY15 and FY16, reflecting contract delays as well as cost overruns on some existing contracts. After a period of restructuring, management confirmed that overheads should reduce significantly in FY16 compared with FY15, and on current revenue guidance for FY16 should be able to achieve positive EBITDA in FY16.
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