TIDMESG
RNS Number : 8872B
eServGlobal Limited
12 October 2015
eServGlobal Limited ("eServGlobal" or the "Company")
Trading Update
12 October 2015
eServGlobal (AIM:ESG & ASX:ESV), the provider of end-to-end
mobile financial services to emerging markets, provides the
following trading update for its financial year ending 31 October
2015.
Further to the Company's announcement on 28 September 2015, the
Board now expects that there will be delays in closing certain high
margin orders ahead of the year end. As a result, the Board now
anticipates that full year revenues will be in the range of EUR17.5
- 18.5M. Whilst the Board expects these orders to be delayed, they
largely remain in the pipeline and it is expected that they will be
booked in the first half of FY2016. In addition to these contract
slippages, significant additional costs have been incurred in
delivering prior period projects, in turn causing further delay in
recognising work in progress. As a consequence, EBITDA* for the
full year is now expected to be a loss in the range of EUR5 -
6M.
Total overheads in FY2016 are expected to be below EUR9M,
against a backdrop of approximately EUR12.8M expected for FY2015.
We are targeting revenues of EUR20 - 22M in FY2016 and expect to be
EBITDA positive for the year (our reduced cost base and improved
sale process is expected to support a breakeven point of EUR19 -
20M in revenues). Substantial changes, including changes to the
sales process and structure, are now largely complete and the
Company will continue to focus on cost and process optimisation
going forward.
With a streamlined and revitalised Board and management team,
the Company is now better positioned to drive effective cash
collection and deliver revenue growth. PayMobile 3 is the platform
on which we can execute. Our attention is now firmly on improving
gross margins and revenue generation, and with our improved sales
processes and streamlined costs, we believe the Company is capable
of exceeding a 20% EBITDA margin and with greater predictability.
We do, however, remain cognisant of the usual macro and execution
risks that any company may face (particularly in the emerging
markets in which eServGlobal operates).
With regard to HomeSend, this is a long term journey but our
shareholders have been understandably disappointed at the lack of
newsflow. The Board considers that the increasing activity with
partners and different geographies supports HomeSend's progress and
materially supports the original plans and aspirations for this
business.
The Board reiterates its belief in the prospects for HomeSend,
as evidenced from our participation in the recent capital raising
process. HomeSend is beginning to transition from a start-up to a
growing business and will present more news going forward. The
Board of eServGlobal now believes it is reasonable for it to
consider the appropriate valuation of the Company's 35% investment
in HomeSend every six months (as we did in September 2015). A
reputable independent expert will be engaged for this ongoing
process and these six-monthly HomeSend valuations will be
communicated to shareholders as soon as they become available.
John Conoley, Chairman, said, "This is clearly a disappointing
result. With the benefit of continued support from its
shareholders, the Company has taken significant strides in the
second half to de-risk the business for 2016. We have exceeded our
original cost reduction targets and focus on cost optimisation and
re-organisation will continue in 2016. The recent loan from one of
our largest shareholders will provide us with sufficient working
capital for FY2016, in addition to allowing the Company to fully
participate in HomeSend's recent capital raising. The eServGlobal
Board further highlights the public statement by HomeSend that the
joint venture expects to break even in 2017, and we are confident
of an increasing tempo of positive news to demonstrate continued
progress in building out this business".
Core Business
The Board considers the PayMobile 3.0 platform to be the best
mobile money and advanced recharge technology for emerging markets
on the market today. This is has been demonstrated through customer
evaluation of eServGlobal's technology against that of our
competitors.
Several bids are currently with customers. PayMobile 3.0 is now
live in 5 customer sites and we are starting to realise the
benefits of offering a true industrialised product. We have
completed the first end-to-end implementation of our standardised
platform for a customer in Botswana. This project was completed 35%
faster than previous projects on PayMobile 2.0, allowing us to
reach payment milestones earlier while investing less time and
resources in development.
We have adopted a new hardware architecture and a new handling
process with PayMobile 3.0, and we have also made significant time
savings through software standardization. This approach brings the
average project duration down from 6 - 8 months to 3 - 5 months,
which equals to a 43% average saving in time and resources
costs.
There are opportunities for both gross margin enhancement over
time and for easier cash collection.
HomeSend
International money transfer is a multi-billion dollar market
ripe for disruption. HomeSend's offering to provide an alternative
to traditional money transfer methods is highly compelling.
HomeSend is the 'back-end' which powers money transfer services for
businesses worldwide, including several of the Top 10 money
transfer organisations today, such as MoneyGram, WorldRemit, Skrill
and Azimo.
eServGlobal's decision to participate in HomeSend's capital call
demonstrates our firm belief in the success of the joint venture.
The funds will be used primarily for two strategic steps.
Firstly, the establishment and management of a Payments
Institution License, expected shortly, will allow HomeSend to
commence transfers to previously inaccessible markets, in
particular India and Pakistan. The funding will also allow HomeSend
to finalise the relocation of its data centre to a PCI DSS
compliant facility. This is a prerequisite to complete the
integration with the MasterCard network, therefore enabling
HomeSend to access the 24,000 financial institutions with which
MasterCard operates and the 2 billion MasterCards worldwide.
MasterCard has demonstrated the strategic nature of their
investment in HomeSend through the announcement of their MasterCard
Send solution. Currently live domestically in the US, MasterCard
Send will use the HomeSend hub to process cross-border card-to-card
or card-to-wallet transfers for all connected users worldwide,
opening HomeSend to a substantial new sending and receiving
markets.
While the lack of visibility in the short-term has been
challenging to all supporters of HomeSend, eServGlobal remains
confident in the progress and strategic direction of the joint
venture.
*EBITDA is adjusted to exclude restructuring costs, equity
accounted impact of HomeSend investment and FX gains/losses.
For further information, please contact:
eServGlobal www.eservglobal.com
Tom Rowe, Company Secretary T: +61 2 8014 5050
investors@eservglobal.com
Canaccord Genuity Limited (Nomad www.canaccordgenuity.com
and Broker) T: +44 (0) 20 7523
Simon Bridges / Cameron Duncan 8000
/ Emma Gabriel
Newgate www.newgatecomms.com
Adam Lloyd / Helena Bogle T: +44 (0) 20 7653
9850
About eServGlobal
eServGlobal (AIM:ESG, ASX:ESV) offers mobile money solutions
which put feature-rich services at the fingertips of users
worldwide, covering the full spectrum of mobile financial services,
mobile wallet, mobile commerce, recharge, promotions and agent
management features. eServGlobal invests heavily in product
development, using carrier-grade, next-generation technology and
aligning with the requirements of more than 65 customers in over 50
countries.
Together with MasterCard and BICS, eServGlobal is a joint
venture partner of the HomeSend global payment hub, a market
leading solution based on eServGlobal technology and enabling
cross-border money transfer between mobile money accounts, payment
cards, bank accounts or cash outlets from anywhere in the world
regardless of the users location.
eServGlobal has been a source of innovative solutions for mobile
and financial service providers for 30 years.
This information is provided by RNS
The company news service from the London Stock Exchange
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