TIDMESG
RNS Number : 5332Y
eServGlobal Limited
18 May 2016
eServGlobal Limited (eServGlobal or the "Company")
Trading Update
Paris: 18 May 2016
eServGlobal (LSE: ESG.L & ASX: ESV.AX), the provider of
end-to-end mobile financial services to emerging markets, provides
the following trading update ahead of the release of its half-year
results for the six month period ended 30 April 2016 ("1H16"). The
Company expects to publish the half-year results, after review by
the auditors, by 30 June 2016.
HIGHLIGHTS:
-- Expected small EBITDA* surplus for the core business for the full year
-- Recovery in sales began in 2Q16 for the core business,
evidenced by new projects and the improved sales pipeline for
2H16
-- New contract announced to supply the Company's PayMobile
software, valued at EUR6.0m over five years, with approximately
EUR2.5m forecast to be recognised within the current financial
year
-- Achievement of key strategic milestones in 1H16 have opened
more opportunities for the HomeSend business, and the eServGlobal
Board remains confident in expectations for the joint venture
-- Loss making contracts entered into during 2014 and 2015 have
now been either completed or conservatively provisioned
-- The new senior management team has implemented systems to
minimise the risk of future contractual issues which led to the
losses in FY2015
At the AGM on 14 March, Executive Chairman John Conoley, stated
that the Company would begin to recover 2Q16. The Board can
confirm, based on significant orders received, that this recovery
did indeed begin. The outcome of the previously announced
restructuring is a substantially lower cost base for the year, and
based on this and the recovery in sales, the Company confirms it
remains on track to achieve a small EBITDA* surplus for the core
business. The Company expects to achieve operating cash breakeven
on a monthly run rate basis in the final quarter of FY16.
The recovery in sales is evidenced by the two new project wins
recently announced. The Company expects to report 1H16 revenue of
EUR5.5m with a normalised EBITDA loss* of between EUR4.5m -
EUR5.0m. The recurring revenue plus the orders referenced above in
1H16 give the Company a good base from which to perform well in
2H16. Revenue and profitability is anticipated to be weighted to
the second half due to the improved pipeline and an element of
seasonality.
Following the restructuring in late 2015 the Board is pleased to
report that there are clear signs that the changes implemented are
improving the financial performance of the Company. Management
focus on costs continued throughout 1H16 with total normalised*
costs tracking close to previous guidance. The overhead line is
slightly behind plan, but more progress has been made on Cost of
Sales than expected, without adversely affecting customer service,
product or quality. Assuming a reasonable sales mix, breakeven is
expected to be achieved with revenues in the range of EUR19.0 -
EUR20.0m.
A loan facility was agreed with Alphagen Volantis Fund Limited
and the Alphagen Volantis Catalyst Fund Limited, part of Henderson
Global Investors ("Hendersons"), on 23 March 2016, of EUR1.3m (GBP
1m), and the final EUR0.65m (GBP 500,000) will be drawn down
imminently taking total Company indebtedness to EUR14.1m (GBP 11m)
plus capitalised interest. This final tranche will enable the
business to maintain its growing momentum. As previously indicated,
the Company's improving control of quality and process management
continues to yield a better cash collection performance than in
2015. The continued attention to cost has further benefitted the
cash performance.
In 1H16 HomeSend moved substantially beyond its initial
objective of facilitating remittance transfers to mobile wallets in
emerging markets, and is now firmly positioned to facilitate a
growing range of international payments and transfers including
transfers to developed markets and international disbursements.
* Normalised cost and EBITDA excludes non-operating and
exceptional one-off costs including the equity accounted share of
HomeSend results, foreign exchange gains or losses and share based
payments.
John Conoley, Executive Chairman, eServGlobal, said, "HomeSend
continues to make strong progress. The advent of several strategic
milestones will be instrumental in moving HomeSend beyond its
original role as a facilitator of remittance to emerging markets,
to now lead the shift to digital in global international payments
of any kind. Our confidence in this position is affirmed through
delivered capabilities such as MasterCard Send, end-point bank
account termination and digital wallet payouts. We are looking
forward to seeing progress over the next few months.
"The major transformation of the core business of eServGlobal is
now beginning to yield results. Year to date revenues, work in
progress, maintenance and recurring revenues show that we can
expect approximately EUR12.0m already for the year, meaning that we
require in 2H16 about a further EUR7.5m of additional project
revenue to reach revenue guidance. We can expect about half of that
to come from existing customers, leaving EUR3.75m to be sourced
from customers new to eServGlobal. Whilst challenging, it is not an
unreasonable target to achieve breakeven, and we have a range of
opportunities that we have been working on for many months to
enable us to reach our target."
Core Business Update | Mobile Financial Services
During 1H15 eServGlobal announced a contract to supply its
PayMobile software, valued at EUR6.0m over five years,
approximately EUR2.5m is forecast to be recognised within the
current financial year. This is evidence of the previously stated
recovery in sales that was expected to begin in 2Q16. Additionally,
in May, the Company announced a new contract win with a new
customer in West Africa valued at EUR1.6m with EUR1.1m to be
recognised in the current financial year.
PayMobile 3, the Company's latest release of its proprietary
software platform, has been key in opening up new opportunities for
eServGlobal; it enables a wider approach to the market through
channel partners, in addition to a direct sales approach. The
Company is now seeing more opportunities from Latin America, the
Far East and other parts of Africa. Expected order flow in 2H16 and
future pipeline shows a diversification of geographical presence,
and an improved risk profile for orders and cash flow.
PayMobile 3 is now established with multiple live reference
sites. The Company is taking steps to consolidate this progress
through the addition of a richer set of modules and functions. This
includes an analytics product based on Big Data principles, which
is already trialling in several customer sites. This product will
enable a greater focus on recurring revenue, and is also expected
to bring new opportunities for the PayMobile 3 software.
Loss making contracts entered into during 2014 and 2015, have
now been either completed or conservatively provisioned. The last
of these will be a EUR900,000 provision for a project which cannot
be completed due to an irrecoverable debtor.
HomeSend Update| International Transfers and Payments
HomeSend continues to progress against its objective to
facilitate the "shift to digital" in international payments and
transfers. The hub addresses the existing challenges of PSPs
(Payment Service Providers) by offering a fully interoperable
global network. The formation of the joint venture has enabled a
significant expansion of end points, both sending and receiving,
opening HomeSend to a larger remittance market and new market
segments. The use cases for HomeSend enabled transfers continues to
grow, supported by the key differentiators of providing a near
instant transfer and transparency of transaction.
HomeSend is a disruptive technology that offers an alternative
to the traditional international financial infrastructure. The
payments hub is positioned as the centre-piece of an open and
interoperable payments ecosystem with the ability to connect any
PSP not just to eWallet Providers, MNOs and MTOs, but also Banks,
Regulators, Disbursement Enablers, Micro-finance Institutions, Card
Networks and Merchant Aggregators.
HomeSend can provide availability of funds in substantially
shorter periods of time than international transfer organisations.
HomeSend can perform international transfer to any account often in
near real time; some transactions can take a maximum of 30 minutes.
This is in comparison to Banks who typically offer international
transfers in 1 - 5 working days.
HomeSend has stated publicly that they expect to reach breakeven
during 2017. This is supported by the achievement of several
strategic milestones, including the acquisition of a Payment
Institution Licence and the move to a PCI-DSS Compliant Data
Centre. These achievements will enable HomeSend to move forward on
several fronts through the expansion of an ever-increasing range of
use cases and reaching more and more transfer 'end points'.
Notably, HomeSend will support the international payment and
transfer functionality for MasterCard Send. This MasterCard product
is now launching in the three 'send-to-card' markets, Russia,
Ukraine and the Philippines, and a rollout is scheduled to continue
for the next two and a half years covering a large number of
countries.
HomeSend can also now support end-point bank account termination
and disbursement from a digital wallet. These new use cases are in
addition to existing significant coverage in reaching mobile
wallets in emerging markets, such as the relationship with Vodafone
to reach mobile wallets in Kenya, DRC, Ghana, Lesotho, Mozambique
and Albania as well as existing relationships with top Global MTOs
such as MoneyGram, WorldRemit, Azimo and Skrill. In two countries
HomeSend has already captured a current share of the addressable
market of over 10% of inbound remittances.
Corridor progress remains on track with over 3,800 live
remittance corridors at the end of April 2016, connecting 200+
sending countries and 36 receiving countries. This progress is
expected to continue in 2H16, the 'network effect' of adding new
corridors will support transaction volume enablement
initiatives.
The Board of eServGlobal has said it will consider its carrying
valuation for HomeSend each six months. This was last considered in
March, and the Board believes that progress is on track and
therefore did not require a change to the valuation. However,
HomeSend is undergoing an exciting period of development, and the
Board will be reviewing this valuation again in September.
eServGlobal's CTO, James Hume, has recently joined the Board of
HomeSend. James has been involved in HomeSend from its earliest
inception. His in-depth technical and market knowledge will be
immensely valuable to the Board, and James is already working on
additional projects shared between HomeSend and eServGlobal.
During 1H16 eServGlobal received the final escrow from
MasterCard which enabled the completion of eServGlobal's EUR3.5m
contribution to a capital raise in HomeSend. This ensured
eServGlobal retains its 35% share. The continued financial focus on
HomeSend has been important as it has enabled eServGlobal to retain
key shareholder rights that underpin the value of this
investment.
For further information, please contact:
eServGlobal www.eservglobal.com
Alison Cheek, VP Corporate Communications T: +33 (0)1 4612
7746
finnCap Limited (Nomad and Broker) www.finnCap.com
Jonny Franklin-Adams / Carl Holmes T: +44 (0) 20 7220
0500
Alma PR (Financial Public Relations) www.almapr.co.uk
Hilary Buchanan / John Coles / T: +44 (0) 208 004
Josh Royston 4218
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.
For more than 30 years, eServGlobal has been a source of
innovation for telcos and financial institutions. Using
carrier-grade, next-generation technology, eServGlobal aligns with
the requirements of customers around the globe.
Together with MasterCard and BICS, eServGlobal is a joint
venture partner of the HomeSend global payment hub, enabling
cross-border money transfer between mobile wallets, cards, bank
accounts or cash outlets from anywhere in the world.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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