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Blancco board positive as it continues hunt for new CEO
Mobile device diagnostics and secure data erasure solutions provider Blancco Technology Group issued a trading update for the six months to 31 December on Friday, in advance of its half yearly results which would be announced on 20 March.
The AIM-traded company said that, during the six months to the end of December, "significant" management time and effort was focused on the immediate priorities required to place Blancco on the "best operational and financial "footing following the resignation of the CEO and the review of the accounting for contracts and financial controls.
It said revenue in the first half of the current financial year was "marginally behind" that of the same period last year, but the board expected trading to grow during the second half leading to positive full year revenue growth.
The impact of currency had been slightly adverse following the strengthening of sterling, the board added
"Results for the six months to 31 December 2016 included a number of non-repeating volume sales deals, where revenue was recognised up front on the sale of software covering multiple future years," the Blancco directors explained in their statement.
"Several of these replaced deals previously contracted and recognised over time on a monthly basis.
"These were not due for renewal during December 2017 impacting Blancco's comparative year on year revenue and the contract renewal rate."
They said new client contracts won during the current period did not fully mitigate the impact of last year's non-repeating deals.
Overall, the group's erasure division saw a decline in year-on-year sales due to the non-renewal of multiyear end-of-life erasure contracts.
Mobile erasure saw a substantial growth rate, however, as the company secured numerous new clients.
The group's mobile diagnostics division remained flat, in line with management's expectations for the first half.
"As we expected, adjusted operating profit was lower than in the prior year, due to the lower revenue and the significant selling, general and administrative costs taken on during the second and third quarters of the prior year flowing through the first half the current year," the board added.
"Adjusted operating profit margin percentage was lower than full year guidance, but was better than our first half expectations, following the reorganisation and cost savings made between September and December 2017."
The board said it now expected full-year revenues to be towards the lower end of its guidance range, while adjusted operating profit and cash flow remained in line.
"During the period we also negotiated the sale of our Mexican legal entity, which will become a distributor of Blancco products in the Latin America region, consequently we have reclassified the results of the Mexican business as discontinued and treated them appropriately in the current and prior financial periods," the board added.
"We believe that this structure will benefit both parties to the transaction and promote the growth of Blancco services in the region."
Payments related to the restructuring of the management team and a legacy payment relating to prior year mergers and acquisitions had reduced cash balances since the financial year end, however, the group's operating cash flow before interest and tax remained "positive".
The board said the CEO recruitment process was progressing "well", adding that it would update the market at the appropriate time.
"The board is confident that we have considerably improved the functioning of the business, which stands Blancco in much better stead for the new CEO to execute a sustainable growth strategy, allowing the group to leverage its market leading position and take advantage of growing demand."