Aferian trading in line with expectations

The AIM-traded firm said it had made significant progress in improving the quality of earnings and enhancing revenue visibility.

It said it expected to report an improved exit run rate annual recurring revenue (ARR) of around $19m, reflecting growth of 20% compared to the previous year, or 21% on a constant currency basis.

The higher-margin software and services revenue for the period was expected to reach around $13.7m, marking a 14% increase compared to the prior year, or 16% on a constant currency basis.

However, device revenues in the first half were projected to decrease by 71% year-on-year, amounting to approximately $9.4m.

As a result, the group's revenue for the period was expected to reach around $23.1m, which is lower than the $44.5m reported in the first half of 2022.

Aferian previously announced management actions in February and June to reduce its annualised cost base, including capital expenditure.

Those actions had resulted in a reduction of around $5m and an additional $3m, respectively, in the current financial year.

The cost reduction measures had led to savings of $3.4m in operating costs and $1.5m in capital expenditure.

In order to mitigate potential supply chain delays, Aferian said it had proactively invested in inventory within its Amino business.

As at 31 May, its inventory balance stood at $8.6m, compared to $4m in the prior year.

Aferian's net debt at the end of May was $13m, in contrast to net cash of $7.8m at the same time in 2022.

The company said it anticipated a reduction in net debt over the remainder of the current financial year as inventory levels decreased.

Aferian added that it was currently compliant with its loan facilities covenants.

Looking ahead to the full year ending on 30 November, Aferian reported that 90% of the management's forecasted group revenues were already contracted.

The remaining 10% was covered by a well-developed sales pipeline.

It said the implementation of cost reduction measures, in combination with the contracted revenues, had provided the board with confidence in the expected outturn for the full year.

Aferian anticipated generating a positive material EBITDA for the year.

“The group's strategy continues to be growing software and services revenue in the fast-growing video streaming market through the 24i division's streaming video platforms,” the Aferian board said in its statement.

“Demand here remains strong and the 24i management team are focused on accelerating profitability in the second half of the financial year and beyond.

“The Amino division, which connects pay TV to streaming services, will now focus on higher quality, higher margin streaming devices which can also be bundled with its SaaS device management platform.”

Aferian said the SaaS device management platform was also integrated with third party devices and sold on a standalone basis.

“With encouraging initial traction, the group will also look to continue to grow its digital signage business.

“At the group level, the Board anticipates full year software and services revenue growth of 10% to 15% in this financial year.”

Moving into the 2024 financial year, Aferian said the 24i business and management team would focus primarily on the plan to deliver enhanced profitability and cash generation.

“Devices revenue in the second half is expected to be higher than the first half, and this recovery is expected to continue in the 2024 financial year as inventory levels continue to normalise within the supply chain.”

At 1246 BST, shares in Aferian were down 16.58% at 11.89p.

Reporting by Josh White for Sharecast.com.