Dublin-based Escher Group issues profit warning

Dublin-headquartered software firm Escher Group has issued a full-year profit warning due to a shortfall in licence revenue.

The company, which is a provider of outsourced, point-of-sale software to the postal industry, said it expects lower revenues than previously forecast as it will not now close additional sales that were expected to be completed in the second half.

Group revenues are now forecast to be around $22 million (€20.1m) for the year, compared to $21 million (€19.2m) in 2014. License revenue “will be materially lower than expectations,” Escher said.

Davy, which had previously estimated full-year revenues of $24.2 million for the company, lowered its guidance for Escher but stressed that its balance sheet remained in good shape.

Investment analysts at Panmure Gordon’s equity division meanwhile downgraded Escher ’s stock to a “hold” rating in a report issued to clients.

Escher said while the shortfall in revenues will feed through to the adjusted earnings before interest, tax, depreciation and amortisation (ebitda), it still expects to report ebitda growth in excess of 80 per cent from $2.1 million in 2014.

"It is disappointing to have to report a shortfall in new license revenue which has restricted the strong growth in adjusted ebitda year-on-year," said chief executive Liam Church.

“We will now end the year with a strong balance sheet, with forecast net debt down from $5.3 million to $3.1 million at year-end, an increasing proportion of recurring revenue and numerous growth opportunities, particularly in our rapidly developing interactive and digital businesses, where significant investment is taking place,” he added.

The company said it continues to make good progress in developing its recurring licence and maintenance revenues, having secured significant contracts in Germany and the US during the year. Such revenues are expected to amount to more than 50 per cent of 2016’s revenue.

“The majority of this revenue is contractually committed for several years, is high margin and is not dependent on new license sales,” Escher said.

Escher Group was founded in 1989 in Boston and moved its headquarters to Ireland in 2007 following a management buyout. The company reported a 202 per cent rise in first-half pre-tax profits to $1.26 million from €420,000 in 2014.