Shares of software firm Escher drop on revenue decline

Davy analyst says Escher’s licence fee revenues remain ‘lumpy’

Postal software provider Escher saw its shares fall almost 10%  in London as it reported a 24%  decline in first-half revenues. Photograph: iStock

Postal software provider Escher saw its shares fall almost 10% in London as it reported a 24% decline in first-half revenues. Photograph: iStock

 

Escher Group, a Dublin-based provider of software for use in the postal, retail and financial industries, saw its shares fall almost 10 per cent in London as it reported a 24 per cent decline in first-half revenues.

The company, which counts paper packaging tycoon Michael Smurfit and account and debt restructuring expert Bernard Somers among its main shareholders, said total revenues fell to $9.4 million (€8m) from $12.3 million for the year-earlier period.

Earnings before interest, tax, depreciation and amortisation (ebitda) are expected to decline to $1.4 million for the six months from $3.4 million, it said.

“As anticipated, our licence sales in the first half were modest compared to those in [the first half of] 2016,” said Liam Church, chief executive of Escher.

“Overall, our pipeline of business for [the second half] gives the board confidence that expectations for the full-year are deliverable.”

The lower revenues were largely a result of a decline in one-off software license sales during the reporting period. However, recurring revenues now make up almost two-thirds of group turnover, compared to 52 per cent in the same period in 2016, “which demonstrates the ongoing evolution of the business”, it said.

New product areas

The company said it has continued to invest in new product areas, and was exploring the possibility of adding a second “leg” to the business in the activity of “licensing and permitting platforms”.

Shares in the company, in which Mr Smurfit’s Bacchantes family investment vehicle owns a 6.4 per cent stake and Mr Somers holds 5.3 per cent, fell 9.6 per cent in early trading in London to £2.125, giving it a market value of £39.9 million (€44.7m).

“At a strategic level it is encouraging that Escher continues to transition to a better mix of recurring revenue and invest in its licensing and permitting platforms,” said Davy analyst Ross Harvey. “However, licence fee lumpiness remains a hallmark of the financial performance.”

The analyst said he does not expect to make “material changes” to his full-year $5.7 million ebitda forecast for Escher.