22nd Sep 2016 08:21
LONDON (Alliance News) - Billing Services Group Ltd on Thursday said its first half results demonstrate it has successfully executed its business plan despite reporting lower revenue, earnings and profit.
"The first half earnings were in line with expectations. As expected, overall revenues declined, but the company succeeded in generating additional revenues and cash flow from delivery of higher-margin services," said Chief Executive Norman Phipps.
The payment facilitator said it also expects revenue and earnings to be lower than previous guidance after a large local exchange carrier ceased third-party billing earlier this month, impacting the contract signed with the Billing Services.
Revenue for the full year is now expected to be in the range of USD30.5 million to USD32.5 million, and earnings before interest, tax, depreciation and amortisation will be within a range of USD4.8 million to USD5.2 million.
Both have been lowered from original guidance for the year of revenue totalling between USD32.0 million to USD34.0 million and Ebitda of USD5.5 million to USD6.0 million.
Importantly, both those metrics could come in even lower than the revised guidance dependent on the outcome of the issue with the large exchange carrier, Billing Services warned.
"The company expects there will be a modest impact to revenue and Ebitda in the current financial year resulting from the decision by the [large exchange carrier] to effectively terminate virtually all third-party billing," said the company.
"In addition, the company expects that revenues in the second half of 2016 will continue to be affected by the secular decline in billable long distance and operator service calls initiated on landline phones, partially offset by revenue gains from services to the wireless market," Billing Services added.
Results in the first half were in line with management expectations, even as it reported a fall in pretax profit to USD4.2 million in the first half from USD6.8 million a year earlier, with net income dropping to USD3.4 million from USD6.0 million.
Revenue dropped to USD16.2 million from USD18.9 million and even though Billing Services sold more higher-margin services in the period, pushing overall gross margins up to 52.5% from 49.2%, gross profit was still slightly lower year-on-year at USD8.5 million from USD9.3 million.
Ebitda fell to USD3.0 million from USD3.3 million.
On a more positive note, cashflow was positive and pushed the cash balance up to USD8.8 million at the end of June from USD8.2 million last year and, more importantly, the company is now completely debt free after clearing its outstanding balance, which at the end of June 2015 stood at USD1.5 million.
Billing Services said current trading is in line with the first half.
"Our primary strategy is aimed at providing more services to the wireless sector. The strategy is working, but new revenues are not yet being generated quickly enough to replace the decline in revenue from services associated with landline phones," said the company.
The issue with the large exchange carrier remains a potential burden for Billing Services. The carrier terminated third-party billing services as it was a condition of the consent decree it signed with the Federal Communications Commission, and the London-listed company said the carrier plans to "take actions beyond what it is required" pursuant to the decree.
"These actions, if carried into effect, would result in a decline in both revenue and Ebitda in 2016, and would have a materially negative effect in the future. We are currently investigating alternative billing arrangements which could potentially offer several advantages over third-party billing through the LECs, and while optimistic in this regard, we emphasize this is still in its early stages," Billing Services said .
"As is our custom, we will issue guidance for 2017 when our year-end 2016 results are announced, expected in March 2017," it said.
Billing Services shares were up 3.0% to 3.47 pence per share on Thursday.
By Joshua Warner; [email protected]; @JoshAlliance
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