13th Nov 2024 14:29
(Alliance News) - Merit Group PLC on Wednesday said it swung to a loss during the first half of its current financial year, as revenue for its Merit Data & Technology business declined.
The London-based data technology company swung to a pretax loss of GBP224,000 during the six months that ended September 30, from a profit of GBP529,000 the year before.
Group revenue fell 6.1% to GBP9.3 million from GBP9.9 million last year, while administrative expenses reduced 4.8% to GBP4.0 million from GBP4.2 million. Cost of sales remained flat year-on-year at GBP5.2 million.
"Whilst trading of the Dods Political Intelligence business continues to perform in line with management's expectations, the revenues of Merit Data & Technology in the period have fallen by 8.5% year-on-year, as projects within the Data Technology division have reached their conclusion and conversion of the sales pipeline for new work has fallen short of expectations with both macro and local factors impacting prospects' willingness to commit to scale IT projects," Merit said.
Adjusted earnings before interest, tax, depreciation and amortisation declined 33% to GBP1.2 million from GBP1.8 million a year prior.
Chief Executive Officer Phil Machray said: "The underlying market demand for data and data-related technology is forecast to continue to grow in the coming years, and Merit Data & Technology is well positioned to benefit from this structural market growth. We have taken steps to strengthen sales and marketing capabilities across the group and expect to see growth in the sales pipeline and an improvement in prospect conversion over the next 18 months.
"Clearly, the current dip in revenues, combined with the additional costs of investment in product, sales & marketing, is having and will have an impact on profitability in the short-term. We are confident of returning revenue to growth in the year to March 31, 2026; and, given the company's strong operational gearing, expect to report a strong return to profitability. We remain confident in delivering financial 2025 performance in line with the guidance provided in our October 2024 trading update.
"Our focus remains on strong operational management, whilst pursuing revenue and earnings growth, and we remain confident in the longer-term outlook of the business."
In October, Merit said it expected revenue of around GBP18.5 million for the current financial year due to end March 31, which was 11% lower than market expectations of GBP20.7 million and down 7.0% from GBP19.9 million a year ago.
Merit also expects full-year adjusted Ebitda of around GBP2.0 million, which was 41% below market expectations of GBP3.4 million and about half of the GBP4.0 million it reported for financial 2024.
Shares in Merit were flat at 40.00 pence each in London on Wednesday afternoon.
By Emily Parsons, Alliance News reporter
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