LONDON (Alliance News) - Payments company eServGlobal Ltd on Monday issued a warning on its full-year results due to contract delays and said its cash is set to be squeezed further by a planned capital raising by its HomeSend joint venture, leading it to outline early plans to raise new funding.
eServGlobal said that there is an increased risk that its revenue and earnings before interest, taxation, depreciation and amortisation will be below market expectations for the full year to the end of October. The company said its revenue profile is traditionally weighted to the end of the year and, as yet, it has not closed a number of key contract opportunities which would support its margins for the full year.
Combined with cost overruns it has faced from long-running legacy projects, the company said its Ebitda is likely to take a hit should the higher margin deals it is currently working on not close before the financial year ends.
The delays in signing the new contracts also will hit cash collection for the company, and eServGlobal said it expects to have limited working capital over the next few months. This warning came as it said the board of HomeSend, its remittance services joint venture with MasterCard and BICS, is set to launch a EUR10.0 million capital raising.
eServGlobal will have the option to invest in the capital raising in order to maintain its 35% stake in the joint venture, which it intends to take up. The pro-rata offer for eServGlobal to invest in the capital raising would mean it would have to pay EUR875,000 in mid-October, with a further EUR2.625 million due in April 2016. Should it fail to make that final payment next year, the other joint venture partners would have the right to acquire all of its shares in HomeSend at the paid-up amount.
The company said that due to its plan to invest in the capital raising for HomeSend and with the delays to cash collection from its difficulties in getting the higher-margin contracts signed, it will now be looking to raise GBP2.5 million "shortly" and will seek to raise up to GBP5.0 million by April 2016.
It said it is currently in talks with a shareholder about securing a loan of up to GBP5.0 million and will make a further announcement on these talks once the outcome is known.
The company did say that its cost-saving initiatives have gone beyond its original plans, and it expects these to have a beneficial impact on profit and cash generation going forward.
Shares in eServGlobal were down 23% early Monday to 8.80 pence, the worst performer in the AIM All-Share.
By Sam Unsted; samunsted@alliancenews.com; @SamUAtAlliance
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