No recommendation
No news or research item is a personal recommendation to deal. Hargreaves Lansdown may not share ShareCast's (powered by Digital Look) views.
(Sharecast News) - Essensys posted a return to EBITDA profitability for the year ended 31 July on Tuesday, despite a sharp fall in revenue, while the firm warned of a current year performance materially below expectations.
The AIM-listed flexible workspace software provider reported revenue of £19.2m, down 21% from £24.1m a year earlier, with recurring revenue falling 17% to £16.9m.
Run-rate annual recurring revenue declined to £15.0m from £20.3m, or £15.6m on a constant-currency basis.
Adjusted EBITDA swung to a £1.3m profit from a £0.9m loss in 2024, reflecting cost reductions and a more focused operating model, while the statutory loss before tax widened slightly to £5.7m from £5.5m.
Net cash at year-end stood at £1.8m, down from £3.1m, with the group remaining debt free.
The company said the revenue decline largely reflected the anticipated reduction in activity from one large customer, alongside a deliberate shift away from lower-quality cloud revenues towards its core Essensys Platform.
Excluding the large customer and adjusting for currency, annual recurring revenue from strategic customers fell by 2%, driven by portfolio rationalisation.
Gross margins improved to 59% from 57%, supported by a higher proportion of recurring software revenue.
Operationally, Essensys highlighted the launch of its new Elumo product across all core markets and the completion of a data centre decommissioning project, delivering £1.5m of annualised cost savings.
A post year-end restructuring refocused the business around its two core products, with dedicated teams for elumo customer acquisition and for deepening relationships and retention on the Essensys Platform.
"FY25 marked a year of significant operational progress for Essensys, underpinned by the successful launch of Elumo, the execution of substantial cost-saving initiatives and the restructuring of the business as announced in November to support our two core products with a sharpened focus on strategic customers," said chief executive James Lowery.
"This progress aided essensys in its return to EBITDA profitability, despite ongoing macroeconomic challenges, delivering £1.3m in adjusted EBITDA for the year."
Lowery said the decline in revenue also reflected a strategic repositioning of the customer base.
"While revenue reduced year on year, due to the downsizing of a customer, it also reflects a deliberate evolution of our customer portfolio and revenue mix, with a greater emphasis on scalable, higher-quality software revenues," he said, noting that the shift had improved margins and strengthened the long-term sustainability of the business.
Looking ahead, Essensys said first-quarter revenue was broadly in line with expectations but warned that full-year performance was now expected to be materially below management expectations, citing elongated sales cycles and slower-than-anticipated adoption of Elumo amid volatile economic conditions.
Management said it remained focused on customer engagement, operational efficiency and a targeted go-to-market approach.
The update came as the company continued to assess a possible all-cash offer.
As announced in November, founder and non-executive director Mark Furness submitted a preliminary, non-binding proposal to acquire the entire issued and to be issued share capital at 20p per share.
Reporting by Josh White for Sharecast.com.
