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Trading statements

Sepura warns on FY adjusted EBITDA

04 April 2016 07:16

Sepura expects FY revenues of 190m-200m euros, and sees adjusted EBITDA lower than expectations at 16m-20m euros.

"Consistent with previous years, the Group's revenue profile continues to be significantly weighted to the second half of the year with particularly strong trading in the final weeks of the year," the company said in a statement.

"Two significant opportunities did not close before the year end cut-off which adversely impacted EBITDA. These are expected to close early in FY17.

"Performance in the newer areas of DMR and Applications was below expectations in H1 and this continued into H2. In addition profitability was impacted by a €2.6 million adverse $:€ foreign exchange movement.

"The overall performance of Teltronic has been ahead of expectations and the integration of the business has been successful with significantly higher cost synergies than were originally expected (€4 million in FY16).

"In addition significant new contract wins in Latin America, North America and Europe demonstrate the strategic rationale of the acquisition.

"On 22 February New York City Transit announced its intention to procure a Sepura TETRA solution and a "Notice to Proceed" has subsequently been issued to Sepura's partner.

"The Board maintains its expectations for adjusted EBITDA for FY17. This is driven by the additional contribution from the delayed orders together with a full year of synergy benefits which will drive lower operating costs for the combined business in FY17 and a recovery in product margins now that the Saudi contract has completed.

"These factors offset the lower expectations for Applications and DMR. With the growing momentum for the TETRA business, particularly in North America, the Company will be increasing focus in this over newer areas such as DMR.

"The increase in net debt has arisen from an expansion in working capital together with further costs relating to the Teltronic acquisition and additional investment to accelerate cost synergies.

"The working capital expansion accounts for the majority of the increase and is primarily as a result of delays in contract awards and slower debtor collection. Contract delays impact the timing of receipts with inventory costs already having been incurred.

"Slower debtor collection is in part a function of the Group's broader geographic diversity with some of these markets experiencing more challenging economic conditions.

"As a result the Company's year end net debt position is significantly higher than market expectations at approximately €120 million. The working capital expansion is expected to significantly unwind during the new financial year.

"The Board retains its medium term target of net debt to EBITDA of around 2x. The Board has held discussions with the Company's debt providers regarding the Company's liquidity requirements and the possibility of covenant breaches. The Company's debt providers ‎have waived any potential breach of year end covenants.

"The Company will provide a further update once the year end close process has been completed."

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Related Company: SEPU

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