Essensys reports lower revenue, reduced cash ahead of founder offer deadline

(Sharecast News) - Essensys reported lower first-half revenue and sharply reduced cash on Friday, as the flexible workspace software provider continued to feel the impact of customer downsizing, slower sales cycles and churn, although it remained marginally EBITDA positive and said a recommended 17p-a-share takeover offer from founder Mark Furness would support the business. For the six months ended 31 January, revenue fell 25% to £7.8m from £10.4m, while recurring revenue declined 24% to £7.0m and run-rate annual recurring revenue dropped 24% to £12.7m.

Adjusted EBITDA remained positive at £0.1m, down from £0.8m a year earlier, while the statutory loss before tax narrowed slightly to £1.7m from £1.8m.

Net cash stood at £0.9m at the period end, compared with £2.2m a year earlier.

The company said the decline in revenue was primarily driven by the continued downsizing of a single large strategic customer, property portfolio rationalisation by customers focusing on more profitable sites, and expected churn among smaller non-strategic customers and in its Cloud business.

North America revenue fell 36% to £3.7m, UK and Europe revenue dropped 18% to £3.1m, while APAC revenue rose 24% to £1.0m.

Essensys said it had restructured the business around its Essensys Platform and elumo products, generating cost efficiencies and improving organisational focus.

It also highlighted upgraded customer support and monitoring, the launch of a strategic partnership with OfficeRnD, and the first cohort of elumo sites going live, though it said elongated sales cycles and slower adoption weighed on first-half sales.

"Although we have experienced financial headwinds over the past six months, we have made significant progress in executing our strategy with a clear focus on meeting the needs of our customers, while driving new customer acquisition," said chief executive James Lowery.

"We have restructured the business to provide greater focus across our two core products, transformed our customer support function and successfully delivered the first cohort of elumo customers.

"These actions have established a solid foundation for future growth."

Post-period end, Essensys said independent directors agreed the terms of a recommended cash offer of 17p per share from Essensys Bidco Limited, a vehicle backed by Furness and other members of a concert party.

The offer, announced on 24 February, must become or be declared unconditional by 1700 BST on 8 May.

"The period has also seen the recommended cash offer for the company from our Founder, Mark Furness," Lowery said.

"The independent directors believe that this offer will facilitate clear strategic and operational benefits for Essensys's internal and external stakeholders, including the employees and customers of Essensys and provides a fair and reasonable value and a certain exit opportunity for shareholders."

The company said discussions to secure a debt facility were ongoing and warned that material uncertainties remained over its going concern prospects, given continued net cash outflows, pressure on revenue growth and uncertainty over the outcome of the offer and future funding options if it does not complete.

At 0802 BST, shares in Essensys were down 1.45% at 16.31p.

Reporting by Josh White for Sharecast.com.

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