Aferian plc (LON:AFRN), the B2B video streaming solutions company, today provided an update on current trading and its impact on the outlook for the financial year ending 30 November 2023.
H1 FY23 current trading
The 24i business (which focuses on streaming video services) won six customers in the final quarter of 2022 and this momentum has continued in the first quarter of 2023. Trading continues in line with expectations. The focus for 24i in 2023 is to continue to grow revenue and ARR at double digit percentages whilst also increasing profit margins.
For our Amino business (which connects Pay TV to streaming services), as previously communicated, the wider macro-economic situation resulted in a decline of revenues in the second half of 2022 as some customers delayed their orders of new streaming devices, preferring to run down their existing inventory. This trend has continued longer than we expected and device sales in the first half have been materially lower than anticipated. While Amino continues to have a strong sales pipeline for second half of 2023, the recovery is now not expected until later in the financial year. As a result, management now expect Amino’s outturn for the full year ending 30 November 2023 to be substantially lower than originally anticipated.
Actions to reduce the Group’s cost base
The management team has already taken significant steps to identify and deliver efficiencies in the Group’s cost base. These steps have already reduced the Group’s annualised cost base by c.$5m. These cost reductions were underpinned by efficiencies identified in the operations and research & development teams of both our 24i and Amino divisions.
FY23 Outlook
Whilst it is early in the new financial year, in light of the above performance from the Amino division, the Board now expects Group revenue and adjusted EBITDA for the year ending 30 November 2023 to be substantially below its original expectations. Whilst device revenues continue to be negatively impacted by the current market environment, the Board has confidence in the growth drivers of the video streaming market as well as Aferian’s ability to address that market. Notwithstanding the difficult trading conditions of the Amino business in the first half of the year, the Company is still expected to generate a positive material adjusted EBITDA for the full year.
Publication of audited results for the year ended 30 November 2022
Aferian Plc has already announced that it expects to report revenue and adjusted operating profit for the year ended 30 November 2022 in line with the trading update published on 8 December 2022.
The Company is in compliance with its banking covenants and is in discussions with its banks to ensure future covenant compliance. This will delay the announcement of the full year audited results for the year ended 30 November 2022. A further announcement will be made as and when practicable.
Intended Board Change
Subject to the satisfactory completion of the necessary NOMAD enquiry & due diligence process, the Board intend to appoint Max Royde to the Board as a Non-executive Director.
Max Royde is a managing partner at Kestrel Partners, an investment management company specialising in business-critical software companies, which has a beneficial holding in Aferian plc of 22,781,891 shares or 26.12% of the issued share capital of the Company.
