The stock was down 15% this morning as it flags delays in customer installations and margin erosion.
Companies: Maintel Holdings Plc
Business communications group Maintel (LON: MAI) has taken a hit this morning off the back of Management's trading update outlining its FY17 trading ahead as the financial year draws to a close.
The Group has warned the reduction in gross margins due to investment in its core ICON cloud services will not be recovered as quick as planned due to several factors.
Management said they expected "two large legacy contracts" assigned to Azzurri Communications, who was acquired by Maintel in 2016, will wind up quicker than expected. This means less revenue than originally anticipated for H2 17 and H1 18.
Further affecting the Group was trading partner Avaya's September announcement it would be filing for Chapter 11 in the US. The impact of delays in customer installations as a result has been "greater than expected" due to delays in resolving the Group's financial woes. Avaya has, however, announced it had exited Chapter 11 last week and "ordering activity has started to recover"
Gross Margins have also been "lower than anticipated" from the Group's August acquisition of Intrinsic Technology, despite Revenue contributions being "in line with expectations".
It went on to say:
"The Board now expects adjusted EBITDA for the year ended 31 December 2017 will be in the range of £12.5m to £13m."
Shares in the Group dove 15% in early trading continuing the stock's downward trend in 2017.
With a Market Cap of £113m, the Group trades on a forecast PE multiple of 9x versus an industry median of 13x. Despite Revenue growth averaging 33% YoY since 2011 Net Margins have fluctuated greatly - an issue, it seems, that will continue to affect the Group in the short to medium term.
