In its final FY2018 results announced today, EU Supply (EUSP), the eprocurement software provider, has reported results in line with expectations and confirmed its first full year net profit. Strong order flow in recent weeks from the launch of new suppler services and an increasing proportion of repeating contracts that enhance the quality of revenues, lend confidence to our unchanged FY2019E forecasts for continuing growth from EUSP’s scalable business model. We also introduce FY2020E estimates which reflect continuing progress.
EUSP has reported an in line 10% increase in revenues for FY2018 to £5.1m and a first full year profit before tax, at £0.4m (compared to a FY2017 loss of £0.2m). Operating costs were relatively steady at £4.5m (2017: £4.6m excl restructuring expenses).
Additional supplier side services were developed in H2 FY2018 and refined post year-end and are contributing significant order flow. The annual value of orders received since the launch five weeks ago of new services has been £600k, in approximately 730 orders, the majority being of recurring or repeatable nature. Long term, there is potential to target more recurring revenues from the over 500k suppliers registered on the platform.
The annual recurring revenue run rate is up about £0.6m or 17% in the current FY2019 year to date, which is the highest achieved by EUSP. This significantly increases the proportion of repeating revenues, which were already 70% of 2018 revenues at December 2018, itself up from 66% at December 2017.
EUSP’s focus on increasing the proportion of recurring revenues, with fewer one off projects releasing development capacity, will add to its already solid profitable platform and the visibility and quality of revenues. With a single code product that is configurable online to customer needs and its scalable SaaS business model, EUSP has potential to benefit from operating leverage as it grows.
The Board is confident in continuing growth in annual recurring revenue during the coming months and in further growth beyond 2019. Confirmation that EUSP recorded its first annual net profit, strong new service order flow and the growing repeating revenue base support our maintained FY2019 forecasts. With new services under development including its micro-procurement service, we introduce forecasts for FY2020 showing 10% revenue growth.