The Panoply’s trading update for the year to March 2020 confirms that H2 trading was solid, and that the Board expects to report revenue and EBITDA in line with market expectations. The group’s financial position remains robust and will be enhanced by cash collections from the solid 20E trading performance. The Panoply is actively involved in the response to the COVID19 pandemic, with the business being only minimally impacted so far. Overall, we believe the announcement contains a number of positive messages. However, with ongoing macro-driven uncertainty over the medium/ longer-term outlook, we revise forecasts. Our FY 21E and FY 22E EBITDA estimates are reduced by 37% and 21% respectively.
The release confirms that H2 20E saw a solid trading performance, driven by new client wins and Brexit and election-related stability. The Board expects to report FY 20E revenue and adjusted EBITDA performance in line with market expectations.
The group closed FY 20E with a gross cash position of £4.7m and net debt of £0.3m. As at 24 April, the group held £6.2m in cash. Management expect the group’s financial position to be further improved in Q1 21E by cash collections from the solid H2 20E trading performance. In addition, the group has recently agreed a £1.5m overdraft facility with HSBC and is in early discussions about extending its £5m Revolving Credit Facility.
Public-sector clients now contribute c70% of The Panoply’s revenues, and the group has been working with a number of clients on the COVID-19 emergency response – including the NHS, HM Government and a number of local councils in the UK. The release signals the group is not seeking to generate margins at the typical rate for these efforts, with some work being undertaken on a probono basis.
The release confirms that the business has not yet seen a net negative impact on revenues and clients continue to be fully serviced. The Panoply has not furloughed any staff to date and utilisation remains over 70%, in line with previous periods.
Following the release, we take a more prudent view on the medium/ longer term outlook for the business. Our FY 21E and 22E EBITDA estimates fall by 37% and 21% respectively.