Amino has released an update on the impact of COVID-19 on the business. Overall, the devices supply chain is returning to normal but the pandemic is now impacting customer spending and the FY 20E outlook clearly remains uncertain. Pending market stabilisation, dividend payments have therefore been suspended - including the proposed FY 19A final dividend which retains an additional $5m within the business. The group has financial headroom of $13.7m as of today. The strategic move towards software, alongside a broader product set and more diversified customer base following the 24i acquisition in our view gives Amino a strong platform, and financial position, to face the challenges arising from COVID-19.
Devices supply chain returning to normal: Production in Amino’s Chinese facilities resumed on Feb-27 at reduced capacity. Volumes are now back to normal levels – albeit subject to irregular flow of materials in the region.
Supporting customers with high levels of TV viewing demand: The group is ensuring that its streaming services and apps manage the high usage levels resulting from population lockdown. All employees are now working remotely, and customers supported with tools to remotely manage, support and install devices, removing the need for engineer visits. Longer term, we see the normalisation of working from home as a driver of increased demand for video over IP services – a growth opportunity for Amino’s carrier customers.
Amino’s financial position remains strong: The Group has gross cash as of 30 March 2020 of c$3.2m and undrawn credit facilities of $10.5m. We believe $13.7m of financial headroom positions the group strongly to deal with the challenges in its marketplaces.
Outlook uncertain, dividend suspended: The release also signals that the outlook for FY 20E financial performance remains uncertain given the impact of COVID-19. The AGM resolution declaring the FY 19A final dividend of 5.6p has been withdrawn, and future dividend payments will be suspended until market conditions stabilise. Retaining dividend payments will also further improve the group’s financial position.
Earnings estimates unchanged: We leave FY 20E and FY 21E earnings estimates unchanged following the release. With no dividend payments now anticipated in both years, the result is increased forecasts for the net cash position, which we now estimate at $9.2m and $19.0m FY 20E and FY 21E respectively. Clearly, risks continue to rise within our forecasts, which we expect to revisit in due course, once the outlook is clearer.