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Arq Group Limited (ASX:ARQ) reported a 39% decline in EBITDA of $19.5 million for the Fiscal Year ended 31st December 2018. This reflects an underlying decline of 3% to $37.6 million and the impact of Groupâs one-off items including investment in new brand and loss on a reassessment of contingent consideration liability in relation to InfoReady.
However, its underlying FY18 EBITDA of $37.6 million was well within the companyâs guidance range of $37.0 million and $39.0 million as announced in August last year. Moreover, the Groupâs reported revenue also strengthened to $213.0 million, up 8% on $197.4 million in FY17. It outlines 2018 as the year of transformation to the Group with the development and launch of the new brand and strong growth achieved in the Enterprise business unit.
Arq Group CEO, Martin Mercer, stated that â2018 was a transformational year that set up a return to growth in 2019. During 2018, Arq Group invested in growth, including the launch and development companyâs identity and a move into new offices in Sydney and Melbourne.â
The Groupâs Enterprise business has continued to post strong performance in 2018, driven by the growth in mobile applications and data & analytics. Moreover, new customer win in addition to robust customer renewals has led the segment to be Australiaâs leading digital partner with revenue up 18% and underlying EBITDA by 26%.
But the bottom line of the Group has returned as massive as 118% decline to $2.5 million NPAT, as compared to $14.0 million in FY17. This comes after the Small and Medium Business (SMB) of the Group got hit in 2018 by lower than expected solution sales. As a result, its Fiscal 2018 revenue slipped 2% to $100.1 million and underlying EBITDA massively declined by 18% to $22.3 million as compared to the previous corresponding period.
The Board declared fully franked Final Dividend of 4.5 cents per share that took the full year dividend to 8.0 cents per share for the Fiscal Year ended 31 December 2018. The payment date has been fixed to 30 April 2019 with the record date of 8 April 2019 and Ex-dividend of 5 April 2019.
Going forward, the company confirmed its intention to sell the Indirect part of SMB and to reinvest the proceeds of sale in the Groupâs digital service strategy. As of now, Arq is into the negation for sale of approximately half of the Indirect part of SMB as the other half comprises of a single customer who has indicated that they will be materially reducing their spend, but the timing and quantum of this remain uncertain.
As a result, Arq expects that the shape and contribution of the Indirect part of SMB will change materially in the first half of 2019. The Group further expects a low single-digit percentage growth for SMB and continuing good growth for its Enterprise business segment in Fiscal 2019.
ARQ stock price has jumped up by 16.37% to close at $1.990 on 26 February 2019. The stock last traded at a Price to Earnings multiple of 62.180 x with a market capitalization of $203.28 million.
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