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On Wednesday, PCI-PAL (LSE:PCIP), a payment solutions firm, disclosed that it will not meet its previous forecast of adjusted pre-tax profit for the fiscal year 2024 due to issues with the timing of revenue recognition linked to a particular customer project.
The company had anticipated a revenue figure approximately 20% higher than previous projections, amounting to £18.0 million. This figure, however, falls short by £700,000 of earlier expectations. The discrepancy is largely due to one specific project. Initially, PCI-PAL had assumed that the customer had fully paid for the services and that the revenue from this project could be recognized in FY24. The board believed that the company had met its obligations under this contract, which justified recording the revenue in the current fiscal year.
However, during the course of its annual audit, and following consultations with auditors, PCI-PAL reassessed its revenue recognition approach. The decision was made to defer the revenue recognition from this project to FY25. This shift has impacted the company’s profit projections for FY24.
As a consequence of this adjustment, PCI-PAL now projects an adjusted pre-tax loss of around £600,000 for FY24. Nevertheless, the company expects to report an adjusted EBITDA profit of approximately £900,000. Despite the adjustment in profit expectations, PCI-PAL has achieved an adjusted free cash inflow of roughly £900,000. This positive cash flow supports a robust year-end balance sheet, with net cash standing at £4.3 million.
The firm’s financial performance update has led to a decline in its share price. As of 1100 BST, PCI-PAL shares were down 7.48%, trading at 53.20p.
This development underscores the challenges PCI-PAL faces with revenue timing and project-specific revenue recognition. The company’s decision to defer revenue aligns with maintaining accurate financial reporting standards. Moving forward, PCI-PAL will need to address these accounting adjustments while continuing to focus on operational efficiency and growth strategies to navigate its financial landscape.
