It was evident from its prelims (see Kewill: half year bad, full year good) that Kewill had a tough H1 but its interim results have revealed just how poor it was. Top line revenue was down 6% to £27.2m, but what is more concerning is that although the Nokia and Palm contracts accounted for a large chunk of the revenue fall - £0.9m – the business was weak everywhere else. Adjusted operating profit plummeted 45% to £2.3m.
Revenue dropped back in all regions. Europe was the least badly effected with revenue down 1% (4% cc) to £16.9m. The Nokia contract was the culprit, even after some of its losses were offset by revenue gains from Kewill’s 2010 Minihouse acquisition but did not account for all of the decline. America was down 12% to £8.9m, (7% at cc), impacted by the Palm contract. But there was no specific cause for the 19% revenue slump (22% in cc) to £1.4m in Asia, just that licence deals were delayed.
Licence revenue plummeted (60% in Europe, 42% in America) but this is not so surprising given reliance on a recurring revenue model – two thirds of the revenue for the business was recurring during the half year ending September 30 2011. However, recurring revenue barely moved (Europe up 2% cc so probably a decline in terms of reported revenue, America down 8% cc, but Asia up by 1%). This is a much more worrying situation and indicates customers are not moving to Kewill’s newer products at the rate the company needs to move forward.
Despite the depressing H1, the company says its pipeline is good and has high hopes that pilot projects will result in full licence deals and that its Customs and Forwarding business will continue to generate new business. Indeed it expects to meet full year targets and already has 82% of full year revenues recognised or contracted. However, the limited amounts of new business show an underlying weakness. With its global trade and logistics focus, Kewill is highly sensitive to wider economic changes and is experiencing the effects.