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UPDATE - ServicePower expects second half boost from new contracts

Published: 14:07 17 Sep 2014 BST

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-- update adds broker comment--

Field management software specialist ServicePower (LON:SVR) predicted a significant improvement in its performance over the remainder of the year as new contracts start to contribute.

Chief executive Marne Martin said the benefits of heavy investment over the past year are also now starting to show through.

ServicePower had been profitable month-on-month since half year with cash balances anticipated to rise prior to year-end, she added.

“With good visibility of customer implementations and a doubling of our sales pipeline, we are confident in achieving strong growth and growing profitability in the second half of 2014 and beyond,” Martin said.

Revenues in the half year to June fell to £6.2mln (£7.3mln), gross profits were £2.7mln (£3.5mln) with a loss before tax of £0.9mln.

The results, which had already been flagged, showed a 39/61% revenue split between the service operations and service scheduling arms.

The second half will see contracts with Electrolux Home Appliances and a number of other unnamed customers start to contribute, while its M2M Connected Services offering with Bosch Software Innovations will also start up.

Martin added the Bosch tie-up will be substantial in terms of the business pipeline going forward.

M2M, where machines are monitored remotely and problems notified automatically, fits in well with its core scheduling business, she added. 

“It lets us know if it is a big part that needs changing or just a wear issue. We can also check if there is any other work that can be done at the same time,” which will give a big boost to the efficiency of field technicians, she said.

Consultant Gartner has predicted the connected device market will grow by 40% overall in 2014 and by 50% annually over the following five years.

House broker finnCap has forecast revenues will be significantly higher in the second half with the recent investment and new contract wins,  though its profits forecast for the year remains unchanged at £100,000.

In 2015, profits could rise to £900,000, added the broker, which has a 10p target price for the shares.

According to Martin, it is only then that all of the functionality it wants will be in place, but it is halfway there now and having played catch-up for a year the business is now "driving forward again".

Shares fell 5% to 6.75p.

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