Aferian PLC (AIM:AFRN) saw its shares plunge on Friday after the B2B video streaming solutions company warned that it expects its group revenue and adjusted EBITDA for the year ending 30 November 2023 to be substantially below its original expectations due to a weak performance from its Amino business, which connects Pay TV to streaming services.
In an update on current trading, the company said, as previously communicated, the wider macro-economic situation resulted in a decline of revenues at Amino in the second half of 2022 as some customers delayed their orders of new streaming devices, preferring to run down their existing inventory.
Aferian said this trend has continued longer than expected and device sales in the first half have been materially lower than anticipated. While Amino continues to have a strong sales pipeline for second half of 2023, the recovery is now not expected until later in the financial year. As a result, the company said its management now expects Amino's outturn for the full year ending 30 November 2023 to be substantially lower than originally anticipated.
Aferian said its 24i business, which focuses on streaming video services, continues to trade in line with expectations and won six customers in the final quarter of 2022 with this momentum continuing in the first quarter of 2023. The company said the focus for 24i in 2023 is to continue to grow revenue and ARR at double-digit percentages whilst also increasing profit margins.
The company said its management team has already taken significant steps to identify and deliver efficiencies in the group's cost base and these steps have already reduced its annualised cost base by around US$5mln, underpinned by efficiencies identified in the operations and research & development teams of both its24i and Amino divisions.
Whilst device revenues continue to be negatively impacted by the current market environment, the company said its board has confidence in the growth drivers of the video streaming market as well as Aferian's ability to address that market and, notwithstanding the difficult trading conditions of the Amino business in the first half of the year, it still expects to generate a positive material adjusted EBITDA for the full year.
Aferian has already announced that it expects to report revenue and adjusted operating profit for the year ended 30 November 2022 in line with the trading update published on 8 December 2022.
The company is in compliance with its banking covenants and is in discussions with its banks to ensure future covenant compliance. This will delay the announcement of the full-year audited results for the year ended 30 November 2022, it added.
In early morning trade on Friday, Aferian shares were down 42.2% at 35.0p.