Interims

Blur Group has announced its interim results for the six months ended 30th June 2016. Revenue decreased by 62% to $632k on the comparable six months a year earlier, driven by a decrease in small business, lower margin project fees as blur increased its focus on higher quality, higher margin repeat enterprise customers. Enterprise platform pilot phases, that could lead to wider roll out phases, are in progress with a number of enterprise customers. Reflecting a decrease in administrative expenses, adjusted LBITDA (before share based payments and foreign exchange movements) reduced by 54% to $2.12 million. We have updated our forecasts in light of the announcement mainly to reflect a lower market share of its addressable market. Nevertheless, we continue to value the stock as a growth stock, with the shares offering investors exposure to the high growth business services-commerce market.

Interims

Revenue from project fees represented the majority of total revenue (86%), with premium services fees and subscription and license fees representing a smaller fraction (11.1% and 0.3%, respectively). Cancellation fees reduced to zero, confirming our view that enterprise customers have a higher propensity to take a project all the way to completion. The period saw an increased level of engagement with enterprise customers, with 60% of all completed projects coming from enterprises. The period also saw a high rate of repeat business, with 95% of all kicked-off projects coming from existing customers. Cash reduced to $4.34 million (FY15: $7.1m). There was a significant drop in bad debt, down by 102%, resulting in a small credit in the period, again reflecting the higher quality of enterprise revenues. The six month period also saw an improvement in trade receivables, reflecting the focus on higher quality enterprise customers. Cash burn reduced even further, decreasing to $1.1m in Q2 (excluding foreign exchange effects).

Forecasts

For FY16, we are forecasting revenue of $1.0m (previously $2.4m), gross loss of $85k (previously profit of $274k) and LBITDA of $4.0m (previously $3.9m). For FY17, we are forecasting revenue of $1.8m (previously $3.9m), gross profit of $282k (previously $848k) and LBITDA of $2.8m (previously $2.8m). We continue to expect a higher focus on reducing costs as efficiencies are realised in the business and the platform. The main risk to our forecasts is a lower than expected uptake in the blur platform as the company works towards wider platform adoption with its customers.

Valuation

blur’s addressable market is significant and we estimate it will grow to $641bn in 2018.