- First half trading disappoints
- Clients defer training spend
- Full year profits to be ‘significantly’ below expectations
Mind Gym’s (MIND:AIM) shares were marked down almost 40% to an all-time low of 34.5p after the corporate training specialist said first half trading fell short of management’s expectations and it now expects to post an EBITDA loss ( earnings before interest, tax, depreciation and amortisation).
Steered by CEO Octavius Black, the staff training play warned sales and profits for the year to March 2024 will be ‘significantly lower’ than market expectations, despite seeing an encouraging year-on-year increase in bookings for the third quarter to date.
Shares in the company, which uses behavioural science to build training programmes, have now shed the best part of 80% of their value since Mind Gym floated on AIM at an issue price of 146p in June 2018.
CLIENTS PULL IN THEIR HORNS
Trading in the half ended 30 September disappointed as tougher economic conditions caused ‘some’ of Mind Gym’s clients, a roster that includes most FTSE 100 and S&P 100 index constituents, to kickstart restructuring programmes and defer spending on training.
Pervading customer caution has also ‘pushed out timeframes and procurement of new projects’ according to the company.
Broker Liberum Capital noted that technology markets have been particularly affected and the US has proved particularly weak.
First half sales are now expected to be roughly £21 million, down from £26.8 million a year earlier and dragging Mind Gym to an EBITDA loss, though the company expects to deliver stronger second half performance.
Given the weak first half showing, Liberum has downgraded its full year 2024 sales estimate from £63 million to £48 million and its full year EBITDA estimate from £9.3 million to a break-even result.
ADEQUATE LIQUIDITY
Mind Gym, whose services tap into high profile social issues which companies are under pressure to address such as coping with mental health issues at work, the gender pay gap and workplace bullying and harassment, insisted it has ‘adequate liquidity’ to cope with the testing times ahead.
The company highlighted cash in the bank of £2.1 million and an undrawn £10 million debt facility.
Work to reduce its own cost base continues and planned capital expenditure for the second half is being ‘materially reduced’, with Mind Gym focused on what clients are already buying including Performa, its digitally enabled coaching platform.
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Despite the damaging profit warning, Mind Gym sounded pretty bullish about the growth opportunity ahead of it in a highly fragmented £350 billion learning and development market where there is ‘no scale player’ and with companies needing to invest to attract and retain talent in a ‘tight labour market with a shortage of skills’.
Mind Gym insisted it has an ‘encouraging pipeline of larger opportunities’ and is currently bidding on ‘a number of multi-year and multi-million pound frameworks for full year 2025 and beyond. We are now in a stronger position to bid for and win major framework agreements which we expect to be an increasing source of future, sustainable growth.’
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