Surveillance and snooping technology supplier Digital Barriers (DGB:AIM) may have started a new trend in blaming a virus for its revenue warning today. The company reckons the outbreak of the deadly Ebola virus across parts of west Africa has hobbled its staff's travel arrangements and puts up to £6 million worth of revenue at risk this year.
'Given the group was negotiating contracts in west Africa for the deployment of further wide area surveillance solutions with an expected value in excess of £6 million, this will have a clear impact on the group's expected revenues from the region this financial year, particularly in this first half,' spells out today's update.
Analysts at Investec had been anticipating £28.4 million of revenue this year to end March 2015, so this is a significant blow. It also scuppers any hope of breaking into the black in 2014/15. The shares crash more than 13% to 82.5p, their lowest since joining AIM back in February 2010 at 100p.
'An aspiration to move towards breakeven in the current full year, today’s business update suggests breakeven will remain an aspiration,' points out Michael Larner, analyst at respected IT consultancy TechMarketViews.
Investec's forecast for this year, published on the back of May's full year to March 2014 results was for a £1.5 million pre-tax loss, and we would expect the broker to cut deeply into that estimate now.
But it's not all doom and gloom. As Hannah Finch of Megabuyte points out, Digital Barriers also notes that it continues to make good progress with its solutions across other global regions and it is confident that a portion of the revenues can be recovered from other customers.
'It has already secured two separate contracts for its ThruVision people screening solutions in the US and Asia Pacific, each valued in excess of £250,000,' says Finch. 'The company also continues to see very strong interest and active contract negotiations for the Integrated Surveillance Platform with major governments and defence and law enforcement agencies outside of the West African regions,' the analyst concludes.
However, TechMarketViews' Larner adds his own cautionary conclusion. 'Expanding to emerging and frontier markets,like west Africa, presents challenges in dealing with overseas governments, plus unforeseen events, certainly do not help the company build revenues and margins,' he says. 'Having improved margins through rationalising the product line up we think Digital Barriers should conduct a ruthless evaluation of its international pipeline in order to prioritise opportunities and protect margins.'
