viewObjective Corporation Ltd

Objective Corporation downgrades earnings for FY2018, positioned for margin expansion

The company creates information and process governance software solutions.

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Shares were off 19.2% to $2.90 intraday

Objective Corporation Ltd (ASX:OCL) had downgraded earnings for FY2018 and now expects them to be largely in line with last year’s results.

Based on unaudited management accounts as at June 30, 2018, revenue totalled $63.0 million (FY2017:$62.8 million) and EBITDA $10.5 million (FY2017: $10.4 million).

Transition to subscription-based revenue, cash flow strong

The company continues to focus on transitioning its customer contracts to subscription-based revenue, now accounting for 61% of total revenue.

Positively, cash flow from operations increased by 18% to $11.3 million representing 107% of EBITDA for the year.

This confirms good conversion of P&L earnings into cash alleviating working capital concerns.

Margin expansion expected in FY2019

The company is confident it can deliver significant margin expansion in FY2019 due to its R&D investment, operating leverage and transition to subscription revenue.

Objective also remains confident that the fundamental drivers of customer demand for its products has not changed.

Four business units

The company has four main business units, Objective ECM which accounts for the majority of revenue and earnings and Objective Keystone, Objective Connect, and Objective Trapeze.

ECM stands for enterprise content management and ECM software helps business manage their content such a digitalising documentation.

Quick facts: Objective Corporation Ltd

Price: 5.96 AUD

Market: ASX
Market Cap: $556.46 m

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