Objective Corporation Limited on a Sinking Ship

Lowering of Full year Guidance: Objective Corporation Limited’s (ASX: OCL) stock sunk massively 19.5 per cent on July 04, 2018 following the trading update for the full year wherein the group has downgraded it’s earning for FY18 and now expects them to be largely in line with previous year’s result. According to the release, the company is expecting revenue of $63 Mn and EBITDA of 10.5 Mn for the period which is almost in-line with FY17 performance. Over the year, the company has invested to upgrade its workplace for its highly valued employees which resulted to high depreciation cost for full year. As a result, the company downgraded its EPS guidance and now expected to be around 8.0 cents per share from 9.0 cps.

Further, cash flow from operations lifted by 18% to $11.3 Mn, representing 107% of EBITDA for the full year while cash reserve increased by 27% to $21.4m as at 30 June 2018 from $16.9m in the last year. The management expects that the FY19 will deliver significant margin expansion at the back of product enhancements as a result of its R&D investment, operating leverage and the ongoing transition to SAAS licencing.

Despite the several isolated challenges incurred during the year, the company remains confident that the fundamental drivers of customer demand for its products have not changed. They will continue to drive further adoption of the company’s product mix amongst new and existing customers in APAC, Europe, and North America. The group stated that they will adopt new accounting standards in relation to revenue recognition, known as AASB 15 and the new accounting standards will not have any material impact on either revenue or profit going forward.


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