Ava Risk forecasts better than expected EBITDA for FY 2020

Ava Risk ASX EBITDA FY 2020 Indian Ministry of Defence IMOD
Ava Risk’s EBITDA for the past financial year is forecast to reach $6.8 million, 26% higher than previously expected.

Risk management services provider Ava Risk Group (ASX: AVA) has published fresh guidance for the past financial year and included several updates related to its services and technology divisions.

Most interestingly for shareholders was Ava’s revised revenue estimates that exceeded previous guidance published by the company earlier in the year.

Ava estimates that its Q4 FY2020 revenue will hit $12.3 million and exceed its previous estimate by $1.8 million.

Furthermore, the company published a revenue forecast of $24.6 million for the second half of the past financial year – more than a $2 million improvement. For the entire year, Ava forecast a revenue figure of $45 million and an EBITDA of $6.8 million which equates to a 26% improvement over the previous estimate.

In terms of operations, Ava said its services division had performed “strongly” between March and June, a period dominated by the effects of COVID-19. Ava said it increased its revenue, margin and customer diversification during the quarter despite global challenges related to coronavirus and a particularly hard-hit air freight sector.

Despite the challenge, its services division had maintained and increased its full suite of services to its customer base.

However, Ava admitted to its Technology division being impacted by $2.5 million of order delays due to COVID-19.

“Supply chains have experienced some delays, a majority of employees have been working from home on reduced hours and pay whilst international travel for commissioning systems and attending to maintenance services remains challenging,” the company said.

Indian MOD project

On a positive note, Ava said its technology division had ensured that manufacturing for Ava’s large-scale supply of FFT’s SecureLink technology to protect data communications cables for the Indian Ministry of Defence (IMOD) restarted between March and June.

Last month, Ava received notification that the remaining units from its last batch of 200 had been completed, with the entire batch now passed over for Factory Acceptance Testing (FAT). The first 25% tranche of units has already passed FAT testing with Ava expecting all remaining units to do the same.

“Confirmation that all 200 units from the last batch of tranche one have successfully passed FAT is great news, and further builds upon the earlier news we have received about the momentum really picking up again on this IMOD project,” Ava Risk’s outgoing chief executive officer Scott Basham said.

“With all COVID-19 related manufacturing backlog now cleared, we’re looking forward to receiving confirmation of the balance of tranche one leaving the warehouse so that we can start the timer on receiving our next $1.5 million payment,” he added.

New leadership

As part of its company-wide update, Ava confirmed that its current chief executive officer Scott Basham will soon retire having served in his role for a little more than a year.

“It has been a pleasure working with the Ava team, driving change and executing strategies to leverage their world-class product portfolio,” said Mr Basham.

“We have had a lot of wins in the past 16 months and I am pleased to move on to other challenges knowing that the company is now in great shape to leverage off the strategy that has been implemented,” he added.

According to Ava, it intends to fill the vacant chief executive officer position by installing current Technology division chief operating officer Rob Broomfield.

The move would complete an operational shift at Ava that has already seen the company realign its services division to report directly to the main board.

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