MSP Castleton stutters after 'significantly weaker' Q2

Firm expects second half of the year to be better

MSP Castleton Technology has said it will miss financial targets after its Q2 was "significantly weaker" than expected.

The AIM-listed company reported in a trading update that revenue of not less than £11.6m and adjusted EBITDA of not less than £2.9m for the six month period ending 30 September 2019.

The MSP stated that revenue has been "behind expectations" and that this was due to turnover from product and professional services being lower than anticipated.

Recurring revenue has increased, representing approximately 65 per cent of total revenue in the period, but this was not enough to counter the reduction in one-off revenue, resulting in turnover, EBITDA and operating cash lower than H1 2018.

Castleton is confident that there will be a "material improvement" in revenue in the second half of the year, though "this is not expected to be sufficient to meet current market expectations".

The MSP acquired Deeplake Digital and Indian consultancy CarbonNV InfoLogic earlier this year and stated that the effects of these acquisitions and merging its managed services and software divisions are starting to materialise.

"The second quarter of the financial year has been significantly weaker than we expected particularly compared to the strong comparable period last year," stated Dean Dickinson, CEO of Castleton.

"This is primarily due to revenues of a one-off nature. Whilst this is difficult in the short term it highlights the importance of transitioning away from one-off revenues and focusing our efforts on growing our recurring revenues.

"In the first quarter of the year, we reorganised the group to streamline our sales and delivery functions. Embedding this has both taken longer and been more disruptive than we anticipated, however, it positions the group well for the longer term.

"Despite these short term challenges, we are confident that the move to 'One Castleton' will enable us to offer customers better service and drive future growth."