Avast still planning to pay final dividend
Avast
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Avast updated the market on its first quarter of trading on Thursday, as well as its ongoing response to the Covid-19 coronavirus pandemic, telling shareholders it has identified four priorities in light of the outbreak.
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The FTSE 250 computer security giant said group revenue performance in the first quarter was in line with its expectations, with install, uninstall and retention rates continuing to trend positively. Current 2020 financial year revenue guidance remained in place.
For the first quarter, the company said adjusted revenue totalled $214.6m, which was up 6.5% on an organic basis, and 1.3% at actual rates.
Adjusted EBITDA for the three months ended 31 March increased 3.1% to $121.2m, resulting in an adjusted EBITDA margin of 56.5%. The board retained its plan to pay a final dividend of 10.3 cents per share, the equivalent of $105m in total.
Avast said its offices globally were closed as a preventative measure on 16 March, with employees fully equipped to work from home, and its products and services remaining unaffected.
“Due to an increase in working from home, there has been an improvement in desktop conversion rates and billings through the latter part of the first quarter,” Avast said in its statement.
“Conversely, lower advertising spend by certain sectors has impacted the performance of both Avast Secure Browser and mobile advertising in the Indirect channel.
“There have also been weaker trends in SMB and the mobile carrier business, due to disruption to these partner channels.”
Avast said that, due to the relative strength and size of the desktop channel, the net effect had been positive on billings, with billings growth “slightly ahead” of revenue at the group level.
With the situation evolving rapidly, and the duration of the Covid-19 crisis unpredictable, the board said it was difficult to quantify the impact in the coming months.
“We therefore maintain previous guidance for the 2020 financial year of mid-single digit organic revenue growth, while continuing to closely monitor market conditions and the impact of the pandemic on our key markets.”
Costs were being managed tightly, the company said, reflected in the “slightly higher” first quarter margin, however the group currently still expected adjusted EBITDA margin to be broadly flat for the full year.
In early April, Avast extended the right to distribute Google Chrome offers to users of Avast and AVG anti-virus, and CCleaner through to 31 March 2021.
The company said it had a “strong and liquid” balance sheet, reporting that as at 31 March, its net debt-to-last 12 months adjusted EBITDA per the banking covenant was 1.7x, in line with expectations. Loan term loan facilities totalled $1.004bn, maturing in September 2023.
Annual debt service costs, comprising loan repayment and annual interest expense obligations, totalled around $90m. The group said it had minimal working capital requirements, with capex at around 2% of revenue.
As such, the board said it fully expected the company to operate well within its covenants.
The board said the business model benefited from recurring subscription revenue, generating “significant” levels of cash.
At quarter-end, the group had $262.6m in cash on the balance sheet, having already returned the net amount of $71m to Ascential in January.
Liquidity was further supported by the availability of an undrawn $40m revolving credit facility, maturing in September 2022.
At 0926 BST, shares in Avast were up 7.87% at 434.08p.