Eagle Eye Solutions Group PLC has experienced a significant downturn, with shares plummeting by over 40% this week following the loss of a substantial contract with a US supermarket chain. The technology firm, known for powering loyalty programmes for major retailers such as Tesco, Asda, and Morrisons, disclosed that this contract was valued between $9 million and $10 million annually and is now set to conclude in August. The loss of this high-margin agreement is expected to necessitate a comprehensive cost-cutting programme aimed at mitigating its financial impact.
Despite this setback, the company maintains a cautiously optimistic outlook regarding its growth trajectory. CEO Tim Mason stated, “While the news of this contract termination is clearly disappointing, it reflects commercial changes at NRS, outside of our control.” He emphasised that the fundamentally strong nature of the business, alongside their robust offering in loyalty and promotions capabilities, supports the belief that Eagle Eye can still thrive despite the upcoming revenue hit. The firm anticipates a material effect on next year’s revenue, yet plans to sustain double-digit profit margins and return to revenue growth by 2027.
The circumstances surrounding this contract loss are further complicated by earlier concerns regarding Eagle Eye's overall financial performance. Earlier this month, the company had already issued warnings about its revenue forecasts, revealing that it expected revenue for the current fiscal year and the next to fall short of market expectations. Contributing factors included a downturn in professional services revenue and extended sales cycles as a result of challenging economic conditions. For the six months ending December 31, the firm reported flat overall revenue growth at £24.2 million, despite a 10.4% rise in recurring SaaS revenue being overshadowed by a 16.4% decline in professional services and a staggering 77.5% drop in SMS revenue.
Amid this turmoil, there are glimmers of potential recovery for Eagle Eye. Notably, the company has secured a five-year contract with Pattison Food Group, Canada’s largest grocery retailer, aimed at enhancing its More Rewards loyalty programme. This contract highlights a growing demand for Eagle Eye's innovative solutions and showcases the introduction of new AI tools to their offerings, signalling a strategic pivot towards advanced technologies as they prepare for the full rollout of EagleAI in 2024.
Additionally, despite the current disarray, the company reported a 19% growth in Annual Recurring Revenue (ARR) to £39.7 million for the financial year ending June 30, 2024, bolstered by acquiring new clients in various regions including the UK, North America, and Australia. A new financial safety net has also been established, with a £10 million credit facility from HSBC to further support growth initiatives and expansion plans. These developments underscore a duality within Eagle Eye's outlook: while significant challenges loom, proactive measures and strategic contracts may pave the way for recovery and resilience.
In closing, Eagle Eye's immediate future appears to be a balancing act between grappling with lost revenue and capitalising on emerging opportunities within an evolving retail landscape.
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Source: Noah Wire Services