IT provider Empired makes gains after confirming earnings upgrade

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Wariness over the earnings outlook for software house Empired after a recent downgrade for RXP Services has proven misplaced.

Empired (ASX:EPD) today confirmed it was expecting buoyant growth this year and next.

Marketing services outfit RXP (ASX:RXP) — which bought digital creative ad agency The Works for $33 million in August — cut its FY18 growth forecast from 10 per cent to 6 per cent in December while it transitioned from traditional “commodity” activities to higher value digital services.

Empired’s news news will be a comfort for the smart money, with the likes of Thorney, Pengana and Microequities Asset Management all topping up their holdings in the shares in recent months.

The shares rose 5 per cent to 50.5c in early Tuesday trade.

Empired — an IT services provider that targets medium-to-large organisations — today said underlying EBITDA earnings would run at $16.6 million to $17.1 million for the year to June.

It had earlier said the second half would “be significantly stronger” than the underlying EBITDA profit of $7.3 million earned in the first half.

Full year revenue is now forecast at $172-175 million for the full year and, more importantly it reckons revenue will expand at a double digit pace next financial year, to June 2019, with “double digit EBITDA, NPAT and EPS growth”.

Earnings growth is being buoyed by its so-called dynamic solutions and enterprise solutions units, it said.

Empired shares (ASX:EPD) over the past year.

New Zealand has been a drag on the recent performance, but this division will turn around in the new financial year, it said.

In mid-May, deferred contract starts saw RXP downgrade its earnings outlook, which saw its shares dumped from around 60c to below 50c, which triggered wariness over prospects for other software developers.