In a trading update for the six months ended June 30, 2020, the background check and medical screening provider said while the pandemic had impacted its business in the period due to widespread job losses and recruitment freezes, its revenue run rate experienced “a significant uptick” from the end of May which continued throughout June and into July.
As a result, ClearStar said revenue for its first half was US$8.9mln compared to US$11.6mln in the prior year, while revenues in June were 74% higher than April and returned to the same levels seen in February.
The company said the growth since May was primarily from financial institutions preparing for a return to normal employment levels as well as business staffing firms and increased demand for medical information services.
Consequently, ClearStar said the increased revenues and cost mitigation measures meant it returned to positive earnings (EBITDA) generation for May and June and that it has sufficient funds to remain viable for the foreseeable future.
The group also said it has made “significant progress” with the onboarding of previously-won customers and continued to generate new business in the first half of the year, while the onboarding of a notable customer, a NASDAQ-listed technology testing and industrial automation firm, is nearing completion with the contact expected to generate revenues by the end of July.
ClearStar added that an agreement signed at the end of the first half to integrate with a provider of end-to-end technology solutions for home healthcare agencies and community organisations will provide “another route-to-market in a key industry” when it goes live later this year.
"We are greatly encouraged by the strong recovery in revenue since the peak of the crisis. The areas that are driving this growth - business outsourcing, financial institutions, home healthcare - are well-positioned for the current environment and the changing needs of workplaces and individuals. We have continued to win and onboard customers, and secured an important new integration that will expand our presence in home healthcare”, ClearStar chief executive Robert Vale said in the trading update.
“Thanks to the decisive action we took in response to the outbreak, we have been able to generate cash to increase our available funds and sustain our business. At the same time, the long-term trends in background screening remain supportive - with employers increasingly screening more employees, with more detailed searches and at more occasions during the employee lifecycle than just recruitment. Consequently, the Board remains optimistic about the future and thanks shareholders for the ongoing support”, he added.
In a note on Friday, analysts at finnCap said they believed the company’s position “looks secure and reassuring” and they were pleased that the lockdown and hiring freeze “has not stopped operational progress”.
“In unprecedented circumstances, [the first half] will doubtless be weaker YoY, but we are pleasantly surprised by these numbers. Just over 20% slippage for a recruitment industry operation when the period was spent in a hiring freeze is impressive, and likely reflects the strength of the ongoing [medical information service] operation as well as the quality of the client base. We expect another positive update in September”, the broker added.
Shares in ClearStar climbed 17% to 37.5p in mid-morning trading.
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