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Location Sciences revenues come in ahead despite pandemic impact

While revenues in the Verify business were impacted by a downturn in location-based advertising, the company had worked to replace these by enlarging its data insights customer base

Location Sciences Group PLC - Location Sciences revenues ahead despite pandemic impact

Location Sciences Group PLC (LON:LSAI) has reported higher revenues in the first six months of the year and lower losses as it works to offset the impact of the coronavirus (COVID-19) pandemic on some of its business lines.

In a trading update covering the six months to June 30, 2020, the location data verification specialist said it expects to report revenues of around £650,000, 43% higher than the prior year, alongside an adjusted cash EBITDA loss of £680,000 compared to an £820,000 loss in 2019.

READ: Location Sciences offers services to government during coronavirus lock-down

While revenues in the company’s Verify business were adversely impacted in the second quarter by a downturn in location-based advertising, it said it has worked to replace these by enlarging its data insights customer base, including making its location data available to UK Government departments and pitching for global data projects linked to coronavirus data analysis. Although no major contract wins had been secured, the company said it is exploring “several open opportunities”.

The firm noted that the lower Verify revenues had been “mitigated quickly” by operational cost reductions, with cash administrative expenses reduced to £950,000 from £1.11mln a year ago.

Looking ahead, Location Sciences said it expects a focus on local advertising to be a “positive driver” for its media verification revenues in the second half of 2020, especially in the fourth quarter when it expects the majority of its Verify revenues to be secured. However, advertising spending is still expected to be lower for the full year than in 2019.

Despite this, the company highlighted a number of upcoming developments, including the launch of its Verify Audience product, which allows brands, agencies and suppliers to check the validity of location based derived audience segments, and upcoming changes to iOS 14, the latest update to Apple’s operating system due in September, which is expected to “add greater consumer choice and transparency features that will have a significant impact on location advertisers”.

"While the first half of 2020 was not what anyone had been expecting or indeed hoping for, there are some positive macro trends emerging in our industry. Only last month, Group M (the world's largest advertising agency) told its customers that location verification is critical to brand safety, a milestone which has been a long time coming and something we celebrated internally”, Location Sciences chief executive Mark Slade said in the statement.

“In the second half of 2020, we expect advertising revenues to return, albeit perhaps not to 2019 levels, however, with a renewed focus on local marketing, something which Location Sciences is ideally positioned to benefit from. I am confident we will emerge from this global crisis as a stronger company and better able to deliver shareholder value", he added.

In a note, analysts at Proactive Research said the update showed the company "has avoided any major damage from the [coronavirus] crisis and is now positioned to resume growth".

"However, we now believe that it is reasonable to expect that Location Sciences will achieve [full year] 2020 revenues broadly in line with FY 2019, based on the first-half performance and an expectation of modest recovery in [the second half]. Over the next three to five years the revenue potential remains very large in relation to the current market cap of the company, in our view", they added.

The company's shares were 3.2% lower at 0.45p in lunchtime trading on Monday.

--Adds analyst comment and updates share price--

Quick facts: Location Sciences Group PLC

Price: 0.4209 GBX

LSE:LSAI
Market: LSE
Market Cap: £2.4 m
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