Background check specialist Clearstar Inc (LON:CLSU) posted an underlying profit on higher demand for medical screening services such as clinical testing and occupational health services.
Bob Vale, Clearstar’s chief executive, expects medical demand to continue to grow albeit margins here a little lower than the traditional staff vetting business, where there was some customer attrition and background check sales dropped by 5%.
WATCH: Clearstar reports strongest ever first half
Revenue in the six months to June rose by 11% to US$9.9mln with medical turnover 27% higher at US$3.9mln.
Underlying profits (EBITDA) were US$65,000 (US$165,000 loss) while there was a US$283,000 operational cash inflow.
Losses after tax were halved to £666,000 from US$1mln.
“We are confident of achieving full year 2018 revenue growth in line with market expectations and being EBITDA positive, and we expect to deliver accelerated revenue growth in 2019," said Vale.
On track for full year
“Interims show 11% YoY revenue growth, on track for our FY 2018 target,” said house broker finnCap in a note to clients.
“However, the medical business has lower margins than background screening software, and with a growing proportion of MIS revenue in the mix, we are easing back our FY EBITDA expectation, although we still anticipate positive EBITDA in H2 up from just over breakeven in H1.
“Good working capital control has left the net cash position unchanged over the half at US$1.2mln and we continue to expect this to see the company through to future profit and cash generation.”
Shares were up 3.2% to 81p come Monday afternoon.
--Updates for share price and broker comment--