Nearmap Ltd (ASX: NEA) is a technological company that specialises in high resolution aerial imagery, city-scale 3D datasets, and integrated geospatial tools. Nearmap has a market capitalisation of A$452 million.

Update on Coronavirus

The coronavirus (COVID-19) was first reported from the Wuhan province in China on 31 December 2019. The World Health Organisation data shows a total of confirmed cases of 2,314,621 and 157,847 deaths globally. As of today (30 March 2020), there have been over 6,625 confirmed cases in Australia.

What are they key points from Nearmap’s COVID-19 business update?

To start with a positive, Nearmap’s management noted that the company has not seen a material impact on current trading conditions. Consequently, FY20 guidance remains unchanged. However, if market conditions change, Nearmap will update the market. In addition, Nearmap will continue to invest in growth initiatives such as the commercialisation of Artificial Intelligence and roof geometry content which remains unaffected.

However, Nearmap management is deploying prudent cost management to preserve cash, maintain a strong balance sheet and maximise flexibility for the future. The cost management initiatives include reduction of board and chief executive officer compensation of 25%, reduction of all other employee remuneration of 20% and deferral of FY20 short-term inventive bonus schemes and reductions in permanent headcount equivalent to 10% of the company’s cost base.

What is the outlook for Nearmap?

The outlook for Nearmap is positive as Nearmap could become the global leader within the market of location intelligence. Further, as Nearmap’s HY20 results show, revenue and subscriptions are increasing strongly. Nearmap also has a solid balance sheet with no debt and a closing cash balance at 31 December 2019 of A$49.6 million.

Nearmap’s North American business is performing strongly, with a 41% increase in annualised contract value (ACV). The North American core business delivered a strong and improved performance in its second quarter, validating the sales and marketing investment and giving further confidence in the scalability of the North American business. The Australian and New Zealand ACV increased by 14%, which again is showing signs of growth within the business. These sales increases could underpin future growth in the company.

Nearmap’s Group ACV portfolio is in the range of A$102 million – A$110 million. As mentioned previously, this guidance remained unchanged.
Nearmap’s Chief Financial Officer mentioned that Nearmap retains the core of the company’s business, continues to invest in areas that offer the potential for strong returns and remains confident in the long-term growth aspirations of the business.

 

What is the market reaction to Nearmap’s business update?

The market reaction to Nearmap’s business update is positive. Nearmap share price is up 5% and is currently trading at A$1.26. This is positive as the Australian market is down around 1.8% today.


 

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This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)
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April 21, 2020