An ASX-listed global online classifieds company expects revenue to fall "materially" below analyst estimates for 2025, with Frontier Digital Ventures (ASX: FDV) revealing several business closures and staff cuts for its Latin American (360 Latam) business which last year accounted for 77 per cent of sales.
After FDV reported the alleged misappropriation of funds and fraudulent credit card expenses in Colombia for its Fincaraíz business back in August, directors appear to have now been blindsided by an employee share ownership plan (ESOP) approved by the 2023 board in Latin America which could imply dilution of up to 5 per cent of equity in the subsidiary.
If the plan is found to be legally binding for the group, it would imply the Latin American business is no longer wholly-owned by the parent company.
FDV has revealed the ESOP does not require performance hurdles or service-based vesting conditions, with key vesting and allocation decisions given to a single unnamed Latin America-based executive "without FDV board oversight or adherence to the company’s remuneration governance framework."
"The FDV board is investigating the extent to which FDV Latam is bound by the terms of the LATAM ESOP," the company stated in a release to the ASX this morning.
"While no securities have been issued, the terms of the LATAM ESOP may legally bind FDV Latam in relation to awards of securities in the future.
"In such a case, the company will seek to implement appropriate performance hurdles, KPIs (key performance indicators) and/or service-based vesting conditions in relation to such awards."
The Latin American business comprises four leading brands, with the highest sales last year coming from Montevideo-based Infocasas, the leading property portal in Uruguay, Paraguay and Bolivia. This is followed by Bogotá-based Fincaraíz, Panama City-domiciled Encuentra24 and Santiago-headquartered Yapo.cl, which are the number one property and automotive portals in Colombia, Central America and Chile respectively.
Combined, the Latin American businesses contributed more than three-quarters of the $68 million in revenue recorded for the group last year, complemented by other brands that are leaders in property or vehicle classifieds in the Philippines, Sri Lanka, Myanmar, Pakistan, Morocco and Tunisia.
FDV itself, which is headquartered in Malaysia but has its registered office for the ASX in Melbourne, was co-founded by Shaun Di Gregorio, the former general manager of REA Group (ASX: REA) which is behind Australia's leading property classifieds site realestate.com.au.
In June Di Gregorio announced his planned resignation from the role of chief executive officer, transitioning to a non-executive directorship by the end of last month, with the company now led by Patrick Grove and Lucas Elliott as executive chairman and executive director respectively.
The management notes a detailed review of the business has been ongoing aimed at increasing profitability and improving free cash flows, all around the key objective of renewing focus on the core online classifieds business.
As part of the continuing review FDV has shuttered various revenue lines that were either loss-making or not part of that core renewed focus, including Latin American business-to-business (B2B) property materials portal Centrify, as well as "numerous events and other transactions-related businesses".
The group has also altered its approach for Yapo.cl subsidiary Iris, a centralised real estate information platform.
Iris will thus be "refocused from a transaction commission model with negative margins and a challenging cashflow cycle, to a subscription model more consistent with the core online classifieds business, whereby real estate agents and developers pay to participate in a marketplace that matches new housing inventory with property agents who may have potential buyers of that inventory".
The group has also revealed extensive staff cuts for its 500-plus Latin American workforce and further global staff cuts in the pipeline.
"In addition more than 30 per cent of the headcount in FDV’s Latin America business has been removed with plans to further streamline headcount in all operating regions," FDV states.
"The overall result is an expected improvement in future operating margins."
The group forecasts calendar 2025 revenue of $60-63 million, which is below analyst estimates above $67 million, while one-off adjustments and write-offs will drag down EBITDA to $6.5-7.5 million, although this is still technically a vast improvement on 2024 EBITDA of $1.8 million.
FDV has projected a net loss after tax of $9.5-10.5 million, which would be a marginal improvement on the 2024 result and fairly similar at the lower end to the $10.7 million loss reported for 2023.
This signifies expected accumulated losses to reach at least $94.9 million by the end of 2025, given their level at $85.4 million at the close of 2024.
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