AIM-listed firm saw revenues and EBITDA grow 24%, with a "signficant" increase in EPS
AIM-listed software group Ideagen gave a pre-close trading update for the full year on Wednesday, reporting results in-line with expectations, net cash ahead of forecasts, and significant EPS growth in its eighth consecutive year of revenue and EBITDA growth.
Revenues are expected to be £27m for the full-year with adj EBITDA of nearly £7.8m (+24% YoY). There was also a significant increase in EPS. Analysts had been expecting £26.2m in revenues and 3.2p EPS.
finnCap lifted its target price to 108p (from 98p), in line with its peer group year one multiple of 26x P/E and 17x EV/EBITDA. Analyst Andrew Darley said finnCap's forecasts left out the potential for the benefit of further acquisitions, which he considers inevitable:
"Net cash was significantly ahead of expectations at £4.2m (£1.6mE), indicating very strong cash generation in 2H17, implying strong working capital movement compared with our expected £0.9m outflow. Performance in key verticals remains robust, including particular success in Life Sciences, Aviation, and Financial Sectors. Recurring revenue run rate continues to improve with the transition to subscription revenues, driven partly by the Coruson platform’s potential for larger contract wins. Target price 108p (98p)."
The Group reported impressive cash generation, with net cash ahead of forecasts at £4.2m by 30 April but slightly lower than then £4.8m reported six months ago. This was also after the firm paid £4.6m for the acquisitions of IPI Solutions and Gael, and paid £300k in dividends.
CEO David Hornsby said the company had delivered a year of high-quality earnings growth underpinned by strong cash generation. Mr Hornsby added that its four acquisitions had provided scale, product capability and recurring revenues.
"We continue to grow organically and to increase the percentage of our revenues derived from recurring business. The Group has significant contracted work in progress and a strong pipeline of new business opportunities which provides the Board with confidence for the current year and beyond."