The positive on EBITDA, the negative on free cash flow

In 2018, Prodware had satisfactory EBITDA in a challenging transformation to SaaS. Conversely, free cash flow was disappointing due to a deterioration in the collection of trade receivables in Q4 18, a strong increase in capex due to the renovation of the headquarters and agencies within the group. Management confirmed the focus on the development of SaaS revenue, margin improvement and higher free cash flow by the end of the strategic programme 2016-21.

EBITDA margin increase anticipated based on good revenue. (Prodware)

EBITDA margin increase anticipated based on good revenue. EPS CHANGE CHANGE IN TARGET PRICE€ 15.5 vs 15.4 +0.72% The adjustment of the target price is related to the fine-tuning of our model (see our comments on the change of 2018E EPS). The share price has recovered since the beginning of the year 2019 (+10% ytd) but has underperformed the software sector (+12.3% ytd) (situation on 25 February 19). The stock is trading at low PE ratios (<8x 2018E and <7x 2019E based on a cautious outloo

Good revenue growth, above expectation.

In Q4 18, revenue growth (+10.7% on constant scope) was above expectation and benefited also from a low comparative in Q4 17 (-16.7% on constant scope). Prodware had record SaaS revenue growth (+45.9%) following a weak Q3 18 (+2%). Geographically, there was a good development in International (c.+11%), in particular in Benelux (+23.6%) which integrated the Microsoft Dynamics business acquired from CTAC in the Netherlands.

Decline in revenue as expected in Q3 18.

The decrease in revenue by -1.2% on a constant perimeter was broadly in line with expectation; note last year’s high comparative (+3% on constant scope in Q3 17). Software editing and integration were satisfactory overall while SaaS revenue decelerated strongly in Q3 18 following two buoyant quarters. We see this as temporary and not calling into question SaaS future growth since the expansion of SaaS is structural in the software market.

Good margin achievement

The strong EBITDA margin (21.1% of revenue) resulted from revenue growth, management of subcontracting, the transformation to the SaaS mode and also no restructuring costs, all offsetting the surge in staff costs related to the recruitment of people with greater expertise to meet customer demand.

Revenue growth above expectations

Revenue growth accelerated above expectations at constant scope in Q2 18 (+6.9% following +4.9% in Q1 18). Growth was driven by the international markets which benefited from the signature of a large number of contracts based on the Microsoft Dynamics 365 online platform. The development of the SaaS model, a source of recurring revenue, continued at high double-digit growth. In H1 18, SaaS revenue represented 17.4% of the total (+3.1pts).

Reshaping the business

Prodware is making progress with its strategy to refocus the company on profitable business lines and cloud-based solutions. This is reducing revenues in the short term but should ultimately result in higher recurring revenues and more sustainable profitability. We have revised our forecasts to reflect current trading and the transition to subscription-based revenues. On our reduced forecasts, Prodware continues to trade at a discount to peers; growth in recurring revenues combined with margin e

Solid foundations for growth

The Q1 revenues release shows that with revenues of €42.5m in Q1 Prodware continues to make solid progress (+2.6% Q1 on Q1 underlying growth) and that there are also signs of a turnaround in the Benelux and all important German markets. The €79m debt restructuring post year-end leaves Prodware well financed to achieve its ambitious medium-term growth objectives. The shares, however, continue to trade on substantial and undeserved multiple discounts to comparators.

Drive for growth

Prodware is well positioned both to grow revenues and to drive sales of its higher-margin software, rather than its integration services. The integration and restructuring of the Qurius acquisition is now complete and the balance sheet has been restructured. Furthermore, management is once again focusing on growth, as evidenced by the stated intent to grow revenues to €300m by 2020, the Prodware Academy programme, the creation of the Business Consulting division and the open desire to make acqui

Alphawave Semi: FY23 trading update, amended forward guidance

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It’s not what you sell, it’s the way that you sell it

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Synectics + (SNX, House Stock at 185p) - Strong FY23A profit growth to continue

Maintel - Strong FY23 year-end TU continues trend of over-delivery

Maintel has reported a trading update for the year ending December 2023, indicating revenue in of at least £101m and adj EBITDA of “in excess of £9m”, compared with respective forecasts of £98m and £8.6m. Net debt of £18.1m also outperforms our expected year-end net debt of £18.6m. The group is continuing the trend established with the reintroduction of forecasts in April 2023, where growing confidence in delivery led to upgraded forecasts in both August and September, and still achieving outper

Eleco - FY23E EBITDA +3% ahead, FY24-26E EBITDA & EFCF reiterated

Eleco’s FY23 trading update highlights record recurring revenue growth of +22% to £20.7m, strong profitability that leads us to expect FY23E adjusted EBITDA +3% ahead of our previous forecast, and a confident outlook that leads us to reiterate our FY24-26E EBITDA and EFCF. Across the group, excellent execution of the SaaS transition has driven recurring revenue to 74% of group revenue from 64% in FY22, and ARR is +24% yoy to £22.6m (£19.7m at H1), including c£2m of ARR from the successful acquis

Morning Note – 4 April 2024

Auction Technology Group - H1/24 Trading update

ATG’s H1/24 trading statement indicates revenue for the six-month period to 31 March 2024 was $86m, a 6% increase on H1/23 (1% organic growth), helped by the addition of the EstateSales.Net (ESN) marketplace last year, which performed well in the period. Total marketplace revenue increased 2% (organic), driven by growth in value-added services (VAS) and event fees, offsetting a decline in commission revenue (mainly through lower asset prices).

Intelligent Ultrasound Group - GE Healthcare launches new Voluson Signature with

GE Healthcare has announced the launch of the Voluson Signature 20 and 18 ultrasound systems, with the related press release noting these systems ‘comprehensively integrate artificial intelligence’ to improve the ultrasound procedure for clinicians and the women being scanned. These ultrasound systems include SonoLyst, the AI which incorporates Intelligent Ultrasound’s ScanNav Assist and ScanNav AutoCapture AI software. The launch of additional Voluson systems including the SonoLyst suite of AI