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GB Group (GBG) expects to report underlying revenue growth of 10% y-o-y for H121, with a one-off contract in the US making a material contribution to revenues. Combined with strict cost control this resulted in adjusted operating profit growth of 26% y-o-y and a £32m h-o-h reduction in net debt. With management guidance for revenue well ahead of our and consensus forecasts for FY21, we have upgraded our revenue and EPS forecasts for FY21–23. Despite COVID-19 related pressure on new business in the short-term, we view GBG as well placed to benefit from the accelerated shift in the digitalisation of business processes.
Companies: GB Group PLC
This new Q3 update is a welcome addition to QTX reporting calendar, particularly as it reveals impressive resilience through the pandemic; far better performance than originally thought. Management expects FY 2020 revenue and FCF to be in line with consensus forecasts but with earnings substantially ahead. There is a caveat on the impact of the second wave of COVID-19, but so close to YE the risk is relatively low and we raise our forecasts appropriately. Fleet is the driver; despite the impact of lockdowns on new subscriptions in Q2, the subscription base has grown 11% YoY across the 9 months to 168k, fuelling 7% YoY growth in Fleet revenue. The annualised subscription base has risen 5.3% from £20.8m at YE to £21.9m in September, comfortably underpinning our FY 2021 forecast.
Companies: Quartix Holdings Plc
Gamesys Group’s Q320 trading update is ahead of expectations with pro forma revenue growth of 31% and an improved financial position. As in previous quarters, the company increased the active player base responsibly and benefitted from new game launches. We increase our revenue forecasts for FY20–22 by 5.7–7.0%, and EBITDA forecasts by a slightly lower 2–3% as management further invests in growing a sustainable and repeatable business, while ensuring revenue growth is done responsibly. This follows an EBITDA upgrade of 7.8% for FY20 at the time of the interim results. For FY21e, the free cash flow yield is 9.2% and the dividend yield is 2.9%.
Companies: JP7 GYS JKPTF
Expected profitability in H1E will be consistent with the level delivered in the interim period last year, albeit at a substantially higher margin. Order flow had seen some disruption from COVID-19 in fiscal Q1E and into Q2E but the September cycle for RFPs and order wins has been encouraging. Our FY21E forecasts are unchanged, and with the stock at the bottom of its trading range, we maintain our buy recommendation.
Companies: Shearwater Group plc
AGM statement as expected; Resume with a Buy
Companies: CloudCall Group PLC
LoopUp has announced a very strong H1 period, in line with the previous trading update and reflecting a number of months of exceptional performance. This is allowing the business to invest in the major identified new opportunity, to provide telephony within Microsoft Teams, where the early signs are extremely positive. We look forward to further detail on the Teams pipeline and sales levels over time.
Companies: LoopUp Group PLC
Benefiting from the pandemic-driven surge in sofa shopping, Asos has released strong FY20 results. However, the strong trading performance in FY 20 and a good start to FY21 were not enough to relieve management’s cautious view on the outlook.
The recent return rate has started to climb back from the bottom in April and the macro-economic consequence of COVID-19 may start to weigh on consumer demand. We should see the sales growth pace and profitability normalising in the coming months.
Companies: ASOS plc
CAP-XX Ltd* (CPX.L, 4.5p/£19.9m) | Gfinity plc* (GFIN.L, 3.8p/£28.9m) | MTI Wireless Edge Ltd* (MWE.L, 44p/£38.7m) | Newmark Security plc* (NWT.L, 1.175p/£5.5m)
Companies: CPX GFIN MWE NWT
H1 results were ahead of our estimates. However, excluding select factors, profits were well above our expectations. Sumo’s strong underlying results positions it to outperform current market expectations. In addition, Sumo announced the acquisition of Pipeworks, which we estimate could drive 18% earnings accretion even based on conservative forecasts. Given the relatively modest share price reaction, Sumo now trades at a lower multiple than prior to the acquisition.
Companies: Sumo Group Plc
Gaming Realms is a creator and licensor of innovative games for mobile, with operations in the UK, U.S. and Canada. Flagship brand Slingo® is a highly popular and unique game genre which combines elements of slot, bingo and table gameplay. These games are licensed by some of the biggest online gaming operators in the world, including DraftKings, Sky Betting & Gaming and GVC, and distributed directly to operators or via global partners such as Scientific Games & Relax Gaming using the company's proprietary Remote Game Server platform.
Companies: Gaming Realms PLC
essensys’ FY’20E prelims highlighted strong US performance. Group sales rose 9% y/y to £22.5m (recurring: +19% to £19.4m) underpinned by the US, were 59 new site adds drove recurring sales up +45% y/y to £8.1m. Lockdown saw some sales cycle elongation, yet Group recurring sales were stable h/h, 19 new sites were added in H2 and pipeline includes 47 new contracted Connect sites to deploy. Outlook remains positive, and reintroduced N1Se numbers forecast 15% CAGR in recurring sales to FY’22E. We also explore the adjacent addressable opportunity presented by the essensys STEP product which we estimate to be worth £90m pa in London alone (US market many multiples of that). Valuation at 2.9x EV/sales is at a c.50% discount to peers exhibiting similar attractive SaaS metrics and top-line visibility.
Companies: essensys PLC
Nanoco is now focused on generating value from three core areas: nanomaterials for the sensor market, where it has a framework agreement with STMicroelectronics; quantum dots for TV displays where a number of development projects are underway; and pursuit of the patent infringement litigation against Samsung. Noting that net cash consumption is now c £0.3m per month, which management, led by Brian Tenner, estimates gives a cash runway to December 2022, we have reinstated our estimates.
Companies: Nanoco Group PLC
Audioboom plc* (BOOM.L, 177.5p/£24.9m) | Starcom plc* (STAR.L, 0.85p/£3.0m)
Companies: Audioboom Group PLC (BOOM:LON)Starcom Plc (STAR:LON)
Interims reveal a particularly strong trading period for the group, with underlying organic sales growth accelerating to +20% c/c (previously mid-single digit), underpinned by both strong trading in the US (+c.50% u/l) and the UK (+11%). Additionally, Eckoh benefitted from a large perpetual Coral licence deal, bringing reported sales growth to +37%. In our view, these results speak to the strong proposition, opportunity and momentum Eckoh across its markets. We leave FY u/l forecasts unchanged but acknowledge they look more than achievable. Currently trading on a 5% FCF yield, rising to 6% in FY21E, we think Eckoh offers a unique investment opportunity.
Companies: Eckoh plc
FY19 revenue increased 16.9% to £19.4m following a strong H2/19, c9% ahead of forecast. New products released included Concurrent's first AI board, aimed at the military market. Order intake was strong, especially during H2/19, continuing into 2020. Inevitably COVID-19 has caused uncertainty about H2/20 activity levels and potential delays from customers, though there has been no immediate slow-down. Concurrent is a supplier to some of the world's most prominent defence companies in the UK and US and continues to supply these customers uninterrupted. Given COVID-19 related uncertainty we have taken a prudent view and trimmed our FY20 revenue (and consequently PBT forecasts). With over £10.5m cash and no debt, a strong order book and top tier customers, Concurrent is continuing to invest in R&D and progress its plans to add new software and hardware product ranges and enter new markets.
Companies: Concurrent Technologies Plc