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Shearwater delivered adjusted EBITDA ahead of expectations. FY20A was a strong year with the Group delivering maiden profitability and an enhanced margin profile. Cybersecurity and resilience are enduring themes but we are now cautiously presenting a picture of unchanged profitability in FY21E as a measure against the impact of COVID-19.
Companies: Shearwater Group
Sopheon has this morning announced a major win for Accolade – the global snack food giant, Mondelez. The deal is good evidence that Sopheon continues to win material deals despite the pressures of COVID-19, and that its innovation management platform is genuinely market-leading. We continue to believe that the group will see a return to strength as the market slowly recovers, and see today’s announcement as a useful signal.
Smartspace released positive news for both Space Connect and SwipedOn on Friday, sending the stock nearly 50% higher. Space Connect has signed a distribution agreement with Softcat and the SwipedOn has posted 80% yoy growth in AAR. Encouragingly too, SMRT also flagged current net cash at £1.7m (vs. £1.9m in April) demonstrating impressive reliance despite a challenging macro backdrop. In fact, SMRT has adapted quickly and is proving a ‘Covid beneficiary‘, seeing strong inbound demand as customers look for safe news ways to conduct business. Reassured by this, we continue to believe that Space Connect and SwipedOn could be worth considerably more than the current market cap.
Companies: Smartspace Software Plc
Blackbird plc* (BIRD.L, 17.5p/£58.8m) | Shearwater plc (SWG.L, 185p/£43.9m) | The Panoply Holdings plc (TPX.L, 92.5p/£51.3m)
Companies: BIRD SWG TPX
RenalytixAI (RENX.L): KidneyIntelX to be used in study investigating kidney risk in COVID-19 Patients
Companies: Renalytix AI Plc
Gross Value Flows across both HomeSend bank and MTO network in Q2 saw a remarkable rise; virtually double Q1, leading to the urgent requirement for a €15m facility from Mastercard last month. HS continues to focus on its banking business, but the nearly equal growth between bank and MTO business in Q2 is due to several recently added MTOs and an increase in demand for person-to-person transfers during the COVID-19 pandemic. With more small-scale personal transfers, there was little change in Average Transaction Value and the Payments terminating to a bank account as a percentage of Gross Value Flows in Q2. Hopefully, early-stage implementations have been unaffected by lockdown. HS will review its business plan this quarter to ensure that it is structured for anticipated acceleration in customer and volume growth ahead.
IMImobile delivered strong FY’20 results, with growth seen across all regions. Gross profit rose 26% y/y to £79.1m, with EBITDA +13% y/y to £21.6m. Cloud communications gross profit rose +15% y/y on an underlying basis, with Europe (+12% organic) a key driver. Post-year end, Q1 saw resilient performance in cloud communications gross profit (+30% y/y, organic: broadly flat) whilst management have noted an activity uptick from hardest hit verticals as of the end of May. We reintroduce forecasts, looking for gross profit of £103.8m by FY(Mar)’23E (+9% 3-year CAGR). EBITDA margins are forecast to expand by 230bps, driving FY’23E FCF to £15.1m (an 8% yield at current valuation). A peer-based multiple valuation approach, plotted against 3-year sales growth, values the cloud communications business alone at 375p – 470p/share.
GHT is acquiring Inforalgo for £2.3m cash and £1.3m deferred, an attractive <2x ARR. We adjust our FY20 forecasts for modest accretion. This strengthens GHT’s nascent Regulatory business, allowing it to offer end-to-end solutions and significantly extends its real-time cloud connectivity services such that it can provide a potentially transformative STP capability. Adjusting for the acquisition, for cash, valuing Clareti Services at 2x sales and Legacy at 1x, leaves Clareti valued at just 4.1x ARR.
Companies: Gresham Technologies
Pelatro PLC (LON:PTRO) is a software provider focussed on the telecom sector, offering telecom operators solutions for increasing revenue per subscriber, retaining subscribers, and monetising data.The customer base includes major global telecom operators, with the biggest geographies being Southeas
Companies: Pelatro Plc
These H1 results demonstrate the remarkable quality in the QTX business, reporting YoY growth in revenue, earnings, customers, total subscriptions and even slight growth in FCF, all despite the exceptional circumstances of the COVID-19 lockdown in March and April and the continued decline in Insurance business. The key to this H1 performance was the maintenance of the high-quality service and protection of the Fleet customer and subscription base; so hard and so expensive to win and thus vital to retain. In H1, attrition has increased, but not critically, and the overall 7% growth in Fleet subscriptions to >160k has seen its Annualised Recurring Revenue (ARR) rise to £21.5m, underpinning management confidence in the year. We are thus able to re-issue forecasts for FY 2020 and FY 2021, largely in line with previous, while the company returns to cash distribution through an augmented Interim dividend.
Companies: Quartix Holdings Plc
What’s new: OnTheMarket Chairman, Christopher Bell, is expected to make the following observations at the AGM later today:
OnTheMarket had £9.4m net cash at end June 2020 (end May 2020: £8.8m).
Agents listing with OnTheMarket are seeing strong levels of activity … following the release of pent-up consumer demand as the market reopened, buoyed further by the Chancellor’s stamp duty holiday.
OnTheMarket delivered 1.8m leads in June. This is an average of 134 leads per advertiser (compare: average of 94 leads per advertiser last year; 126 leads per advertiser for January).
1,619 agent branches list exclusively with OnTheMarket (up 42% yoy).
At 30 June 2020, OnTheMarket’s total advertisers* had reached almost 14,000.
* advertisers include new home developments, as well as estate and lettings agent branches
Shearwater sells resilience and today's trading update shows us how resilient demand has been for its products and services. The Group has swung to EBITDA profitability and cash flow is well ahead of expectations. The macro themes of cyber security and remote working are supportive of robust demand levels going forward. We are maintaining our forecasts. Buy.
Companies: Shearwater Group Plc
LoopUp has delivered a trading update for H1, highlighting some exceptionally strong activity during the COVID-19 lockdown period, which appears to be at least partly translating into longer-term outperformance. We materially upgrade our forecasts for 2020 and 2021, and look forward to additional detail at the late-July Operational Update webinar.
Companies: Loopup Group
Finals for the year to March demonstrate rude health and opportunities despite lockdown – and after nearly four years, the absence of the spectre of the FCA investigation has been dealt with. The organisational efficiency which CEO (and former CFO) Peter Brotherton has delivered over those four years has not just allowed included cost savings, but also an upgraded and rationalised network and infrastructure, a single ERP (from October), and opportunities for private and public sector revenue growth. The group is now primed to play an active part in the consolidation of the mid-market managed services sector, as predator or prey, with a healthy balance sheet (net debt/EBITDA 0.1x at FY21) and an FY22 debt facility. Results are as expected: FY21 EBITDA is tweaked up 2%, and FY22 is introduced with upgrade potential. We lift our target price once again, to 170p (160p), 10x March FY22 EBITDA and still delivering a 6.0% FCF yield.
Digital transformation services provider The Panoply has reported FY 20 results (to the end of March) slightly ahead of our forecasts. The period saw impressive revenue growth and expansion of the platform. However, the FY 20 financial year only saw a short window impacted by COVID-19. The subsequent operating environment has changed markedly. The group responded quickly and has already reported a record performance in Q1 21E, with a stronger financial position at the end of June. We maintain our underlying FY 21E and FY 22E estimates and introduce FY 23E numbers. We continue to believe that the group is strongly placed to capture growth opportunities in digital transformation – particularly in the public sector.
Companies: The Panoply Holdings