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Following the announcement this morning of a recommended cash offer for APC Technology by Specialist Components, we withdraw market forecasts.
APC Technology Group
Interims to 28 February 2019 continue to vindicate the group’s strategy, set in 2017, to focus on technical sales of specialist electronic components, products and systems. Revenues increased 24% to £10.4m, adjusted profit before tax rose by 78% to £0.6m and adjusted EPS amounted to 0.4p. Notably, net debt fell by £1.3m to £2.7m. APC continues to focus upon its three-pronged approach of increasing revenues through its established and growth technologies, signing new proven technology partners and sales growth through bolt-on acquisitions. APC continues to trade in line with expectations. We are forecasting FY 2019E revenues of £22.6m and PBT Normalised of £1.63m.
APC’s AGM statement highlights that “the Board are pleased with the start to the new financial year” and confirms that “the Company continues to trade in line with management expectations”. APC remains focused on its growth strategy. We maintain all of our forecasts at this stage. Our FY2019E forecast is for PBT of £1.63m and EPS at 0.74p putting the shares on a PER of 8.3x. Interims are expected in April. We reiterate our Buy recommendation and 12p target price.
FY2018 results are in line with expectations. Revenues rose 10% to £17.1m, EBITDA was +43% to £1.15m and PBT rose by 63% to £0.68m. The performance has been helped by a concentration on its core strengths, a reorganisation of its sales team and the addition of new technologies. APC made 2 acquisitions First Byte Micro and Aspen Electronics in the period. APC remains focused on its growth strategy. We have kept our FY2019E PBT of £1.63m, up 139% and EPS at 0.74p putting the shares on a PER of 9.5x. We retain our Buy and 12p TP.
Today’s update highlights that the group continues to trade in line with management expectations. APC continues to make progress in its three-five year strategy to grow through increased bookings from existing technologies, especially those in high growth markets, from signing new complementary product lines and through targeted bolt-on acquisitions. We are forecasting FY2018E revenues of £17.51m, EBITDA of £1.18m, PBT of £0.68m and EPS of 0.42p. The group is due to announce finals on 17 December. Buy TP 12p.
FY2018 results are expected to be in line with management expectations, showing further growth in revenue and profit. The integration of Aspen Electronics is going well and synergies being progressed. In FY2018, the enlarged group took bookings of £22.5m, a healthy book to bill ratio. Net debt is expected to be lower at £2.5m (£3.1m). We increased FY2019E forecasts at the time of the acquisition leaving FY2018E unchanged. We forecast revenues of £17.51m and PBT of £0.68m. We reiterate our Buy and 12p target price.
APC has acquired Aspen Electronics for a £2.2m net consideration. Aspen is a premium UK-based distributor of RF and microwave components and highly complementary to APC. A placing & subscription of 37.5m new ordinary shares at 6.75p raised £2.54m. The consideration is a mix of placing and subscription proceeds and the issue of vendor shares. The acquisition is expected to be EPS enhancing and we have increased our FY2019E EPS by 32%. APC is trading in line for FY2018. We have raised our target price to 12p (10p). Buy.
With the first half of 2018 behind us, we evaluate the performance of the tech sector versus the broader market, and peers across the pond to see how the London listed technology universe compares to its bigger and better known US counterparts. We examine if the UK listed tech sector is overvalued on a relative basis. No tech sector review can be complete without analysing the performance of the big eight mega tech companies who had a strong H1 period and currently have an aggregate market capitalisation of US$5.18tn, marginally bigger than the Japanese economy.
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At the half way mark in 2018, we look back at two key indicators of the health of the sector: M&A and IPOs. The London technology sector’s outperformance in 2017 created a fertile environment for both M&A and IPOs. H1 2018 saw a similar healthy trend across both the M&A and IPO markets for technology stocks (i) more companies coming to market/ being acquired than H1 2017 and (ii) higher deal values/ gross proceeds than H1 2017. In fact, the H1 aggregate tech M&A value at £2.7bn was 4x higher than the whole of 2017, and the £916m in IPO fundraises was 2.5x full year 2017.
2018 is shaping up to be a big year for technology IPOs in London. By the end of this week, five new tech companies will have listed in London, since the start of 2018, with one IPO last week, one yesterday and one tomorrow! At the same time last year just one company had listed in London. The five IPOs in 2018 have raised a combined total of £907m in gross proceeds, some 2.5x the aggregate £371m raised by the 2017 by tech IPOs. In this note, we look at how the IPOs that have come to market since the start of 2017 have performed and look at the winners and losers amongst the new entrants.
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The FTSE 100 hit an all-time high earlier this week, surpassing the 7,800 mark as concerns over a US-China trade war receded. As Table 1 below shows, all indices have now moved firmly into positive territory for the year to date. We have continued to see significant M&A activity. With some exceptions, company results have been as anticipated, although the outlook in some sectors of the economy looks less promising than previously. In Share News & Views, we comment on Bloomsbury Publishing, Braemar Shipping*, DeepMatter*, GetBusy*, Location Sciences* PCF Group* and Sprue Aegis*.
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The MPC faces this dilemma on Thursday. Just a few weeks ago, the decision appeared straightforward. Since, the outcome has become less obvious. A slew of weak economic indicators, not least a slowing of UK Q1 GDP growth to 0.1% point to this conclusion. Markets have rallied, due in part to renewed sterling weakness. We have also seen further M&A activity, especially in the FTSE 100 which may extend to smaller companies, in due course. The results marathon is slowing. In Share News & Views, we comment on Advanced Oncotherapy* Bloomsbury, Cronin*, OnTheMarket* and Synectics*.
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As the table shows there has been a reasonable rally in markets over the last month. An increase in interest rates in May now seems less likely, partly due to the fall in inflation. We have seen continued volatility, with some profit warnings as highlighted by the EY report and M&A activity. As the results marathon continues, the vast majority of results have been as anticipated, with some notable exceptions. In Share News & Views, we comment on APC Technology*, Christie Group, ECSC*, Escape Hunt*, EU Supply*, Norcros, Northbridge* Quarto* Sprue Aegis*, Tricorn Group* and Warpaint London*.
With Q1 2018 behind us, we evaluate the performance of the tech sector versus the broader market, and peers across the pond to see how the London listed technology universe compares to its bigger and better known US counterparts. We examine if the UK listed tech sector is overvalued on a relative basis. No tech sector review can be complete without analysing the performance of the big eight mega tech companies who had a very good year and currently have an aggregate market capitalisation of US$4.79tn, roughly the size of the Japanese economy.
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Interims to February show operating profit up by 45% to £0.55m on 3.6% revenue growth to £8.6m. The results vindicate APC’s strategy of focusing upon driving high margin, design-in distribution sales as well as the benefits of a lower fixed cost base. APC acquired First Byte Micro in January which has provided a significant boost to its APC Locator’s business. The group continues to focus on its three-strand growth strategy. The shares have risen by 13% in the last three months. We retain our FY2018E PBT of £0.68m and 10p TP. Buy.
As the quarter ends and Easter approaches, the results marathon is set to pause. As highlighted previously, the vast majority of results have been as anticipated, with some notable exceptions. The state of the UK economy is improving according to the Chancellor. The MPC meeting on Thursday is likely to leave interest rates unchanged but an increase in May seems likely, even though inflation is set to fall over the next 12 months. We have continued to see significant M&A activity. In Share News & Views, we comment on Braemar Shipping*, Burford, CLS, ECSC*, FDM*, GetBusy* and XLMedia.
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Having shown some signs of stability, markets have fallen over the last fortnight, due, in part, to concerns over potential trade tariffs which does not augur well. As the marathon of company results runs on, the majority have been as anticipated and will provide us a better insight into the outlook for corporate UK generally. However, the problems facing some retailers are clearly apparent. We have also continued to see significant M&A activity. In Share News & Views, we comment on APC Technology*, Hunting, James Fisher and Sons, PCF Group*, Ricardo and Swallowfield.
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The London listed technology space has been brimming with activity since the start of this year, with three companies M&A targets, with an aggregate deal value of some £1.5bn, over twice the combined £679m M&A market in 2017. We take a closer look at Temenos’s £1.4bn acquisition of FTSE 250 constituent Fidessa, which was announced last week. Although the deal alone is over twice the value of the entire London-listed technology M&A market in 2017, the final selling price could be higher with the involvement of well known activist hedge fund, Elliott Capital Advisors.
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Today’s positive AGM statement highlights that the Board are pleased with the start to the new fiscal year and can confirm that the group continues to trade comfortably within management expectations. The group acquired First Byte Micro in January, following FY2017 results announced in December, which were in line with expectations. In light of this update and recent share price performance, we are raising our price target to 10p (9p) and reiterate our Buy recommendation. APC is due to announce interims to February 2018 in April.
Since our last missive, we have continued to experience volatility but there have been some signs recently of increasing stabilisation, although some nervousness clearly still persists. We have a Spring Statement from the Chancellor of Exchequer on 13 March where he will respond to the forecasts from the Office for Budget Responsibility. We have the prospect of a rise in interest rates in the short run, with further increases likely over the medium term with negative implications for ‘defensives’. In Share News & Views, we comment on Hargreaves Services, RWS Holdings, Staffline and Synectics*.
The sharp fallsin global markets have had an inevitably adverse impact on our smaller companies universe. We have seen prices marked down sharply but the level of underlying selling is not yet apparent. Without wishing to appear ‘one-eyed’ about it, it raises the question whether these falls represent a buying opportunity? Firstly there have to be signs of stability returning which may take time. There is an MPC meeting on Thursday which is likely to leave rates unchanged. In Share News & Views, we comment on 2017 AIM IPOs, Braemar*, Cropper*, FDM*, GetBusy*, NWF, Porvair, Sprue* and Warpaint*.
With 2017 behind us, we evaluate the performance of the tech sector versus the broader market, and look across the Atlantic to see how the London listed technology universe compares to its bigger and better known counterparts. We examine if the UK listed tech sector is overvalued on a relative basis. Lastly, no annual review of tech can be complete without analysing the performance of the big eight mega tech companies who had a very good year and currently have an aggregate market capitalisation of US$4.82 tn, roughly the size of the Japanese economy.
In July 2017, we highlighted the progress that AIM made in the first half of the year. We are now reviewing the performance over H2 2017. The latest AIM Statistics published yesterday show that there are currently 960 companies, with 80 new issues in 2017, raising £1.58bn and secondary issues raising a further £4.7bn. However, with 102 companies cancelling their listing there was a net 22 fall in 2017 as a whole. It appears that both the trends of new issue momentum and de-listings are set to continue in 2018. In Share News & Views, we comment on APC Technology*, ECSC Group* and IG Design.
The acquisition of FBM gives the group a significant presence in the ‘hard to find’ or obsolete electronic component sector. FBM is expected to report revenue and profit growth in the current year. Furthermore, the existing APC business hasstarted FY2018E well and the group continues to trade in line with expectations. The net consideration of £0.5m, excluding £0.7m of cash which goes on completion, represents a multiple of 2.6x FY2016 PBT. We have upgraded our FY2018E PBT by 28% to £0.68m. We reiterate our Buy and 9p TP.
Consistent with its strategy, APC is acquiring First Byte Micro, a franchised and independent distributor of electronic components. The net consideration payable will be £0.5m as FBM has cash of £0.7m which will go on completion. Of the remaining £0.5m, £270,000 will be paid on completion and £230,000 in 12 months. FBM reported FY16 revenues of £1.3m and PBT of £0.2m. The acquisition will add to the existing businesses which have started 2018 well, and are trading in line with expectations. Forecasts are under review.
We ended the year on a record high with the Santa Rally finally materialising. As the table below shows, all the major indices progressed in the year although the mid-cap and smaller companies ones outperformed by some margin. In 2017, the FTSE 100 rose 7.6% and the FTSE Small Cap rose by 14.9%. As usual, we face the New Year with a degree of optimism, somewhat tempered by uncertainty about the outlook for growth in general, and the consumer, in particular. In Share News & Views, we comment on recent news from Cohort, Kromek Group, Sprue Aegis* and Synectics*. Happy New Year!
Festive cheer abounds – Honest! Some overseas markets continue to attain new highs. but our own markets have retreated over the last fortnight due, in part, to the downbeat portrayal of the outlook for UK growth set out in the Budget. News that sufficient progress has been made in the first phase of the Brexit is positive, though there is little sign of the Santa rally yet. We have seen a number of fundraisings as the year end approaches. In Share News & Views, we comment on recent news from APC Technology*, Clipper Logistics, Helios Underwriting* PCF Group*, Tricorn Group* and Warpaint London*.
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FY 2017 results are in line with the update in September. Revenues from continuing operations amounted to £15.6m (£18.0m), EBITDA recovered to £0.8m (£0.3m) and Adjusted PBT amounted to £0.4m. Net debt reduced to £3.1m (£3.2m), of which £2.5m relates to its invoice finance facility. APC is now focused upon increasing revenues from its existing and high growth technologies, from new complementary product lines as well as from targeted acquisitions. We maintain our forecasts, 9p target price and Buy rating.
Hard to believe but we are only days away from the big event. As the nation awaits the Chancellor’s Autumn Budget and the delights of the Red (Magic) Box, the smaller companies community view this as just a preamble to the headline act - The Growth Companies Seminar - due on 30 November. With only 25 share buying days left to Christmas what better excuse to escape to the West End to pick up some (share) bargains. In Share News & Views, we comment on recent news from AdEPT Telecom, Cropper (James)*, EU Supply*, Norcros, Quarto Group*, Verditek* and Warpaint London*.
Further evidence that the shrewder investor prefers a smaller company, the Nobel Prize in Economics was awarded to Professor Thaler, an avowed fan of the smaller brethren. Back down to earth, all markets continue to make headway, with the smaller company indices continuing to lead the way. Despite the apparent deadlock in the Brexit process, life appears to carry on. The MPC meeting on 2 November and the Budget on 22 November may offer greater insight. In Share News & Views, we comment on recent updates from Cropper*, Halstead, Norcros, Tricorn* Walker Greenbank and Wincanton.
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The summer is now well and truly behind us, with the days getting shorter and the weather getting colder. Pleasant summer days spent on warm sunny beaches, seem to have given way to mega cyber security breaches: Equifax being the most high profile of the lot. Accounting giant Deloitte also fell victim to hackers, with confidential emails and plans of some of its blue-chip clients compromised. While Yahoo announced that its 2013 record breaking hack, had affected all its 3bn accounts rather than 1bn accounts. On a happier note, we also look at Canyon Bridge’s £550m bid for Imagination Technologies.
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Without wanting the year to pass any quicker than it is, November may well turn out to be a key month. The next Bank of England Monetary Policy Committee meets on 2 November when base rates may increase for the first time in a decade; three weeks later the Chancellor of the Exchequer gives his Autumn Budget. While both these events could represent key developments for markets, not to be overlooked, is our Growth Companies Seminar on 30 November. In Share News & Views, we comment on recent results/newsfrom APC*, Braemar*, ECSC*, Helios*, Sprue*, SQS*, Verditek* and Warpaint*.
APC specialises in the design, specification and distribution of specialist electronic components, products and systems. APC is focused on increasing revenues from its existing and growth technologies, securing new proven technology partners and bolt on acquisitions. The recent trading update for FY2017 was positive, indicating a return to profit with expected revenues of £15.6m and an EBITDA of £0.8m. We are forecasting Adjusted PBT of £0.4m. Ahead of final results due in December we have set an initial target price of 9p.
APC specialises in the design, specification and distribution of specialist electronic components. Following 18 months of restructuring, APC is focused on exploiting the growth opportunities from its current portfolio of customers and manufacturers. Today’s update is positive, indicating a return to profit. It highlights expected 2017 revenues of £15.6m and an EBITDA of £0.8m. We are forecasting an Adj. PBT of £0.4m and EPS of 0.23p. APC offers both recovery and growth potential. Finals are due to be announced in December. Buy.
CES 2016 has come and gone, and every little tech wizard in the world was buzzing around Las Vegas sprawling through the seemingly endless technology showcases that seem to extend to more venues every year! But what indications has this technology circus given us of 2016?
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