The offer from Assytem Technologies will see SQS shareholders receive 825p cash per share.
Companies: SQS Software Quality Systems
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*.
Companies: APC BMS CRPR ECSC EUSP FDM PCF SNX FA/ SQS TCN W7L GETB
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.
Companies: APC BMS CRPR ECSC EUSP FDM PCF PPIX SNX FA/ SQS TCN W7L GETB
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.
Companies: APC BBSN ECSC EUSP FDM PPIX FA/ SQS SNX GETB
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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*.
SQS H1 results were in line with the July update. Revenues were down c.4% in Euro terms, but margins improved, and profitability was slightly ahead of last year - adjusted EBIT margins of 7.5% compared to the prior year’s 6.9%. We trim our full-year revenue estimate by 2.6%, but maintain PBT estimates. We continue to welcome the new medium-term EBIT margin target of 9%, c.150 bps above current levels. We reiterate our Buy and 650p Target Price.
The ongoing results season is giving investors a better idea of how companies are faring as well as an indication of the prospects for the rest of the year. So far, the majority of announcements have been as anticipated, with some surprises. The various market indices have regained their positive momentum over the last fortnight. Brexit negotiations continue (to progress?). Add to this, the major party conferences are only three-four weeks away! In Share News & Views, we comment on recent results/news from Braemar*, Churchill China, EU Supply*,James Fisher, Goodwin* and ProPhotonix*.
Companies: CRPR ECSC EUSP FDM PCF PPIX SNX FA/ SQS TCN W7L GETB
The London listed technology sector has had a very good summer. Two companies were promoted to the FTSE 250 index: FDM* and more recently Alfa, boosting the number of technology companies in the FTSE 250 by 40% since the start of the summer. Three new tech companies were listed during the course of the summer: Alfa, Ethernity and GetBusy*. All three have performed robustly, with an average gain of 33%, by far outperforming the AIM All Share Index, which was the best performing major index, posting a 1.8% gain over the summer period.
Companies: BBSN ECSC EUSP FDM PPIX FA/ SQS SNX GETB
As the nation’s youth await the outcome of their studious efforts, investors also hang on the delivery of results. We are in that quiet spell, ahead of the welter of interim results due in September. So far, the majority have been in line with expectations, though some share prices have given back prior gains. As the table shows, most major markets have slipped back in the last fortnight, largely reflecting macro uncertainties. As the results season gathers pace, this will set near term direction. In Share News & Views, we comment on recent results/news from Clarkson, Hill & Smith, H&T Group and Headlam.
Companies: BMS CRPR ECSC EUSP FDM PPIX SNX FA/ SQS TCN W7L GETB
The last edition of our 2017 summer biweekly has an unmistakably Asian flavour. The recently published Fortune Global 500 rankings for 2017 showed that of the 47 tech companies that made the grade, a little over half (24) were from Asia. The sector was far more dominant in profitability, with a number of tech companies outdoing Exxon Mobil. Chinese tech giants Alibaba and Tencent’s forecast beating quarterly results, added to their robust share price performance since the start of the year, catapulting both into an exclusive club of mega tech companies, which until recently was all American
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In the middle of the holiday season, when in theory the livin’ is easy, far from taking a breather, markets have continued to rise. All major indices are close to all-time highs. Although the Brexit picture is no clearer, share prices continue to make headway. Both M&A and new issue activity remains to the fore. In contrast, the latest snapshot of the economy shows increasing signs of a slowdown. The reporting season continues apace which will set the near term direction. In Share News & Views, we comment on recent results/news from AdEPT, Clipper Logistics, FDM*, GetBusy*, Quarto* Sprue* and Staffline.
Companies: BMS CRPR ECSC EUSP FDM PCF PPIX SNX FA/ SQS TCN W7L
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Following the announcement of a business restructure and temporary cost reduction measures to reduce costs by A$12m, we have updated our forecasts for Seeing Machines. We believe that the significant measures taken by the management offset a weaker revenue outlook, as the impact of COVID-19 looks likely to continue for longer than anticipated. The net result is a similar to previous expectations in terms of cash, which we believe remains sufficient to see the company through FY22 ahead of profitability in FY23. The long-term effects of the business restructure is expected to be positive for shareholder value as demonstrated by our DCF based valuation which increases to 7.2p (from 7.0p).
Companies: Seeing Machines
Resuming with a Buy rating on expected resilience
Companies: Crimson Tide
Seeing Machines has announced the implementation of a business restructure alongside a range of temporary cost saving measures in response to the COVID-19 pandemic. This is in response to a reduction in the rate of sales growth compared with the same period last year across all divisions. These initiatives are expected to result in significant ongoing cost savings for the business, estimated at approximately A$12m over the remainder of FY2020 and FY2021, thereby helping preserve Seeing Machine's balance sheet strength. The initiatives include:
When in doubt about pandemics, ask an expert. One of the best being former FDA Commissioner Dr Scott Gottlieb (non-exec director of Pfizer & Illumina), who has been calling for widespread COVID-19 workplace testing for some time. Today came news that there is now one such test available for all American businesses, freelancers, ‘gig’ workers &/or sole traders. This new tech-enabled solution is powered by CLSU’s ClearContact, ClearID and Virtual Badge (strategic partnership) applications, in conjunction with Clinical Reference Laboratory’s (CRL) expertise in blood/antibody & saliva tests.
Oxford Metrics has delivered solid 1HMar20 results, with sales of £15.0m (PY: £16.1m) and adj. PBT £0.3m (PY: £1.7). Within this, Yotta demonstrated continued ARR progression (up +15% to £6.8m) while at Vicon, the division added additional bluechip customers, further validating its industry leading position. Progress was, however, held back by lockdown restrictions. £1.1m of expected orders slipped to post period, but have now largely been fulfilled. Had they occurred as expected group sales would have been flat y/y. Looking ahead, CV19 related uncertainty leads us to withdraw forecasts. At this stage we expect disruption to be short-lived. As such – and considering OMG’s persuasive track record - we continue to view the company as a long-term winner in this growth industry.
Companies: Oxford Metrics
The Panoply’s trading update reveals the business entered FY 21E with a £15m order backlog and that the group expects to report a strong trading performance for Q1 21E, having recorded £9.5m of new contract wins since the start of the year. A further positive is confirmation of a $5.2m contract win with a global philanthropic organisation by the group’s FutureGov unit (included within the £9.5m total). Against an ongoing backdrop of COVID19 driven uncertainty, this is a very positive announcement in our view. Noting that c70% of group turnover is now generated by public sector clients, we continue to believe The Panoply is well-placed to weather the COVID-19 pandemic and we maintain estimates following the release.
Companies: The Panoply Holdings
Synairgen (SNG.L): Preliminary 2019 results | Yourgene Health (YGEN.L): COVID-19 testing service launch and business update
Companies: Synairgen Yourgene Health
There has been much comment on the fact that equity markets in the US and Europe have been shrinking for some years now, certainly in terms of the number of quoted companies, if not in total market capitalisation (MCap). This paper has been written with the assistance of the Quoted Companies Alliance (QCA) and focuses on the evidence for such in the London market and, in particular, that for smaller and midcap companies. It assesses that evidence and considers explanations. Finally, we ask why it matters, and assuming that it does, what practical steps can be taken to reverse the trend. Successful public markets have been a key part of the United Kingdom’s economic success for generations, even centuries, and we should not allow them to wither on the vine.
Companies: AVO AGY ARBB ARIX ASAI DNL GDR HAYD NSF PCA PIN PXC PHP RE/ RECI RMDL STX SCE TRX TON SHED VTA
This morning's announcement from PEN highlights significant mitigations of some of the Covid-19 risks identified in its recent Report & Accounts, notably where cash and working capital are concerned. From this perspective it is highly reassuring that major invoices to the tune of £2m in relation to PEN's contract with General Dynamics (GD), delayed by the practical issues around milestone meetings during the pandemic crisis, have now been raised, with help from virtual technology, and that written confirmation has been received from the client that the equipment milestone has been met. Formal agreement by GD to the £1.5m pricing adjustments which PEN had applied for is also excellent news, and as a result a contract which initially was expected to be valued at £7.3m is now worth at least £13.5m, with more potentially to go for. Moreover, on the back of the re-scoping of last year's Middle East contract and the GD agreement combined, over £4m of positive working capital is expected to flow into the current year, resulting in a significantly improved cash situation.
Companies: Pennant International Group
Interims demonstrate group revenue growth of 30% (including 7% organic) from increasing revenue quality as recurring revenue hits 74%. With an increase in ARR of 20% over only 6 months (+10% organic and +10% acquired), SaaS revenues have grown 76% year-on-year, from a 48% increase in SaaS bookings. The strategic execution remains impeccable, with two acquisitions in the period, integrated through Ideagen’s internal 72-point plan, leading to both revenue growth and margin expansion, from cross sales and synergies. Net debt of £18.0m represents less than 1x forecast FY20 EBITDA, with an expectation of net cash by FY21 and clear balance sheet capacity for further acquisitions ahead of the current income statement. Forecasts are unchanged and, with the General Election expected to release a log jam of decision making by acquisition targets, as well as providing a flurry of additional red tape as a post Brexit UK invents its own regulation standards in addition to target trading markets, we lift our target price to 200p in anticipation of acquisitions.
Today’s update is a positive one and acts as a reminder of DOTD’s solid and recurring business model. Such visibility, combined with excellent profitability (30% AOP margin) and strong cash resources (£22.6m net) means the company is strongly placed for a challenging macro environment, and worthy of attention in view of indiscriminate SP weakness. At a time, when many companies are seeing sales fall, DOTD has today revealed that demand continues to grow – evidencing DOTD’s secular growth drivers and omnichannel opportunity. New business is however taking longer to convert, as events and businesses have seen disruption. Offset against this, retention has improved, as customers’ digital transformation plans have slowed. Related to this, we also highlight that key customer risk is very low, as no customer represents >1.5%/sales, furthermore sector exposure is diversified. In view of today’s update, we therefore reduce FY20E sales by £2m to £46.8m, but flag that this still implies 6% growth in H2. DOTD has meanwhile identified savings (by reallocating its marketing budget) such that FY20E profit remains unchanged. Notwithstanding the company’s solid (90% recurring) business model, we view it conservative to withdraw FY21&22 estimates, given the potential for prolonged disruption. Despite this, much confidence can be taken from the company’s strong financial profile and growth opportunities, which (we view) will be unaffected longer term.
Companies: Dotdigital Group
Results from PEN this morning for the year to December 2019 are fully in line with expectations, with £1.6m of EBITA from £20.4m of revenues, also £1.6m PBTA. Net debt at £2.2m is likewise well aligned to expectations. Successful fulfilment of the major Qatar contract is a powerful reflection of PEN's specialist technical capabilities and client-orientated model. In addition, a key challenge for 2019, the successful re-scoping of the General Dynamics contract, was also met. Before, the bulk of PEN's £2.4m EBITDA was made by its Technical Training division; however the Integrated Solutions activity was further strengthened following the year end by the acquisition of Absolute Data Group, which should be a good move for the company, given both its repeat revenues and the synergies with the pre-existing Omega PS product which has been marketed successfully in Australia and Canada. PEN was also successful in renewing its sizeable, $C30m, five-year contract with the Canadian government. Most importantly, the £33m order book remains a key platform for future progress as well as a reflection of the group's success in bidding for contracts in previous periods.
Seeing Machines has announced a trading update for the six months ended 31 December 2019 (H1/20) where it expects to report revenue of A$15.8m (A$13.5m for H1/19). It finished the period with 20,551 Guardian units installed, representing a forward Annualised Recurring Revenue (ARR) run rate of A$13.2m, and the Board%u2019s guidance for FY20 remains unchanged (revenues of A$45-50m and ARR at 30 June 2020 of A$18-20m).
The last week has seen an unprecedented change in the global transportation industry as governments and people around the world implement drastic measures to limit the impact of the Coronavirus. These measures have already permanently changed the global transportation industry and, as Seeing Machines is a transportation focused technology company, we attempt to qualify and quantify what some of this could mean to it following its COVID-19 update statement. In summary we believe Seeing Machines will be affected in the near term from this period of uncertainty, and we have rebased our forecasts to account for this, but also that Seeing Machines will be resilient to this with significant cash runway to ride out the effects of the COVID-19 outbreak fallout, based on these revised expectations and with some flexibility in its cost base. We believe these revised expectations should provide headroom for upgrades as the transportation industry eventually emerges from the crisis, adapts to a new normal and resumes its focus on improved passenger safety.
The delayed FY 2019 results are a slight beat on YE guidance, but more importantly they reflect a change in the business model as the maturing PTRO is able to persuade customers to sign recurring revenue contracts rather than buying one-off licences; deepening its relationship with its customers as it deepens their connections to their subscribers. By changing its model, PTRO is sacrificing the growth from upfront revenue and cash, in return for much greater quality and security and in fact more revenue over the full lifespan of the contracts. In the long term, this is an excellent and necessary shift; however, it does have that near-term impact on growth and cashflow. Otherwise, PTRO is reporting ‘business as usual’ for its customers despite COVID-19. PTRO is operating home working and benefits as its USD-denominated revenue rises, travel costs are curtailed and mobile telecom usage increases across the world. We adjust FY 2020 forecasts for the results but continue to expect revenue and earnings growth.