While the H1 revenue decline (-11% to £13.2m) and EBITDA loss (-£0.9m) reflects the impact of organisational restructuring and the transition to a recurring revenue model, there are many positives to take from this set of results. Four new deals totalling £3.2m were signed on a recurring revenue basis, recurring revenue has grown to 68% of the sales mix (vs 60% in H1 2016) and proof of concept trials for microservices have been secured for H2. Management expects full year results to be in line with market expectations, hence we make no changes to our forecasts, recommendation and target price. We continue to view the current valuation (FY 2018 EV/EBITDA of 8.6x, falling to 5.3x for FY 2019) as highly attractive given the potential for accelerating revenue growth, significant margin enhancement and improvement in quality of earnings.
