Timing is everything when it comes to innovation. Too early, and even ground-breaking technology can struggle to gain traction. Too late, and the opportunity might be lost. A tricky balance. However for Rosslyn Data Tech, we think this ‘battle-hardened’, cash-rich (Est Apr’21 net funds of £6.1m) & now profitable SaaS firm is ideally placed to benefit from strong secular demand for its cutting-edge & fully integrated Big Data, AI, spend analytics, SMDM (Supplier Master Data Management) & customs/duty handling applications.
Today the company posted record revenues (FY20 £7.1m +2.1% LY) & profits, aided by the £49k acquisition of Langdon (+£0.9m) in Sept’19, partly offset by the elimination of low margin pass-through contracts (£0.6m). Encouragingly, EBITDA (pre SBPs) was positive for the 1 st time ever at £36k (-£432k LY), despite expensing all £1.3m (£0.9m LY) of its R&D costs (18% sales), whilst not capitalising internally created software either. A rare & highly prudent accounting policy in the tech world.
In terms of FY21, we understand YTD trading is in line with expectations (ED est +£309k EBITDA on turnover up +7.1% to £7.6m), even after experiencing some order delays related to the pandemic. Here we are modelling flat H1 organic sales growth, followed by mid-single digits in H2 & 10%+ from FY22 onwards.
Well from a macro perspective, the sector is being propelled by the digitisation/virtualisation of all things physical, 5G networks and IoT, alongside continued buoyant demand for data analytics, AI & cloud services.