Research, Charts & Company Announcements
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The acquisition positions Idox as the UK's second largest supplier of electoral back office software and services.
Idox has announced the £5.0m acquisition of Halarose Holdings Ltd (“Halarose”), a supplier of Electoral back office Management Software and Services (“EMSS”) to UK local government. We believe the deal has solid strategic logic, transforming Idox into the second largest EMSS supplier in the UK, and offers strong synergy potential. We make modest increases to FY18E estimates (adj. EPS +3.1%) following the announcement.
Idox announced the acquisition of Halarose Holdings, a supplier of electoral back office software and services to UK local authorities for £5.0m, comprising £3.5m in cash and £1.5m in shares. This acquisition broadly doubles Idox Elections customers to c.140 and positions the group as UK’s second largest supplier of electoral back office software and services. Idox is paying a c. 4.5x LTM EBITDA multiple, about half the multiple it is trading on, for a business that significantly strengthens its existing position in Elections and paves the way for cross selling to existing and new customers in the UK and Europe. This is wholly consistent with its strategy of focusing on and investing in the wider public sector in the UK and abroad. We have upgraded our FY’18 and FY’19 adjusted EPS by 2.7% and 2.3%, respectively. We view the current Oct’18 EV/EBITDA of 8.4x as highly attractive in the context of its growth and renewed focus.
IDOX (IDOX LN) Attractive £5.0m acquisition in Public Sector, strengthens position further | Oxford BioMedica (OXB LN) Interim results; CTL019 approval anticipated by early October | ReNeuron Group (RENE LN) Pipeline continues to progress
Companies: OXB IDOX RENE
Avingtrans (AVG.L) Sch1 on its Reverse Takeover of Hayward Tyler (HAYT). Combined market cap of c.£75m. Expected 01 September 2017 OnTheMarket—Intention to float on AIM to raise c. £50m which will be used to fund the growth of the OnTheMarket.com portal, already the third biggest UK residential property portal provider. Expected valuation £200m to £250m. Kosmos Energy—. Secondary listing, currently on NYSE. Oil and gas exploration and production company focused on frontier and emerging areas along the Atlantic Margins. During the first half of 2017, gross sales volumes from Ghana averaged approximately 132,000 barrels of oil per day (net: 26,900 bopd). Due 21 August. No offer. NYSE:KOS. Mkt Cap £2.54bn. Myanmar Strategic Holdings—Intention to float from the independent developer and operator of consumer-focused businesses in Myanmar, one of the fastest growing economies in the world. Expected Mkt Cap $22.7m at $10 per share. No details on funds to be raised. Expected late August. Hipgnosis Songs Fund investment Company offering pure-play exposure to Songs and associated musical intellectual property rights. Offer raising £200m at 100p. The Company has decided to extend the closing date for the Placing, Offer for Subscription and Intermediaries Offer to 1 August 2017. The Company may bring forward this closing date at any time. Admission 15 September 2017
Companies: VOF SRT MED WLF KMK YOLO OXB CLIN IDOX VOG
Headline numbers have been pre-announced so there are no big surprises in the interims. Revenue growth in the period was driven by acquisitions and adjusted EBITDA of £10.3m was slightly up y-o-y, reflecting the lower election activity in H1 which will reverse in H2. Our FY forecasts are unchanged; H2 will be supported by the full period contribution of acquisitions, cost synergies from ongoing integration initiatives, higher elections activity, the expected seasonality/phasing in the business and recent contract wins and a strong pipeline. Idox has focused its strategy on the Public Sector, bringing a strong and relevant offering in a market seeking to drive efficiencies through digital transformation. We believe it is well placed to deliver a strong year of progression with the building blocks for further growth in future years.
Idox has reported H1 2017A results in line with the May trading update. The three recent acquisitions were the key drivers of 19% revenue growth, with adjusted EBITDA 2% ahead of H1 2016A. Cash conversion remained robust, with cash generated from operating activities at 116% of adjusted EBITDA. The key Public Sector Software (“PSS”) business continues to report solid operational momentum. We make minor revisions to estimates following the announcement, and note the positive outlook statement and 10% DPS growth as further signs of management confidence.
Amino Technologies (AMO LN) Another strong period | Carclo (CAR LN) Positive trading; improvement in pension and reserves | FreeAgent (FREE LN) Debut prelims strong; executing growth strategy | Gooch & Housego (GHH LN) Good H1 growth with strong prospects | IDOX (IDOX LN) Solid H1; focused strategy driving execution | Oxford Metrics (OMG LN) Benefits of new strategy beginning to show | Vp (VP/ LN) Strong momentum drives FY18 upgrades | WYG (WYG LN) Positive cashflow surprise, FY18 guidance reiterated
Companies: CAR VP/ AMO GHH IDOX OMG WYG
Gooch & Housego^ (GHH): Interim results – in line with FY expectations (HOLD) | Carclo (CAR): FY results slightly ahead of expectations (BUY) | GB Group (GBG): International and acquired growth drive GB on (BUY) | Joules Group (JOUL): Trading update beats expectations (BUY) | Acal (ACL): Strong H2 backed by cash flow, strategy delivering (BUY) | Amino Technologies* (AMO): Strong trading update (CORP) | KCOM* (KCOM): Prelims on track – stronger second half (CORP) | Fulcrum (FCRM): Converting a large market opportunity (BUY) | Idox (IDOX): Interims demonstrate expansion potential (BUY)
Companies: GHH CAR GBG JOUL ACL AMO KCOM FCRM IDOX
Idox issued an H1 trading update confirming it is on track to deliver in line with expectations for the full year, with the first half showing good progress across a number of areas. We believe the group’s renewed focus on the public sector, specifically bringing digital transformation across a wide range of services, at a time when the efficiency and cost saving agenda remains front and centre, has been helpful in delivering a robust performance. We are making no changes to full year forecasts, with H2 performance to be enhanced by a full contribution from Idox Health, recent contract wins, continuing integration activity, a healthy pipeline and also strong elections contribution. We see good value in the shares which are trading on Oct’18 EV/EBITDA of 10.5x and a P/E of 15.5x, a 15-20% discount to peers.
Idox’s trading statement for the six months to April 2017 confirms that the group is on track to deliver its expectations for FY17E. H1 revenues increased by 19% versus the comparable period, with adjusted EBITDA “slightly ahead” of the prior year, and in line with management expectations. The group continues to report good commercial traction across the key Public Sector Software (“PSS”) business, and the recently-launched Digital Services Platform has also delivered solid operational progress.
Enterprise-focused niche applications of tech illustrate how, while trends appear to be fluctuating away from the current poster children of fintech and the Internet of Things, in fact these developments are refining appropriate application of existing technologies.
Companies: 7DIG AMO ARTA BVC BOTB CTP CFHL ISL DTC DOTD ELCO ESV FDSA FDEV GBG IDEA IDOX IMTK IGP IOM KBT KCOM KWS LRM MAI MMX NASA NET ONEV PHD QTX QXT RCN 932 SSY SEE SIM SPE TAX TEP TPOP TRAK UNG VIP ZOO
Idox’s AGM statement highlights the broad operational momentum in the Public Sector Software and Healthcare divisions. The early part of FY 17 has seen a number of contract wins across multiple domains, including a positive early contribution from Idox Health. Current group trading is in line with management expectations, with a strong order book and revenue visibility giving optimis
GBGI—Schedule One update from integrated provider of international benefits insurance. Raising £32m at 150p. Admission expected tomorrow. Anglo African Oil & Gas— Admission expected early March. Acquiring stake in producing near offshore field in the Republic of the Congo. Guinness Oil & Gas Exploration—Publication of prospectus. Seeking to raise £50m and invest in 15 exploration companies at launch, with plans to grow the portfolio to 30 positions during its lifetime. Issue closing 23 Feb.
Companies: PHE IDOX SOU CTAG AVO ARL EUSP EDL COG
Research Tree provides access to ongoing research coverage, media content and regulatory news on IDOX. We currently have 62 research reports from 5 professional analysts.
|22Sep17 14:33||RNS||Exercise of Options and Total Voting Rights|
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|04Sep17 10:38||RNS||Directors' Dealing, Exercise of Options & TVR|
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|04Aug17 16:20||RNS||Director and PCA Dealing|
With its exposure to a structural growth market, a highly recurring business model, consistent strong execution, healthy balance sheet and potential new avenues for growth, we believe dotdigital remains a core holding in the sector. It offers investors an attractive compounding growth stock with the potential for accelerated growth as it expands internationally and increasing prospects for M&A. The FY results (19% sales growth, 27% EBITDA growth and 32% EPS growth) showed another year of strong execution, with the H2 growth acceleration particularly pleasing. We remain confident of the group’s prospects.
Companies: Dotdigital Group
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 GETB PCF PPIX SNX SPRP SQS TCN W7L
Augean (AUG LN) Board changes and reduction in expectations | First Derivatives (FDP LN) Agreement with European Space Agency | Futura Medical (FUM LN) Market research supports the commercial potential of Eroxon® | Low & Bonar (LWB LN) Civil Engineering struggling | Sinclair Pharma (SPH LN) Forecast update; profitability inflection and strong growth ahead
Companies: AUG SPH LWB FUM FDP
HomeSend, eServGlobal’s JV with Mastercard and BICS of Belgium, has always represented a very exciting prospect. With the backing of the giant credit-card agency, it stood a good chance of securing a significant share of the US$600bn global remittance market. With a relatively minimal cost base, the transaction volumes from even a tiny share would have delivered US$100m in earnings for eServGlobal’s 35% stake – and Mastercard’s 26% of the global credit-card market suggested a far greater share was possible. Now, after recent announcements, we realise: firstly, that the applicable market size was woefully underestimated; secondly, that its share will not be tiny but significant; and thirdly, that success for HomeSend is becoming a certainty. On the contracts already signed, HomeSend will generate revenue and profits of hundreds of millions of dollars; it is now simply a matter of when its transaction corridors go live and the commission streams ramp up. We understand that that, too, will be faster than thought.
The trading update notes an A$200m pipeline of opportunities; however, prudent resource constraints have forced a slowdown in spending on the Fleet business roll-out with a knock-on impact to this year’s revenue and losses. Since the sale of the Off-Road business to Caterpillar, Fleet is the main revenue-driving division. On the back of this update, we are easing our Fleet - and therefore group - revenue and earnings forecasts for FY 2018 and FY 2019. Nevertheless, Seeing Machines is still demonstrating extremely strong sales growth, issuing guidance that it expects to more than treble revenue this year from A$13m to around A$40m, and then double this again in the year to June 2019 at c.A$80m. By then, OEM Automotive, Rail and Aerospace divisions should all be making strong sales contributions to augment the Fleet division growth.
Companies: Seeing Machines
Flowtech Fluidpower* (FLO): Q3 trading update confirms good organic growth (CORP) | President Energy* (PPC): Puesto Flores – first oil delivery and revenue (CORP) | dotDigital* (DOTD): 2H acceleration: progress on every front (CORP) | Orchard Funding* (ORCH): Insuretech winning (CORP)
Companies: FLO PPC DOTD ORCH
The Company has provided an update for H1. Revenues ($112-114m guidance) are tracking slightly lower than we had been looking for with gross margin higher by 1% point (at 38%) and OPEX lower resulting in EBITDA being not far adrift from our expectation ($1.5m to $2.0m guidance). The Company is guiding to meeting our full year $16m EBITDA expectation, in part because OPEX is expected to continue to be materially lower (US$87m for the full year). In order to meet our forecast the Company will need to still achieve our revenue objective although we flag there is still some scope for OPEX to surprise given the continuing consolidation of the operations and acquisitions. More cash has had to be invested in working capital (an issue in the industry at the moment) and there are some YUME acquisition related expenses (we estimate c$3m) also impacting cash (guidance of $37m rising to $50m at year end). The Company expects some recovery in working capital in H2. The shares have been drifting off during the YUME acquisition process. We expect the shares to recover as the process nears completion (due early 2018) and investors get confirmation the Company is tracking towards the delivery of the critical leap in profitability this year.
Oxford Metrics’ year end trading update highlights another strong period of delivery for the group, with FY’17 revenue and adjusted PBT both expected to be slightly ahead of expectations. Net cash at the year end of £9.8m is also ahead of our £9.4m forecast. FY’17 is the first year of the group’s five-year growth plan and both Vicon and Yotta are beginning to see the benefit of the increased investment in the year. Oxford Metrics continues to provide investors with an attractive mix of IP led, market leading technology and cash generation, with recent investments placing the group on an enhanced growth trajectory. Our Dec’18 SOTP calculation results in an intrinsic value of 72p, with further outperformance potential as the group utilises its strong balance sheet.
Companies: Oxford Metrics
RhythmOne has issued a trading statement for H1 2018. Performance is in line with management expectations and revenues are expected to be $112-114m vs H12017 of $67m. These numbers are not LFL as they include Perk for the half and RadiumOne for a quarter. Gross profit margin was 38% which is up from last year and in line with my FY2018 expectations. The gross margins at Perk and RadiumOne are higher than old R1. Adj EBITDA is expected to be a profit of $1.5m -$2m.
Two new product integrations with Microsoft Azure, together with the recently released Amazon AWS hybrid solution, add up to a meaningful strengthening of WANdisco’s credentials and platform for growth. We see scope for a significant acceleration in operationally geared growth, especially if the company can progress one or two of its tier one relationships into a strategic relationship akin to the one with IBM.
IQE has announced that during the course of a routine US tax filing exercise, unexpected prior year taxes due of c.£4.2m have been discovered. The identified taxes date back to 2013, when the group acquired the epitaxy business of Kopin. As a result of the September ’16 group re-organisation, it is believed that no similar tax liability arises in 2017. Alongside this announcement the group has confirmed that the VCSEL ramp up in Q3 is on track, giving us confidence in our full year forecasts. We do not expect to make any material changes to estimates and remain positive on the stock, with multiple programs expected to drive significant upgrades to our FY’18 estimates and beyond.
While iomart’s share price is roughly where it was in 2013, it has since then doubled revenue and profits through a combination of organic growth and bolt-on acquisitions. Including potential future acquisitions (not in forecasts), we think it should maintain mid-teens growth in revenue and EBITDA consistent with the past few years making the shares attractively priced at 9.4x FY’18 EBITDA. This compares to other UK Technology midcaps at 16.0x on the same expectation of 15% EBITDA growth p.a. We initiate with a buy rating and price target of 430p.
Companies: Iomart Group
Strong results from text book execution derive from delivery of the three strategic routes to growth: more partners, doubling the addressable market; increasing reach of successful operational territories, delivering 48% revenue growth outside the UK; and broader product functionality – leading to +24% spend per customer, from a growing stable of c4,000 active customers. FY17 revenue is in line with expectations, while EBITDA of £10.2m (vs £9.7mE) is 5% ahead; adj EPS is 9% ahead. Cash of £20.4m (£19.3mE) highlights 2H free cash flow of 108% of adjusted PBT, and a balance sheet with options open for further growth – increased investment through opex and capex; a well-covered dividend; and potential M&A to accelerate product development, or enhance organic growth in new territories through acquiring local presence. We lift our 12-month target price to 92p (80p), in line with the Megabuyte accounting and enterprise software peer group.
Companies: Dotdigital Group
Totally (TLY) - Sch 1 for £11m RTO of Vocare, a provider of integrated urgent care services to the NHS throughout the UK. £76.8 million rev in the year ended 31 March 2017. Totally to address Care Quality Commission concerns. Due 24 Oct. Central Asia Metals (CAML) -RTO of Lynx Resources. Anticipated market capitalisation at Admission: £404.8m. Raising £113m at 230p. Acquiring the SASA zinc-lead mine in Macedonia from Solway Industries. Due 15 Dec. OnTheMarket—Intention to float on AIM to raise c.£50m which will be used to fund the growth of the OnTheMarket.com portal, already the third biggest UK residential property portal provider. Expected valuation £200m to £250m. Orogen plc, to be renamed Sosandar plc on Admission. Sosander is an online womenswear brand specifically targeted at a generation of women who have graduated from younger online and high street brands, and are looking for affordable clothing with a premium, trend-led aesthetic. Offer to raise £5.3m with market cap of £16.1m, expected 2 November 2017 OG Graphite, brownfield development-stage graphite company focused on the reactivation of its wholly-owned Kearney natural flake graphite mine and mill located 280 km north of Toronto, Canada. Offer TBA, expected late October .
Companies: PPC BMK HCM IHC KCR DOTD STI TIDE
First Derivatives has announced that Kx has been selected by Scientific Revenue as its real-time analytics platform for dynamic pricing. While this deal has no immediate impact on our estimates, we believe the revenue potential is significant. Moreover, it further highlights the ultra-high performance capabilities of Kx and its attractions to technology leaders addressing analytical challenges in environments characterised by large volumes of fast-moving data. We will revisit our forecasts and target price when interim results are released on 7 November.
Companies: First Derivatives