FY25 results are in line with revised expectations: u/l sales +4% y/y, driven by +7.5% recurring growth to £58.8m and within this, direct customers grew +16% i.e. implying strong / broad-based demand. However, this was offset by OEM weakness, which as whole (i.e. including non-recurring revenue) fell c.15% to £22.7m (now ~27%/revs). ARR meanwhile grew +5% (down from +9% organic in FY24) also reflecting indirect impact. EBITDA was also in line at £8.3m ~10% margin and -27% y/y effectively reflecting how SAAS was ‘behind the curve’ on costs and hence margins have been hit, post the revenue shortfall. However, this shortcoming has at least stimulated action (£5m of annualised cost synergies completed prior to y/e) hence SAAS has good visibility of improving profits in FY26. Meanwhile we think it’s probably premature to anticipate a reacceleration in revenue, such that SAAS is likely tracking in line with FY26 cons. The stock trades on 1.1x EV/FY26 sales, while 22x fwd. earnings this feels like a rich multiple (growth considered) and we hence struggle to see the stock performing strongly until OEM shows signs of stabilisation and growth. We leave our forecasts unchanged while reduce our target price to 96p ~9x EV/EBITDA and stay at Hold.
