Success breeds success. Take B2B software developer Rosslyn, who over the past few years has meticulously built a leading Big Data & spend analytics SaaS platform (RAPid), supporting an illustrious roster of 100+ clients (many global multi-nationals). Topped off with the synergistic acquisition of Langdon in Sept’19, & becoming EBITDA positive in FY’20 for the 1st time ever - thanks to increasing ARR (+12% to >£6m vs £5.4m LY) & favourable operational leverage (81% gross margins).
Companies: Rosslyn Data Technologies
Rosslyn is expected to move into positive operating EBITDA for FY20E. Moving the business model into self sustaining status will be a major milestone. Rosslyn has raised £7.3m gross in a Placing of new equity to increase its sales & marketing capability, maintain its investment in R&D and position it to take advantage of bolt-on acquisition opportunities.
2019 proved to be challenging for many multi-nationals, with EPS growth for the S&P500 anticipated to be just 0.2% YoY ($162.2/share). Even the poster child of the tech world, Enterprise Software (ES), hit a pot-hole, limping along at a comparatively modest 6.2% to $445bn (source: Synergy Research) vs 13.5% for 2018. This temporary dip being largely attributable to concerns over the US/China trade tensions, Brexit, UK general election, Hong Kong protests, French/Paris strikes et al.
Annualised recurring revenue rose 19% YoY in H1A and post period end contract wins mean the company is on track to meet our EBITDA forecast. ARR now equals administrative costs, a major step forward, and now these contracts have been secured the share price reversal seen in December should unwind. Buy.
The Global Sustainable Farmland Income Trust will invest in a diversified portfolio of operational farmland assets located in major agricultural markets including the United States, Europe, New Zealand, Australia and certain countries within Latin and South America. Raising up to $300m. Due 28 February
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Success in business, investing and life in general revolves around seizing opportunities, whilst equally trying to neutralise any associated risks. As illustrated in yesterday’s trading update by Rosslyn. Here in September, the company acquired the IP, software, assets, client list, contracts and domain names of Langdon Systems Ltd for a mere £48,750 - directly from the administrator. Obviously this type of thing is not for the faint hearted, since it requires having both the guts to act decisively under pressure, along with the skills to implement an effective turnaround (re contract novation & rehiring key employees), for a business that was clearly on its knees.
Positive operating cash flow in FY19A was a first for Rosslyn. A significantly expanded product set materially enlarges the opportunity for Rosslyn and projected revenue growth this year should leave the company close to fully recovering its cost base. A demonstrable self-sustaining model will be the key for a re-rating and Rosslyn is almost there. Buy.
Thriving in today’s digital world hinges on accurately & quickly harvesting prescient & actionable insights from literally billions of discreet data points in real-time. Not only to develop new products and enhance revenues, but also build best-in-class logistics & manufacturing networks that can ship items efficiently to ‘I-want-it-now’ consumers. No wonder therefore that consultants Researchnreports predict the global Big Data Analytics supply chain software market will mushroom from $2.12bn in 2017 to $7.53bn by 2025, or 17.1% CAGR.
ReAssure Group plc - The Group is a leading closed book life insurance consolidator in the United Kingdom with 4.3m policies, £68.7 billion of assets under administration on a Post-L&G Illustrative Basis. It is considering a premium listing segment of the main market.
Voyager AIR The Com pany w ill focus on the acquisition, leasing and m anagement of prim arily widebody aircraft, w ith asset management services to be provided by Amedeo Limited he IPO will comprise a Placing and Offer for Subscription of Shares to raise up to approximately US$200m·
Uniphar, a diversified healthcare services business w ith a workforce of over 2,000, is looking to join AIM. Raise TBC, expected mid-July 2019
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Rosslyn generated positive operating cash flow last year, a major milestone for the business. The quality of new business signed is high and we see double-digit revenue growth rate going into 2020E. This revenue growth will help finance investment in new expansionary product areas and sales support. The Board has recently been significantly strengthened and we are Buyers of the discounted valuation.
Due to the enormous popularity of e-commerce, social media and digital 2.0, data analytics has become the ‘battleground du jour’ for large multinationals. The only headache being how to effectively ‘mine’ such vast quantities of disparate in-house, external, structured and unstructured material, in order to generate useful & actionable insights.
Renold plc—a leading international supplier of industrial chains and related power transmission products, announced that it will cancel the listing of the Company from the premium segment and apply for admission on AIM. Expected 06 June 2019. Alumasc Group plc, the premium building products, systems and solutions group, has announced its intention to move from the Premium Segment of the main market to AIM. Expected market cap of £33.4m. Expected 25 June 2019
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Refinancing loans can be a tricky exercise at the best of times, especially given today’s the political impasse at Westminster. Therefore, it was very encouraging to hear this morning that Rosslyn Data Tech had managed to replace its existing £0.75m debt with a new 3 year, £1.5m secured facility from Clydesdale Bank on equivalent terms (ie interest charged to be at 7.75% plus 3 month LIBOR).
Put yourself in the shoes of a hypothetical £1bn revenue FMCG multi-national, manufacturing say 300-400 SKUs at numerous factories located worldwide, using hundreds of different suppliers.
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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
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
COVID-19 continues to have a profound impact on virtually every industry, on a global basis. Enterprises of all types and sizes are racing to adapt their models to the “new normal”. The more thoughtful are looking not just to effect change, but to improve how change happens, to become more flexible and more nimble as organisations. Sopheon has today announced some major developments to its Accolade platform which look to assist the group’s customers in this endeavour. This note describes the changes to the product range, and draws on a recent customer webinar used by Sopheon to highlight the evolving challenges to enterprise innovation management.
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
Nanoco has signed a framework agreement with STMicroelectronics (ST). This covers both development work and commercial supply of nano-materials for use in multiple infra-red sensing applications over a five-year period. While the agreement underpins the operational cash runway, which was recently extended to Q221, there is still significant uncertainty regarding future revenues, so our estimates remain under review.
Companies: Nanoco Group
Watchstone has this morning announced a proposed second return of cash to shareholders, totalling a further £18.4m/40p per share. The rationale for this second tranche relates to the Board having previously allocated a cash buffer of £20m for any possible fines or penalties arising from the now lapsed SFO investigation. Subject to shareholder and court approval, this further return is anticipated to be made on or around 31 July 2020. Shareholders approved the first £50.5m/110p per share return of cash on 27 April 2020, which remains subject to court approval on 11 June 2020 and is scheduled to be paid on or around 30 June 2020.
Companies: Watchstone Group
Synairgen (SNG.L): Preliminary 2019 results | Yourgene Health (YGEN.L): COVID-19 testing service launch and business update
Companies: Synairgen Yourgene Health
Avation is a lessor of 48 commercial aircraft to a diversified airline client base. Intra-day yesterday, the group announced that, as a result of the present uncertain backdrop caused by COVID-19, the Board had withdrawn from the previously announced strategic review and formal sale process, and that it was no longer in active discussions with any interested parties. The key reasons behind this were 1) the present uncertainty meaning that an attractive valuation was seen as unlikely to be achieved at this present moment in time and 2) the distraction of the process in the day to day operational activities of the business.
Petards supplies advanced security and surveillance systems to the Rail, Defence and Traffic Technology markets. Intra-day yesterday, the group confirmed that its RTS Solutions subsidiary had secured a multi-year renewal agreement for the provision of software support services to one of its major rail customers.
Touchstar is a supplier of mobile data computing solutions and managed services to a variety of industrial sectors. This morning, the group has released full year results to 31 December 2019, alongside providing an update on progress against the present COVID-19 backdrop. In line with the market updates provided in February and April, group revenue in the year increased by 3.2% to £7.1m, whilst revenue from continuing operations, excluding the Onboard business that was disposed of in the year, increased by 7.2% to £6.7m, driven by traction being gained with new products and services. The gross margin in the year increased by 280bps to 53.9% reflecting the greater proportion of software and service income. This resulted in a trading loss after tax before exceptionals of £89k, which post exceptionals of £412k that predominantly related to the disposal of OnBoard, resulted in a loss after tax of £501k. As previously reported, the year-end net cash position stood at £850k, which reflected an increase of £554k in the year; this post £1.1m of new product development expenditure and cash costs associated with the disposal.
Companies: AVAP TST PEG
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
1HMar20 sales flat at £2.3m, MRR also flat at £340k. Net loss £-2.0m (PY: £-1.9m), period-end net debt £0.14m. On MRR - a new customer win and also upsells were offset by customer churn. New sales generation has been slower than planned. In response, INX has reduced staff headcount by 20%, starting in January. Covid has negatively impacted business performance – meaning longer sales cycles and higher DSOs. Encouragingly therefore, cash collection improved post period-end (to £0.3m). Further, two upsells have been secured, meaning YTD upsell value is up +10% y/y. Despite this progress, prudently, INX has decided to further reduce costs, with the objective of obtaining a monthly breakeven performance. This, combined with the company’s renewal pipeline and cash position, is said to provide sufficient funding for the current year. The board is however mindful of the sustainability of the changes made and as such, is in the early stages of reviewing its longer-term strategic options to introduce fresh capital. Forecasts remain U/R.
Companies: I-Nexus Global
Walker Greenbank is a higher-end interior furnishings business with well-established global brand names and manufacturing facilities in the UK. This morning, the group has provided a further update on the business in relation to COVID-19 following its previous announcement on 25 March. In addition, and in line with recent FCA/FRC guidance, full year results to 31 January 2020 have been rescheduled to 30 June (previously expected 23 April).
With cash ahead of expectation in a year of transformation, PTY has reported inline results for the year to December 2019, with revenues standing at £80.4m and £0.1m adj. PBT. Net cash at £0.9m is ahead of our expectation prior to the company's pre-close update by some £1.9m, a significant beat.
Dillistone's update this morning is, on the whole, reassuring. Although the economic implications of COVID-19 will likely materially affect FY2020E results, as with many businesses seeing a significant reduction in demand for products and services, it is too early to determine the quantum. As such, we remove our FY2020 estimates that previously looked for an EBITDA contribution of £1.6m and adjusted PBT to £0.1m.
Companies: WGB DSG PTY
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
The Panoply’s trading update for the year to March 2020 confirms that H2 trading was solid, and that the Board expects to report revenue and EBITDA in line with market expectations. The group’s financial position remains robust and will be enhanced by cash collections from the solid 20E trading performance. The Panoply is actively involved in the response to the COVID19 pandemic, with the business being only minimally impacted so far. Overall, we believe the announcement contains a number of positive messages. However, with ongoing macro-driven uncertainty over the medium/ longer-term outlook, we revise forecasts. Our FY 21E and FY 22E EBITDA estimates are reduced by 37% and 21% respectively.
IQE has released its audited FY19 results following the comprehensive trading update in March. We leave our estimates unchanged after the 6% revenue downgrade in March since in IQE’s case the impact of COVID-19 on global handset demand is likely to be softened by gaining share in both the wireless and photonics markets. While the full effect of the coronavirus on the global economy and thus on demand for IQE’s epitaxy remains to be seen, management notes that Q120 was slightly ahead of internal expectations and the outlook for Q220 remains positive.
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.
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