Strong FY22 FCF generation to continue in FY23

FY22 is in line with expectations with the notable figure being FCF before exceptionals of £10.2m. Managed services organic growth of 1% was held back by lockdowns and equipment shortages impacting non-recurring revenues, despite organic recurring revenue growth of c. 7%. We leave FY23 forecasts unchanged. With its updated strategic plan looking to accelerate organic growth and deleverage the balance sheet, the stock remains extraordinarily cheap on 5x P/E and a mid-teens FCF yield. Success on b

Strong Q4 order intake, though headwinds persist

AdEPT ended FYMar22 with a “markedly stronger Q4 order intake” and revenues and adj. EBITDA broadly in line with consensus. This suggests Managed Services achieved mid-single digit organic revenue growth despite the pandemic and hardware shortages. FCF was impacted by largely one-off costs of £2m (restructuring, strategic review and inventory build). Supply chain issues are likely to persist in FY23 with additional headwinds such as higher NI contributions and general macro uncertainty. We deem

The Big Book 2022 - Extended Coverage & Best Ideas

The Big Book 2022 includes our highest conviction Best Ideas for 2022. In 2021 our Best ideas outperformed by 24%, extending our track record (>10% outperformance on average over the past decade). We have again divided our coverage into six distinct themes to create our Matrix. We have added two new categories this year: ESG and Pricing Power, both of which will be fundamental investment themes for 2022. We look forward to discussing our ideas with you.

H1 tracking in line. Cloud business building

AdEPT has produced a resilient H1 despite some continued CV19 & supply chain headwinds in the period and expects to meet FYMar22 expectations. What we think the market is missing here is the extent to which AdEPT has built out its Cloud Services offerings over the recent years. The move deeper into high growth areas such as SD-WAN, hybrid cloud and VoIP has the potential meaningfully to accelerate growth going forward both with existing and new customers. Cloud Centric Strategic revenues now rep

Solid FY21, prospects look even better for FY22

In line results demonstrate an impressively robust performance, where for instance Managed Services sales (81%/Group) are down just -3% y/y. What’s more, by achieving +8% Managed Services sequential growth, trading visibly improved through FY21 and so points to even better prospects for FY22. ADT also made strategic progress - growing ‘Cloud Centric services’ revenue notwithstanding Covid (now ~43%/sales), driven by ADT‘s deep domain expertise in Education, resulting in the Group providing new r

Small Cap Feast

Semper Fortis Esports* recently announced its intention to IPO onto the Access Segment of the Aquis Stock Exchange Growth Market. Semper is a multi-operational Esports organisation focusing on gaming technology solutions, brand enhancement and high growth team infrastructures. The company plans to raise £2.5m to develop their three core areas of establishing an esports team, forming partnerships with brands for sponsorship and B2B consultancy services. The Board are highly experienced in spor

Back on the M&A trail

AdEPT has acquired Datrix Ltd – a London based Enterprise Managed Services provider, specialising in cloud-based networking, communications, and cyber security solutions. Key to highlight is how Datrix is a growing business (sales +8% y/y) – benefitting from its expertise in next-generation technologies, which broaden ADT’s core competencies in attractive new areas. We see how this addition is particularly attractive for larger (more complex) customers – enabling ADT to offer a more end-to-end s

Small Cap Feast

Wickes to demerge from Travis Perkins and list on the Main Market. Expected 28 April. Advance Energy to complete an RTO on AIM indirectly acquiring up to 50% of Carnarvon Petroleum Timor which holds a 100 per cent. working interest and is the contractor under the Buffalo PSC, offshore Timor-Leste. Carnarvon Petroleum Timor is a subsidiary of ASX listed company, Carnarvon Petroleum Limited. The net proceeds of the Placing of approximately £20.01m (approximately US$27.51mm) will be used to fund

In line FYMar21 update – ready to bounce back

Sales and EBITDA are both expected to be in line with our recently reintroduced forecasts. As the top-line, we’re looking for £57m, ~-8% y/y, but more pertinently, this means a sequential stabilisation (H1/H2) – achieved by; the recommencing of Managed Services project revenue (which saw the bulk of the disruption in H1) and also; a strong presence in the Public Sector – where demand has been resilient. ADT’s profit performance has been similarly robust, with N1S forecasts looking for £10.0m of

Reintroducing Forecasts

Q3 trading points to a sequential recovery H2 Managed Services (MS) revenues in the order of 3% for recurring revenues and some 16% for project work. This improved visibility gives the company the confidence to reintroduce guidance for both FY21 and FY22 with the latter expected to benefit from a return of pent-up demand and generate high single digit MS organic revenue growth and FCF of some £6m for an equity FCF yield of c.9%. We view this as attractive given the potential to push FCF towards

LIBERUM: Bango* - Momentum building into H2

Initiation of Coverage

Founded by proven entrepreneurs Subash Menon and Sudeesh Yezhuvath who retain a 29% stake, Pelatro is a fast-growing software company focused on customer engagement solutions that help enterprises increase revenue and reduce churn.

Hybridan Small Cap Feast 21-07-2022

Dish of the day Joiners: No joiners today. Leavers: No leavers today. What’s cooking in the IPO kitchen? Unigel Group, intends to join the Aquis Growth Market. Unigel Group is a pioneer in the field of thixotropic gels for the fibre optic cable industry. The Company is also a supplier of laminated steel tapes to the fibre optic cable industry in the US. Thixotropic gels and laminated steel tapes are essential components to the rapidly growing global fibre optic cable market. The Group export

SP Angel Spec Sits: H122 Results Show Growing NAV (TEK LN)

TEK reported H122 financial results with an increase in net assets to US$77m +13% sequentailly. This translates to a a value of US$0.51/shr. The changes in NAV for the period are the increase in tangible value of Lucyd plc by US$9.7m and Salarius by US$1.6m, and a decrease in Belluscura by US$3.8m since 30 Nov 2021. As at 31 May 2022, TEK had cash of US$1.15m, which included a fundraise of US$2.5m (some of which was received post 31 May 2022). Funds are being used for working capital, and to sup

Morning Note – 2 August 2022

WH Ireland: Sector News and Views – Corporate - dollar earner picks in a changing landscape

A year on from the end of lockdown on July 19 2021, celebrations at the UK's economic bounce-back in H2-21 have long lost their fizz. Two intertwined themes have remained salient / gathered pace over the past six months since our mid-year sector review: exchange rates and inflation. As we write today, press speculation is focussing on the possibility of a 0.5% rise in UK interest rates in August, billed as the biggest move in 27 years. Looking further afield, economists are looking to the F

Interim results update

National World reported interim results that were well ahead of our estimates and despite the challenging macroeconomic environment we maintain our FY22 estimates.

Zeus: Technology Quarterly review - August 2022

This quarter’s key observations • Subsector performance: Marketplaces was by far the best performing subsector from an aggregate share price perspective (up 19.9%) vs. an average –5.2% for the other five subsectors. UK Digital Media was the worst performing subsector with a -12.4% aggregate share price move. • Valuation trends: UK Managed Services saw the largest EV/ EBITDA derating (-2.1x) and is now on the lowest EV/Sales multiple (1.5x FY1) and second lowest average EV/EBITDA (11.3x FY1

Cenkos: Shearwater Group Plc -- More beats

The prescient demand for cyber security protection is shown in these results, with double-digit organic revenue and EBITDA growth. Major contracts wins are reinforcing revenue visibility and the re-platforming of the Software division bodes well for new sales once completed.

Cenkos: Journeo Plc -- No roadblocks in sight

Journeo has released a positive trading update following their half-year ending 30 June 2022. The release documents a healthy period of trading and points towards FY22E being another record year for revenue. A new follow-on contract at Heathrow Airport, worth £0.9m, has been announced. The current trading is in-line with our expectations and we leave forecasts unchanged. Journeo remains materially undervalued given its top-line revenue growth and its progress on the SaaS business model. It curre

Hybridan Small Cap Feast 29/07/22

29 July 2022 @HybridanLLP Status of this Note and Disclaimer This document has been issued to you by Hybridan LLP for information purposes only and should not be construed in any circumstances as an offer to sell or solicitation of any offer to buy any security or other financial instrument, nor shall it, or the fact of its distribution, form the basis of, or be relied upon in connection with, any contract relating to such action. This document has no regard for the specific investment objective

Good visibility for 2022

Q3 21/22 was strong with an acceleration in organic recurring revenue growth (+10% vs +8% in H1 21/22) thanks to demand for cloud software in small/medium-sized companies. Growth was the fastest in North America. Sage Business Cloud revenue surged by +20%. At present there is no impact from the uncertain economic environment on the activities. Sage is confident that it can achieve the high-end of the recurring revenue growth range in FY21/22 (+8-9%) and confirmed guidance of an improvement in th

A roaring H1 with strong progress on revenue and cost synergies

LSEG realised a strong quarter with continued growth in Data & Analytics (recurring revenue) while benefiting from the volatile market environment in Capital Markets and Post-Trade. Thanks to its good progress on its revenue and cost synergies targets, opex landed particularly low vs consensus, leading to a good improvement in adjusted EBITDA margin, now in line with the 2023 target. Management looks set to achieve all its long-term targets and estimates that momentum seen in H1 should continue

H1 update – in line for FY

H1 revenues increased by a strong 39% to £27.6m, within which recurring software revenues increased by over 60% as management continues to focus on higher margin activities. Whilst wage inflation held back H1 profit growth as previously discussed, price increases will support H2. Market conditions in pharma R&D are robust, with demand for Instem’s solutions remaining high. Visibility for H2 has increased, meaning trading for the full year is reported to be in line with expectations. We make no c

WH Ireland: Pennant International (PEN) - H1 update – software strength, gross margin recovery, legacy contract to complete

Today's update from PEN provides further evidence for the significant positive shifts we see in the business. Notably, we are highly encouraged by software progress: (1) software sales up 40% YoY, (2) a good spread across one-off and ongoing (long-term) revenues and (3) significant exposure to PEN's long-term US target market as well as Australasia. PEN is responsible for software / integrated product support solutions supplied to a prestigious client-base of OEM's and governments, and the gr