IMImobile has provided an in-line trading update alongside its AGM, highlighting the resilient performance alluded to in prelims in July. The Group expects to deliver at least 20% y/y growth in gross profit from its core communications business (c.90%/ Group gross profit) supported by continued momentum in key verticals. Key takeaways from the update are: 1) recovery in customer engagement volumes in Q2’21 from Covid-19 impacted sectors; and 2) confirmation of ongoing contract win momentum via competitive tender processes in the Group’s largest and fastest growing addressable market (US). IMI is well placed to build a strong position in North America as a function of the Group’s scaled footprint, sales infrastructure investment and leading end-to-end proposition. Confirmation of successful deployment and launch of services with large US retailers help underpin N1Se growth expectations for H2’21E. IMImobile trades on 3.8x Cal’21E gross profit, a discount to peers exhibiting similar growth profiles (6.1x).
Companies: IMImobile Plc
IMImobile delivered strong FY’20 results, with growth seen across all regions. Gross profit rose 26% y/y to £79.1m, with EBITDA +13% y/y to £21.6m. Cloud communications gross profit rose +15% y/y on an underlying basis, with Europe (+12% organic) a key driver. Post-year end, Q1 saw resilient performance in cloud communications gross profit (+30% y/y, organic: broadly flat) whilst management have noted an activity uptick from hardest hit verticals as of the end of May. We reintroduce forecasts, looking for gross profit of £103.8m by FY(Mar)’23E (+9% 3-year CAGR). EBITDA margins are forecast to expand by 230bps, driving FY’23E FCF to £15.1m (an 8% yield at current valuation). A peer-based multiple valuation approach, plotted against 3-year sales growth, values the cloud communications business alone at 375p – 470p/share.
IMImobile has issued an encouraging trading update, highlighting resilience in the Group’s core cloud communications operation. Gross profit rose 20%, with core Cloud comms (c.90%/revs) up >30% (inc. 3C acquisition). We estimate underlying organic decline at -5% y/y, in the middle of our scenario based range (-15% to 7%) with slow decline implying stabilisation in underlying communication traffic volumes post-lockdown. This stabilisation has been driven by growth in core sectors offsetting decline in sectors adversely impacted by the pandemic. Significantly, demand for the Group’s IMIConnect platform (SaaS revenues model) has remained robust as customers look to accelerate Digital Communication strategies, whilst upsell of additional channels in Q1 is also likely to drive future additional volumes from the Group’s existing base. Net cash of £2m is only modestly light of previous N1S forecasts for H1’21 prior to lockdown (£6.3m) and implies positive FCF through the previous 9-month period. We keep forecasts under review at this stage. In the medium-term, we see a path based on undemanding assumptions to FCF of £15m, offering a 7% yield at current valuation. The Group trades on 12x FY’19 EV/EBITDA (c.10x FY (Mar)’20E EBITDA based on previous forecasts), below recent sector acquisition multiples whilst offering a higher proportion of recurring revenue and operating further up the CPaaS value chain.
Companies: TILS IMO BONH ESYS CHAR VLS DIS SLN WINE AVO
IMImobile delivered solid interim results, in line with expectations. Gross profit rose an organic 12% y/y to £35.2m, with growth delivered across all geographies. Positive momentum was driven by continued customer wins, as well as an increasing number of customers delivering >£500k p.a (H1’20E: 52 projected; FY’19: 43). Adjusted EBITDA rose 27% y/y to £9.8m driven by a 140bps improvement in EBITDA/gross profit margins, while cash conversion reached 127%. Alongside results the Group has also announced a small bolt-on acquisition (consideration: £3.5m) of Rostrvm Solutions Limited (‘Rostrvm’) which has voice channel and contact centre capabilities. We tweak numbers to reflect IFRS16; diluted EPS remains unchanged. A peer-based EV/pro forma FY’20E gross profit approach implies an intrinsic value of 420p/share.
Microsoft unveiled the new Surface Duo, which runs on Android, at its annual hardware event on Wednesday. The folding phone features two side-by-side 5.6-inch displays that are connected by a 360-degree hinge. Microsoft said it partnered with Google to “bring the best of Android” to the device, while incorporating elements of Windows 10X, a new operating system meant for hybrid devices. It can also run two different apps at the same time. Specifically, the Surface Neo will rely on a new "Expression" of its Windows 10 operating system called Windows 10X.
Companies: KAPE EYE IMO
Facebook on Monday announced the acquisition of CTRL-labs, a New York start-up that specializes in allowing humans to control computers using their brains. The start-up will join Facebook Reality Labs, a division of the social media company that is working to develop augmented-reality smart glasses. The vision for CTLR-labs' technology is that it will use a wristband that allows people to control their devices. A very interesting move for a company that’s battling to keep real estate on consumers’ mobiles let alone in their brains.
Companies: MVR MVR DOTD EYE IMO IMMO KBT VRE
Wirecard has signed a memorandum of understanding with SoftBank's Brightstar and anticipates "Significant transaction volume" out of the deal, the German fintech announced on Monday. Under the agreement, digital financial services via a Brightstar platform are expected to be handled by Wirecard as the preferred payment service provider, Wirecard said. In our view, Wirecard’s MoU with Brightstar demonstrates SoftBank’s plan to promote interaction between its expansive portfolio network is beginning in earnest. We believe the resources of the combined US$100bn worth of investments is formidable, and if SoftBank can drive cooperation, there is scope of substantial value creation – which may help to justify some of the stand-out premiums implied at its investment rounds. ZAO, a new Chinese app that lets users swap their faces with celebrities, sports stars or anyone else in a video clip - racked up millions of downloads on the weekend but swiftly drew fire over privacy issues. The app's surge in popularity and sudden backlash from some users highlights how artificial intelligence technologies bring about new concerns surrounding identity verification. Digital privacy, data protection - and now images and biometric data – is being captured and commercialised at a pace that legislation in most economies is struggling to keep pace with in our view. We believe data, analytics and privacy will become a key theme of decade as consumers, governments and MNCs become increasingly aware of assets that were not considered valuable or sensitive just a few years ago. This is a structural theme we will be watching very closely as a potential edge (or liability) to business models on a medium-term horizon.
Companies: KAPE BGO BOKU EYE EQLS IMO TECH WDI
Walt Disney announced on Tuesday that it would offer a $13-per-month bundle of its three streaming services starting in November, a move to attract audiences who have embraced digital services such as Netflix. Disney's bundle includes family-friendly digital offering Disney+, sports service ESPN+, and Hulu, which will cater to adults, for a $5-per-month discount. Speculation in reputable trade publication The Information, mirrored in Reuters and 9to5Mac indicated the next iteration of Apple’s mobile operating system, iOS13, will move to limit apps’ access to data while running in the background. The press notes that this will have repercussions to Messenger and WhatsApp, both owned by Facebook Inc, given both depend on the specific features of iOS that allow internet calls – which may force them to redesign their apps. Snap on Tuesday said it will raise $1 billion in short-term debt and plans to invest in more media content, augmented reality features and may also buy other companies. The parent company of the popular disappearing messaging app Snapchat has revived its user growth and stock price after a rough 2018.
Companies: KAPE ZOO AMO EYE MVR IMO VRE MIRA
IMImobile have announced the acquisition of 3Cinteractive (‘3C’), a leading US-based messaging platform company for $53.2m (£42.8m) to be funded through a combination of new debt, an equity fundraise and consideration shares. The strategic rationale is compelling, accelerating IMImobile’s presence in the high-growth US market, consolidating a leading position in Rich Content Services (‘RCS’), and offering a number of cross-sell/ upsell opportunities and cost synergies. Based on our conservative assumptions the acquisition and placing will enhance earnings forecasts by 1% in FY’20E, rising to 11% in FY’21E. IMImobile’s EV/FY’20E proforma gross profit multiple of 2.7x looks compelling, and we see risks in forecasts to the upside.
Interswitch, a Nigeria-based payments firm, has hired advisers to resurrect plans for a stock-market listing in London and Lagos later this year, which may value the financial technology company at $1.3 billion to $1.5 billion. Voyager AIR The Company will focus on the acquisition, leasing and management of primarily widebody aircraft, with asset management services to be provided by Amedeo Limited the IPO will comprise a Placing and Offer for Subscription of Shares to raise up to approximately US$200m.Roxi Music UK music streaming service plans London IPO as it goes up against Spotify. They have appointed investment bank Arden Partners for an initial public offering (IPO) on the London Stock Exchange later this year.
Companies: SPE VLX VRS ARK CORA IMO DGOC HZD SNG EMR
IMImobile is a leading end-to-end Communications Platform as a Service (CPaaS) provider targeted at Enterprises globally. The group focuses on the automation and improvement of end-user engagement, improving customer experience (CX) and reducing costs. The group is well positioned to benefit from structural growth trends in CPaaS, offering a differentiated and intuitive interactions management platform, and we initiate coverage forecasting 10% gross profit and 9% EPS growth for FY’20E. FY’19 results confirmed strong organic gross profit growth in core markets (16% y/y), and with well flagged headwinds now clearing, we see high potential for group underlying growth acceleration. An intrinsic value of 420p/share offers strong upside potential for investors.
Essensys plc—a provider of mission-critical SaaS platforms and on-demand cloud services to the high growth flexible workspace industry, plans to join AIM. £28m raised. Half primary, half shareholder sell down expected 29 May 2019. Mkt cap £72.6m. Issue price 151p.
Induction Healthcare Group plc—a healthcare technology company focused on streamlining the delivery of care by Healthcare Professionals looking to join AIM. Expected raise of £14.58m at 115p, market cap of £34.07m. Expected 22 May 2019.
SDX Energy plc—a North Africa focused oil and gas company, announces its intention to complete a Canadian plan of arrangement under section 192 of the Canada Business Corporations Act and will have shares de-listed from the TSX-V and admitted to trading on AIM. Expected 28 May 2019, anticipated market cap of £76m
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
Companies: VTC EPWN APC MAB1 IMO RENX DODS BOKU AMYT
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LoopUp has announced a very strong H1 period, in line with the previous trading update and reflecting a number of months of exceptional performance. This is allowing the business to invest in the major identified new opportunity, to provide telephony within Microsoft Teams, where the early signs are extremely positive. We look forward to further detail on the Teams pipeline and sales levels over time.
Companies: LoopUp Group plc
Covid has accelerated the digitisation of all things physical. No more so than in the €10 trillion global construction industry, which some experts reckon has 5 years of catching up to do. A non-insignificant task (eg Crossrail & HS2) that could take decades to play out, but equally realise 100s of £bns of cost, time & productivity savings annually. The €8bn BuildTech sector (10%+ CAGR – see below) is at the heart of this transformation. Providing the glue & ‘digital twins’ that bind all the inter-connected ‘property lifecycle’ parts together – eg CAD/CAM (design), project mgt, visualisation, AI, asset maintenance (operate) and BIM (Building Info Modelling).
Companies: Eleco Plc
ZOO has provided a short trading update to accompany its AGM which will be held later today. The business is performing well…double-digit revenue growth y/y across H1 is clearly a strong result given the market disruption, and is tracking very well towards our full-year figure. We make no changes to estimates (which we reinstated in July) but will consider revisiting them at the time of the H1 results in early November.
Companies: ZOO Digital Group Plc
As flagged in the July trading update, the Eleco group (formerly Elecosoft) has delivered impressive first half financials in the face of the global pandemic. However, the results are somewhat overshadowed by the retirement of Executive Chairman, John Ketteley, after 23 years in the role. The COO, Jonathan Hunter, takes over as CEO and the Deputy Chairman, Serena Lang, steps up to Chairman. Both are very experienced and offer safe hands to guide Eleco forward through the unprecedented conditions of COVID-19. In the early stages of the pandemic, the group demonstrated its resilience as H1 revenue slipped just 4% YoY with 57% revenue being recurring. Moreover, benefiting from reduced cost of travel and marketing, H1 adj. PBT rose 12% YoY to £2.2m. The profit uplift was matched by strong cashflow, improving net cash from £1.1m at YE to a very healthy £4.4m at the end of June. Forecasts remain under review due to uncertainty in the COVID-19 environment, but Eleco continues to be well positioned – not just to weather the storm of pandemic, but to deliver a strong financial performance across the full year.
Given that Pelatro has visibility of over $5m of revenue for FY20E, we are leaving our forecasts unchanged following the interim results. The pipeline is strong and we are cognisant that the mix of business signed in H2E will have a proportionate impact on reported performance this year. Pelatro is trading at the lower end of its 12-month price range which creates a buying opportunity.
Companies: Pelatro Plc
Ideagen is a leading supplier of information management software, specialising in Integrated Risk Management (IRM) solutions to highly regulated industries. Consistently recognised in the Gartner Magic Quadrant since 2016 for its solution set, Ideagen has developed a best-of-breed IRM suite through a blend of internally driven R&D and strategic acquisitions, earning the group significant presence in its core markets. Our mantra remains that the three certainties in life are death, taxes and regulatory compliance – Ideagen is positioned to grow from strength to strength, as organisations worldwide are faced with increasingly demanding regulatory standards, and the requirement to provide a referenceable trail of accountability. As the group embarks on its twelfth consecutive year of growth, coupled with the potential upside of inevitable acquisitions, we believe Ideagen is poised for ongoing acceleration into the coming years.
Companies: Ideagen Plc
Interim revenue to June is in line with 1H19 including the benefit of Celtech (acquired April 2019). Recurring data services revenue grew 19.9%, while elements of implementation suffered from COVID-19: Services and Installation -4% and Consultancy & Maintenance -10%. A focus on cost control resulted in furloughed staff (now returned to work) from a larger cost base than 1H19 after the Celtech integration, and some August redundancies in areas where customer activity has reduced and will likely stay low. Nevertheless, the group won significant business in the period from several major customers as a well as a new Outdoor Payment Terminal contract. A pipeline of £12.5m for 2H20 offers typical 2H strength for the group, derived from recurring revenue and the visible order book, subject to obvious concerns about the ability to implement projects. Net cash (excl. IFRS16) of £1.6m includes gross cash of £4.1m and gross bank debt of £2.5m, with £1.5m headroom in the undrawn April 2023 bank facility.
Companies: Universe Group Plc
LoopUp recently unveiled a major extension to its ambitions – the group is aiming to become a leading global provider of telephony “inside” Microsoft’s Teams product. The opportunity is clear and growing, as enterprise customers look to use Teams for “normal” external phone calls, and LoopUp seems well placed to deliver a differentiated offering using its existing infrastructure and knowhow. In this document we provide an overview of the new platform and explain its strategic significance.
Instem has delivered strong H1 20A results in our view. Despite the backdrop of COVID-19, all three business areas continue to perform well. Notably, the Informatics business made particularly impressive progress in the period. Management commentary on the outlook is positive and we maintain headline forecasts following the announcement. In addition, we increase our forecast FY 20E closing net cash position by £1m. This reflects revised assumptions on working capital movements in the second half.
Companies: Instem Plc
ZOO Digital is one of the companies whose business models have stood it in good stead during the COVID-19 pandemic; its cloud-based platform has proved to be a key attribute over the last six months. Indeed, the changed working practices within the dubbing industry have helped to educate more potential users about the benefits of remote operating and the quality of performance that can be achieved when using the ZOOdubs platform. In our view, ZOO’s Capital Markets Day (CMD) presentations - a recording is available here - achieved a rare combination of being both informative and clear as to those operational benefits and the financial implications (a roadmap to U$100m of revenue) for the Group within an evolving market. We highlight some of the main messages from the speakers – from outside the company in several cases – which covered the market for localisation services, the use and benefits of ZOO’s platform and the technology behind the service.
ABB to raise £13.7m for M&A; Reiterate Buy
Companies: Sumo Group Plc
Salarius Ltd. (91.7% owned by TEK) has signed a distribution agreement with FXM Ingredients Inc. to distribute MicroSalt® in Mexico and Latin America.
Companies: Tekcapital Plc
Renalytix has officially commercially launched the KidneyIntelX testing platform with its launch partner Mount Sinai. The test is now fully integrated into the Mount Sinai health system, and goes beyond mere patient testing into a holistic approach to CKD patient support with Mount Sinai’s care delivery, physician education and support and billing pathways. This is a pivotal milestone for Renalytix triggering first commercial testing revenues, and was achieved in less than two years since Renalytix first IPOd in November 2018. It is estimated there are approx. 66,000 Diabetic kidney disease patients at the Mount Sinai health system, representing a significant initial addressable market opportunity. We continue to expect the launch and similar integrations of the KidneyIntelX platform into two further health care systems in FY’21. Simultaneously, Renalytix also announced agreements with LabCorp and an unnamed national medical logistics provider to use additional service centres to support the launch with the collection of blood samples at centres close to home or by primary physicians within the Mount Sinai system. Given the ongoing Covid-19 pandemic and the impact on physician visits, we believe this is beneficial and aids the use of KidneyIntelX to remotely monitor patients. This also provides a logistics framework to scale this process across multiple territories in the US.
Companies: Renalytix AI Plc
H1 results were ahead of our estimates. However, excluding select factors, profits were well above our expectations. Sumo’s strong underlying results positions it to outperform current market expectations. In addition, Sumo announced the acquisition of Pipeworks, which we estimate could drive 18% earnings accretion even based on conservative forecasts. Given the relatively modest share price reaction, Sumo now trades at a lower multiple than prior to the acquisition.
Watchstone has this morning released interim results to 30 June 2020. During the first six months of the year, the group returned a total of £50.5m/110p per share in cash to shareholders, with a further £18.4m/40p per share post period end in July. The H1 2020A underlying EBITDA loss stood at £1.4m, which excluded Watchstone's only remaining operating business, ingenie, held within discontinued operations. Encouragingly, ingenie saw a much improved trading performance in the six month period, with revenue increasing by £1.5m to £4.8m and the post-tax loss in the period reducing to £0.7m from a £1.8m loss in the comparative period. The net cash position as at 25 September 2020 is reported to have stood at £17.2m (including £2.0m held in escrow), equivalent to 37p per share. Importantly, the Board is ‘confident of returning further cash sums to shareholders in due course'.
Companies: Watchstone Group Plc