The Panoply has reported a very positive trading update for the Q3 to December and indicates that full year results for the year to March will be significantly ahead of expectations. The group won £15m of new contracts in Q3, including the significant assignment from the Planning Inspectorate announced at the November interims. This further demonstrates the successful development of the group, notably its expansion into healthcare and establishment of FutureGov and Foundry4 as full-service brands. In November we raised our FY21 Revenue and PBT forecasts by +5%/+10% to £44.5m/£4.9m and we further raise by +8% to £48.0m/£5.3m this morning. We choose to leave our FY22 estimates unchanged at this stage, but clearly the group has very strong momentum and we see clear scope to raise our forecasts as we progress through the year. We continue to view The Panoply as ideally placed to benefit from the structural tailwinds in digital transformation and, underpinned by our increased forecasts, raise our target price to 235p (was 220p).
Companies: Panoply Holdings Plc
The Panoply’s update on trading for the three months ending 31 December 2020 confirms the group has enjoyed a successful third quarter and continues the trend of positive news flow from the group. Against the backdrop of COVID-19 driven macro-economic challenges, The Panoply has reported an acceleration of new business wins. In our view this further validates both the Panoply’s innovative business model and with operations now focussed on two full-stack brands, demonstrates the strategic value of the acquisitions made to date. Management has increased guidance on FY 21E performance, and we take the company’s cue and revise our revenue and adjusted EBITDA forecasts upwards by 8% and 10% respectively.
It has been a year the likes of which we have never seen before, and hope never to see again. The description of the impact of the CV19 pandemic as K-shaped certainly feels accurate, with some sectors being well placed to benefit from the creative disruption that has engulfed the world, accelerating structural changes, while others through no fault of their own have been severely impacted. This has been the case for the Dowgate portfolio of corporate clients, with our quoted clients falling into three groups. The first, comprising Cambridge Cognition, GRC, The Panoply, S4 Capital and Water Intelligence have on average seen their share prices double this year as structural changes accelerated by CV19 have been accompanied by strong execution. The second, comprising Franchise Brands, OTAQ and SEEEN, have experienced share price declines averaging a third as their businesses have either been directly impacted by CV19 or their growth aspirations curtailed. The final group comprises those companies which have been bid for this year, namely Be Heard, Hunters Property, Huntsworth and Reach4Entertainment. Looking into 2021, we expect continued strong performance from the first group and a rebound in the second as the world returns to normal. Finally, having completed Series A/B rounds for a range of private companies this year, we hope to bring these entrepreneur-led, growth companies to market in 2021.
Companies: COG FRAN GRC OTAQ TPX SFOR SEEN WATR
Digital transformation services provider The Panoply has reported a strong H1 21A financial performance in our view. Revenue grew 58% YoY during the period (+18% YoY organically) and adjusted EBITDA by 142%, reflecting the impressive commercial progress made and the impact of acquisitions. Client billings showed a solid improvement on H1 20. Commentary on the outlook is positive and underpinned by a £17.5m sales backlog to March 2021. Overall, we believe this is a very positive release from The Panoply and that the group remains well placed to achieve its targets.
The Panoply has reported very robust interim results and we upgrade our FY21 PBT/EPS estimates by +5%/+10%. Revenues leapt +58% to £21.2m with LFL growth of +18% (Q1 +10%, Q2 +26%). EBITDA more than doubled to £2.9m, with LFL growth of +37%. Cash conversion was strong and the group has declared a maiden interim dividend of 0.2p. The group had a strong sales backlog of £17.5m at 1st October and we are pleased to note that it is increasingly winning large, multi-disciplinary contracts notably Bloomberg Philanthropies, Land Registry and Planning Inspectorate. These contracts would have beyond the capabilities of the individual businesses before they joined The Panoply and therefore in our view securing these £4m+ contracts vindicates the group strategy. We raise our PBT forecast by +5% to £4.9m (£4.7m). On a maximum deferred consideration basis, EPS is 5.1p (4.8p) while assuming shares are issued at 150p rather than our previous assumption of 120p gives EPS of 6.4p (5.8p). We have re-run our sensitivity analysis using the current share price of 200p and this indicates PF EPS of 10p could be delivered in 2023. We raise our target price to 220p (was 180p) and retain our Buy recommendation.
The Panoply will report interims for the 6m to September on November 30th . The group reported a very robust Pre-Close Trading Update on 12th October, which stated that H1 revenues were not less than £20.5m, with LFL growth of +18% rising to over +50% on a reported basis. We note LFL growth was +10% in Q1 indicating an acceleration to comfortably over +20% in Q2. The group guided to Pre-IFRS16 EBITDA of not less than £2.4m, which is nearly triple the £0.9m reported in 1H19 and up not less than +25% LFL. This robust H1 performance firmly underpins guidance for LFL revenue growth of 10-15% and EBITDA growth in excess of this for FY21. The Panoply secured £25m of total contract wins in H1 and it also provided colour on the significant contract win for the Planning Inspectorate, while the recent launch of a managed service proposition at foundry4 Intelligent Automation led to contract wins for Kettering General Hospital, the University of Law, Linc Cymru and UCL. Kainos recently reported interims in which it stated public sector clients remain committed to key digital transformation programmes with particularly strong growth expected in healthcare; we believe this provides a positive read across to The Panoply. We have prepared our forecasts conservatively and believe the robust H1, strong contract momentum and positive market backdrop firmly underpin our FY expectations, with forecast risk to the upside.
The Panoply’s trading update for the six months to September 30 contains a number of positive messages in our view. Trading remained robust in H1 21, with the COVID-19 pandemic driving an acceleration in demand for digital transformation services. Furthermore, the group’s financial position remains solid, with a £1.0m net debt position as at 30 September 2020. The outlook commentary is positive, with management signalling their expectation of double-digit like-for-like (“LFL”) organic revenue growth for FY 21E, and profit growth in excess of revenue growth. We maintain earnings estimates following the release and re-initiate dividend forecasts.
The Panoply is a digitally-native technology services group that is focused on delivering sustainable digital transformation, primarily for clients in the public sector. Digital transformation within the UK public sector is growing rapidly (17% p/a) and is forecast to be worth £20bn by 2025, with growth further accelerated by COVID-19. Combining deep expertise in organisational design with technology transformation, we view The Panoply as being in a sweet spot whereby it has the scale and resources to deliver projects that are beyond the capabilities of niche players, while not being hampered by the legacy thinking and bureaucracy that afflicts the large consultancies. The Panoply is trusted by the government, education and charities and has a blue-chip client list including the Department of Education, Department for Transport, the NHS, Unicef and Cancer Research UK, and has a high proportion of recurring and repeat revenues. We believe the group has a notably strong ethos, including a commitment to diversity and the Panoply Profit pledge, which will enable it to continue to combine purpose, practice and profit. The Panoply intends to combine continued double-digit organic revenue growth with selective acquisitions to deliver £100m run rate revenues at a 12-14% margin by March 2023, which our sensitivity analysis indicates would deliver pro forma EPS of over 8p. We initiate coverage with a Buy recommendation and 180p price target.
Recent news flow from The Panoply has, in our view, been very positive. Firstly, the group announced the earnings accretive acquisition of Difrent Ltd (“Difrent”), a profitable digital transformation consultancy to the Healthcare and Social Care verticals. Secondly, it confirmed the revision of a number of the Share Purchase Agreements (“SPAs”) arising from certain historical acquisitions, which will reduce share dilution by 7.7m if the shares return to the 130p level as at the time of the announcement. Lastly, the AGM statement confirmed that H1 21E trading remains solid. We upgrade forecasts following the announcements, with the acquisition increasing adjusted EBITDA by 7% and 14% for FY 21E and FY 22E respectively.
Digital transformation services provider The Panoply has announced contract wins with HM Land Registry with an aggregate £4.8m value. The group’s FutureGov subsidiary has been selected to be the client’s usercentred design research and capability partner within its digital and data transformation programme. NotBinary will become the client’s partner specialising in Product Management. Following on from confirmation in the recent trading update that £13m of new business was secured in Q1 21E, the group seems firmly on track to reach our (upgraded) FY 21E estimates. We leave forecasts unchanged following this positive news and continue to believe that the group is strongly placed to capture growth opportunities in digital transformation – particularly in the public sector.
Blackbird plc* (BIRD.L, 17.5p/£58.8m) | Shearwater plc (SWG.L, 185p/£43.9m) | The Panoply Holdings plc (TPX.L, 92.5p/£51.3m)
Companies: BIRD SWG TPX
Digital transformation services provider The Panoply has reported FY 20 results (to the end of March) slightly ahead of our forecasts. The period saw impressive revenue growth and expansion of the platform. However, the FY 20 financial year only saw a short window impacted by COVID-19. The subsequent operating environment has changed markedly. The group responded quickly and has already reported a record performance in Q1 21E, with a stronger financial position at the end of June. We maintain our underlying FY 21E and FY 22E estimates and introduce FY 23E numbers. We continue to believe that the group is strongly placed to capture growth opportunities in digital transformation – particularly in the public sector.
With a record revenue and EBITDA performance announced for Q1, The Panoply has clearly enjoyed a strong start to FY 21E. Operational momentum remains strong, with the group securing £14m of new business during the quarter. Noting that the group entered the current financial year with a £15m order backlog, we believe that visibility on our FY 21E revenue forecast is good. The group’s financial position saw a material improvement during the quarter, the net cash balance improved to £1.8m. The release reveals management’s expectation that the FY 21E revenue and adjusted EBITDA outcome will be significantly above current market expectations. We increase our FY 21E and FY 22E EBITDA estimates by 51% and 19% respectively.
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Sumo is trading strongly, with several drivers that could lead the company to outperform 2021 earnings expectations, in our view. Even based on conservative earnings expectations, we believe shares offer attractive value to growth.
Companies: Sumo Group Plc
IQE has announced it expects FY20 revenues to be c £178m. This is ahead of our estimates, which we revised upwards in November, reflecting outperformance in both the wireless and photonics segments. We have updated our FY20 forecasts. Given IQE’s leveraged business model, this results in a 64% uplift in EPS. Noting the uncertainty about the effect of a pandemic-related recession on the rate of smartphone sales growth, we leave our FY21 estimates unchanged for the time being.
Companies: IQE plc
As a nation, we love knocking ourselves. However in truth, we’re actually a pretty pioneering bunch. For instance, the experts at Oxford University & AstraZeneca have developed one of the world’s 3 most important vaccines in double quick time. Plus, many other British firms are creating similar breakthrough Covid inventions, such as Kromek.
Companies: Kromek Group Plc
Synairgen (SNG.L): Completion of recruitment for at home trial | Sensyne Health (SENS.L): Research agreement with The Royal Wolverhampton NHS Trust
Companies: Synairgen plc (SNG:LON)Sensyne Health Plc (SENS:LON)
MySale has delivered a striking turnaround in profitability with H1 FY21 EBITDA of A$2.5m up an impressive A$6.1m YOY. We believe this marked turnaround validates its AZN First strategy and signals the Group now has a robust and cash generative operating platform on which it can scale.
Companies: MySale Group plc
GB Group (GBG) has sold its marketing services business to HH Global Group for an undisclosed amount. This was not an area of focus for GBG and has been in managed decline for several years. Just before Christmas, GBG boosted its Fraud business with the acquisition of fraud investigation automation software from HooYu for £4m in equity. We have revised our forecasts to reflect the disposal and acquisition, leading to small upgrades to our EPS forecasts. Both deals emphasise the company’s strategy to focus on Identity, Location and Fraud.
Companies: GB Group PLC
FY20E order intake growth of 61% means Corero's revenue for last year of $16.8m will exceed our prior forecast. The trading update confirms c73% annual growth in revenues and further expansion of the annualised recurring revenue base. This performance highlights the increasing prioritisation of protecting networks against cyber and DDoS attacks. Buy.
Companies: Corero Network Security plc
EMIS saw trading gradually improve through H220 to finish the year slightly ahead of expectations. The company continued to support customers in dealing with the pandemic, with the recently acquired Pinnacle Systems’ software now being used in the nationwide vaccination programme. Progress was also made in product development with the launch of the first EMIS-X analytics product. We maintain our forecasts.
Companies: EMIS Group plc
H1A delivered a very resilient performance given the backdrop of halted deliveries and reduced manufacturing capacity. Orders and shipments are resuming and a ramp up in activity levels is expected in H2. A cash outflow in H1A has been supported by new committed facilities and gross cash levels look set to support the business successfully through the second half and beyond.
Strong Q4 performance from Audioboom plc, the leading global podcast company, as it continues to outpace the global podcasting market. Audioboom bounced back from the Q2 CV-19 lull in Q3 and growth accelerated in the final quarter. Q4 revenue of c. $8.5m was a record, up 25% on the same period last year and the previous record, and FY20 revenue of c. $26.8m (+20%) was comfortably ahead of forecast (ACLe: $25.5m). There were also record KPI performances (brand count, eCPM and available ad inventory). Coupled with continued cost control, adj. EBITDA loss fell to c. $0.2m in Q4 and c. $1.8m for FY20 (FY19: $2.9m, ACLe: $1.9m). The company has good access to capital ($6.6m at year end) and management expects to achieve a maiden positive adj. EBITDA for FY21. We introduce FY21 forecasts and set a fair value of 420p/share, equivalent to an FY20 EV/Revenue of 3.3x and 2.5x FY21. Although a premium to the current price, this still represents a significant discount to recent industry transaction multiples.
Companies: Audioboom Group PLC
Tern plc* (TERN.L, 7.1p/£23.5m) Portfolio update: Strong business momentum (12.01.21) | Audioboom plc* (BOOM.L, 276p/£43.3m) Expanded content network (15.01.21)
Companies: Tern Plc (TERN:LON)Audioboom Group PLC (BOOM:LON)
Sage Group released a good set of Q1 20/21 figures with organic recurring revenue growth of 4.7% in line with the full-year guidance (+3-5%). This performance was spread out across various cloud native software and essentially driven by the gain of new customers. Lastly, no deterioration in the churn rate is reassuring considering the continuing tough market conditions. All in all, Sage Group confirmed FY2020/21 guidance.
Companies: Sage Group plc
VR Education Holdings (VRE) expects FY20 revenue growth of around 38% to €1.42m. This was driven by substantial growth in ENGAGE revenue and its user base, with ENGAGE now accounting for over 40% of group revenue. While ENGAGE benefited from changes resulting from COVID, they also caused museum closures, which reduced Showcase Experience revenues. VRE has also outlined its medium-term outlook objectives for 2023 – 2025. Key targets include ENGAGE revenue of €10m, 500 active enterprise customers and 100K monthly users.
Companies: VR Education Holdings PLC
Earnings in H1A were better than flat and H2E has got off to a good start. Margins are up and so too is recurring revenue as proportion of total business. First half order deferrals are now materialising and renewals are positive. Free cash generation was strong and the outlook is positive. We see no fundamental reason for the recent share price underperformance and we reiterate our Buy recommendation.
Companies: Shearwater Group plc
Digital transformation in TV was gaining pace even before COVID, and Amino remains perfectly placed to deliver the solutions the consumer expects from the modern, integrated, TV platforms and content providers which make up the global client base. Amino’s technology platform will continue to grow to serve the needs of clients who are seeking to please their customers with choice, convenience and usability. With a strong history of cash generation, and consistent profitability, Amino is delivering recurring revenue growth, and increasing ARR (+16% FY20; +27% FY21E) from a software focus established in 1Q19. The board has shown confidence through a restored dividend policy, with $9.4m net cash and $9.4m free cash flow in FY20. Amino is undervalued, and overlooked, and provides opportunities for both income, and capital growth.
Companies: Amino Technologies plc
