Sopheon has reported interim results which reflect a resilient performance despite some impact from COVID-19 on its client retention and pace of growth. The Group still produced revenues slightly up on H1 19. Happily, its solutions continue to attract new customers, as evidenced by the Mondelez deal announced in July, a healthy sales pipeline and a doubling of the value of new customer sales bookings. With a historical Q4 weighting for revenues, and bearing in mind the uncertainties in the current operating environment, we do not reintroduce estimates at present. However, we would hope to revisit that in early 2021 in conjunction with trading or results news. Meanwhile, we note the good revenue visibility for the current financial year, the improving rate of Annual Recurring Revenue (ARR) and Sopheon’s strong balance sheet position.
Companies: Sopheon plc
Sopheon (SPE): Corp Rock steady
1H20 demonstrates the beneficial consequences of transition to the cloud: despite the hurdles presented by COVID-19, revenue is a touch ahead, ($13.9m vs $13.7m in 1H19); FY visibility is $25.5m (1H19: $25.4m); and ARR is $16.5m, vs $15.3m. We cannot be certain of recurrence of the historical 4Q boost to licence sales, but even so new customer sales bookings year to date are twice the value of last year, with 100% of new customer wins delivered via the cloud for the first time ever. With $21.9m of cash creating a supportive balance sheet, ARR growth and multi-year deals are welcome support for revenue and cash visibility beyond the current year. Two new customers within 13 transactions compares with 7 and 18 respectively in 1H19, but this year’s deal sizes are bigger, and complemented by a further 8 deals, including 2 more new customers since 30th June. We are surprised and impressed by the maintenance of momentum in 1H20 vs 1H19 – and even more so by the reassuring base of visibility underpinning 2H20, FY21 and beyond. Target price is maintained at 1200p, based on a return to pre-COVID expectations within 24 months, and supported by a rock solid balance sheet offering M&A, R&D and dividend opportunities.
Sopheon has this morning announced a major win for Accolade – the global snack food giant, Mondelez. The deal is good evidence that Sopheon continues to win material deals despite the pressures of COVID-19, and that its innovation management platform is genuinely market-leading. We continue to believe that the group will see a return to strength as the market slowly recovers, and see today’s announcement as a useful signal.
Companies: Sopheon Plc
Belvoir Group (BLV): Corp | discoverIE (DSCV): Corp | Intercede (IGP): Corp | Minds + Machines (MMX): Corp | Omega Diagnostics (ODX): Corp | Sopheon (SPE): Corp
Companies: DSCV IGP MMX ODX SPE BLV
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.
Circassia Group (CIR): Corp Completion of transaction with AstraZeneca | DX (DX): Corp Trading better than anticipated | Oncimmune Holdings (ONC): Corp Contract with Roche | Sopheon (SPE): Corp Accolade 13.1 | Synairgen (SNG): Corp COVID-19 trial completes enrolment of first stage
Companies: SPE SNG DX/ CIR ONC
Although Sopheon is withdrawing guidance for forecasts (and we remove FY 2020E estimates), today’s update reflects a number of positive comments on current trading and the robust nature of the Group’s balance sheet. The pipeline remains at a similar level to the FY 2019 year end (when it was some 50% up year-on-year) and retention levels for Annual Recurring Revenue (ARR) have remained good so far this year. The Group confirms that a number of markets are showing resilience to the crisis and existing customers are re-commencing orders. Sopheon held net cash of $21.8m at the end of April 2020 and, despite prudent cost containment, is to proceed with the previously-declared dividend of 3.25p for FY 2019 – which we take as a clear and positive signal of overall management confidence.
Avacta (AVCT): Corp Potential COVID-19 therapeutic | D4T4 Solutions (D4T4): Corp Celebrus v9.2 offers embedded machine learning | Sopheon (SPE): Corp COVID-19 trading update
Companies: AVCT D4T4 SPE
Sopheon has announced results for calendar 2019 in line with January’s trading update on revenue and ahead of our expectations at the Adjusted EBITDA level, demonstrating the strong finish to the year and continuing delivery on the group’s growing market opportunity. Clearly the outlook for 2020 is entirely shrouded in short-term uncertainty. Consequently, we choose to leave revenue and profit estimates unchanged for now, but will look to revisit them in due course. For the same reasons, we are not introducing 2021 estimates at this point. The group remains very well positioned in our opinion, with strong products and a robust cash balance.
discoverIE (DSCV): Corp | Quartix (QTX): Corp | Sopheon (SPE): Corp | Xeros (XSG): Corp
Companies: DSCV QTX SPE XSG
Prelims are in line with the December trading update and unchanged forecasts for FY20. The transition towards SaaS, in-line with client requirements, has accompanied a move to focus on ARR ($15.9m at year end), supporting overall visibility ($21.2m currently) of 59%. With a qualified pipeline >50% higher than at FY18 (55/45 perpetual licences/SaaS), and a fourth quarter that delivered 49% of the year’s deals, momentum at end FY19 was very encouraging. Cash of $19.4m provides a robust balance sheet to weather the global storm, with confidence expressed in the dividend payment. We can’t ignore the opportunity Sopheon’s Accolade has in providing structure to transformation and response to disruption, including timely expertise in co-ordinating change management. We prudently forego offering FY21 forecasts until August interims, but emphasise the opportunity the group has in both normal and abnormal circumstances.
Avacta (AVCT): Corp TMAC – proof of concept for novel Affimer conjugate | LPA Group (LPA): Corp Full-year results: a year of recovery ahead | Sopheon (SPE): Corp Positive trading update
Companies: AVCT SPE LPA
Sopheon has delivered a trading update for 2019, highlighting revenues and cash both slightly ahead of our expectations, and with EBITDA “in line with market expectations”. We take a good degree of reassurance from this performance, which includes a strong uptake of the SaaS offering. We make no changes to 2020 estimates, but clearly today’s update is a positive both for sentiment and near-term business momentum.
Intention to float by Gemfields Group. No Capital Raise. Currently listed on JSE. (GML:JNB) at circa £122m. The Group's key producing assets, the Kagem emerald mine in Zambia (believed to be the world's single largest producing emerald mine) and the Montepuez ruby mine in Mozambique (one of the most significant recently discovered ruby deposits in the world), are both expected to have long mine-lives with potential for expansion. Also owns the Faberge brand. Due Valentines Day 2020.
Companies: ITX SPE EYE CNC ANX ONC NFC BOD FEN ECSC
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FY’20 results are slightly ahead of our expectations, and cap an excellent period with strong news flow. KidneyIntelX has now launched at Mount Sinai and is cleared to report results in all 50 US states. We continue to believe KidneyIntelX could represent the future standard-ofcare for early detection of chronic kidney disease progression and kidney failure in patients with Type II Diabetes, affecting an estimated 11m. Focus is now on building out the platform with expanded indicated uses, win national reimbursement and drive testing adoption. One significant catalyst ahead is Medicare coverage, which come as early as H1 2021 under new proposed rules. Whether or not this rule is finalised, the company is moving forward towards broader insurance payor coverage. In this note, we have refreshed our forecasts and valuation reflecting the deployment of IPO proceeds.
Companies: Renalytix AI Plc
An H1 update to September reveals a robust performance notwithstanding a challenging macro backdrop - sales (ex. Coral) are just “slightly lower” y/y, indeed if also excluding an intentional move away from hardware-based Support, we estimate core revenue grew c.+7%. This was underpinned by continued strong growth in US SecPay: +80% y/y, now ~32%/group sales, while in the UK, we estimate sales fell by c.-11%. Here, Covid impacted transactional sales (rather than any permanent loss of business) such that a future recovery is likely in our view. Despite the lower sales and GP, it‘s impressive to note profitability is expected to be in line with 1H20 (AOP: £3.4m) following tight cost management. Looking ahead, there’s reason to be optimistic, as in US SecPay, large enterprise tenders that were paused in H1, may resume in H2. Meanwhile in the UK – and despite the headline sales figure – business activity is already reassuringly strong: total new business won grew 8% y/y in H1, this includes the major £4m/6yr contract with Capita and TfL announced in August. In addition, closing net cash of £12.9m (£2m FCF) continues to offer strategic options. We reiterate that this a high quality company, with a robust and cash generative UK business, while leadership position in a nascent and fast growing US market.
Companies: Eckoh plc
Proactis has delivered finals to July in line with the August trading update, revealing EBITDA of £11.8m from revenue of £49.6m and pre-IFRS16 net debt of £45.1m (net bank debt of £37.1m). The focus remains on annual recurring revenue (ARR), total contract value (TCV), and bePayd, with positive news on all three: core ARR increased by 1.3%, TCV won in the period surpassed all previous highs despite COVID, and bePayd engaged with early adopters. While COVID has had an effect on sales cycles, the application of the UK and NL mid-market sales methodology across a consistent target market in France, Germany and the US has already demonstrated results with contract wins and the establishment of a record pipeline. The group has reshaped in favour of efficiency and visibility, delivering credibility with proof of execution and offering substantial upside. Target 80p reiterated, with a long run target of 180p applying reasonable peer group multiples to maiden FY22 forecasts.
Companies: PROACTIS Holdings PLC
Allergy Therapeutics (AGY.L): Initiation of field trial | Sensyne Health (SENS.L): Research agreement with Milton Keynes University Hospital
Companies: Allergy Therapeutics plc (AGY:LON)Sensyne Health Plc (SENS:LON)
Positive update today – reporting that as a consequence of recent SITS contract wins, careful cost management and the efficiency of remote delivery, TRB is tracking “comfortably ahead” of current profit estimates. As a consequence, we upgrade EBITDA and AOP to £14.8m and £11.5m, equivalent to 8% and 10% upgrades respectively. FCF is tracking better also, as implied by current net cash: £11.2m – already exceeding our FY20 estimate. Accordingly, we upgrade u/l FCF (i.e. ex the royalty dispute) to £5.7m. Also announced today - Q3 ARR now stands at £44.5m, up £1.3m on 2H20. While only using 3 months of data, we highlight that this run-rate equates to +12% annualised growth i.e. a significant step-up vs. the +3% y/y achieved to 2H20. To us, this is a clear reflection of how TRB’s on-prem SITS product continues to sell, TRB’s significant cloud hosting opportunity with existing customers and lastly, we’re also starting to see the financial benefits from Tribal Edge, as the first module went live earlier this year. In view of progress, we also make modest upgrades to FY21 estimates, whilst leaving scope for outperformance, should current momentum be maintained. On valuation, whilst the share price has recovered somewhat, TRB still trades on a 7% earnings yield or alternatively, just 2.7x ARR. On either metric, this looks attractive vs. peers…so would suggest TRB’s very real growth opportunities are still not priced in.
Companies: Tribal Group plc
GB Group (GBG) expects to report underlying revenue growth of 10% y-o-y for H121, with a one-off contract in the US making a material contribution to revenues. Combined with strict cost control this resulted in adjusted operating profit growth of 26% y-o-y and a £32m h-o-h reduction in net debt. With management guidance for revenue well ahead of our and consensus forecasts for FY21, we have upgraded our revenue and EPS forecasts for FY21–23. Despite COVID-19 related pressure on new business in the short-term, we view GBG as well placed to benefit from the accelerated shift in the digitalisation of business processes.
Companies: GB Group PLC
Gaming Realms is a creator and licensor of innovative games for mobile, with operations in the UK, U.S. and Canada. Flagship brand Slingo® is a highly popular and unique game genre which combines elements of slot, bingo and table gameplay. These games are licensed by some of the biggest online gaming operators in the world, including DraftKings, Sky Betting & Gaming and GVC, and distributed directly to operators or via global partners such as Scientific Games & Relax Gaming using the company's proprietary Remote Game Server platform.
Companies: Gaming Realms PLC
Microsoft has begun marketing LiveData as its ‘preferred solution’ to migrate Hadoop data into the cloud. The announcement represents a culmination of years of development work from WANdisco and finally proves beyond doubt the capabilities of its technology. As highlighted previously, we expect this launch to drive a significant uptick in financial performance. The exact timing and pace of this uplift is uncertain, but the company has reaffirmed the guidance given to the market at its interims.
Companies: WANdisco Plc
Mirriad Advertising’s H120 numbers show strong top-line progress, up 109% on H119 and 26% ahead of H219. H120 revenues were up over 185% year-on-year in China and Singapore, with market confidence rebuilding. There are very promising new agreements in place with US media owners, with early moves in large adjacent markets, such as music video. There are advanced negotiations ongoing with Tier 1 entertainment platforms. These prospects significantly increase the attraction of Mirriad’s proposition to advertisers. Cash burn is now under £1m per month, with end-August cash of £13.3m (no debt). Market forecasts for FY20–22 are unchanged.
Companies: Mirriad Advertising plc
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
Gamesys Group’s Q320 trading update is ahead of expectations with pro forma revenue growth of 31% and an improved financial position. As in previous quarters, the company increased the active player base responsibly and benefitted from new game launches. We increase our revenue forecasts for FY20–22 by 5.7–7.0%, and EBITDA forecasts by a slightly lower 2–3% as management further invests in growing a sustainable and repeatable business, while ensuring revenue growth is done responsibly. This follows an EBITDA upgrade of 7.8% for FY20 at the time of the interim results. For FY21e, the free cash flow yield is 9.2% and the dividend yield is 2.9%.
Companies: JP7 GYS JKPTF
Expected profitability in H1E will be consistent with the level delivered in the interim period last year, albeit at a substantially higher margin. Order flow had seen some disruption from COVID-19 in fiscal Q1E and into Q2E but the September cycle for RFPs and order wins has been encouraging. Our FY21E forecasts are unchanged, and with the stock at the bottom of its trading range, we maintain our buy recommendation.
Companies: Shearwater Group plc
AGM statement as expected; Resume with a Buy
Companies: CloudCall Group PLC
Idox has reported strong financial and operational progress in its H1 FY20 (the six months to April, only latterly affected by COVID-19) with headline numbers in line with its recent trading update and notable cost control and margin improvement. H1 20 reflects a good performance by a business that has been revitalised, with a ‘cloud-first’ approach, by the current management team. The Group also introduced new marketing strategies which are more closely aligned with product management. Idox continues to trade in line with market expectations and cash collection has been better than expected while the Group continues to win new business and deliver services. Management states that Idox remains in line with its existing forecasts and we note the resilience shown by the business in the current environment. We leave estimates unchanged.
Companies: Idox plc
GHT is acquiring Inforalgo for £2.3m cash and £1.3m deferred, an attractive <2x ARR. We adjust our FY20 forecasts for modest accretion. This strengthens GHT’s nascent Regulatory business, allowing it to offer end-to-end solutions and significantly extends its real-time cloud connectivity services such that it can provide a potentially transformative STP capability. Adjusting for the acquisition, for cash, valuing Clareti Services at 2x sales and Legacy at 1x, leaves Clareti valued at just 4.1x ARR.
Companies: Gresham Technologies plc