Amino has this morning published a positive trading update for the six months to 31 May 2017. Trading in the first half “was at record levels” and this was accompanied with strong margins and an impressive cash generation – the net cash position improved by £6.9m versus the closing FY 2016A figure. Although changes in the product mix are expected to impact margins in the second half, we note management commentary that the business is on track to meet their FY 2017E expectations. We therefore leave forecasts unchanged following the announcement.
Trading at record levels, margins strong: Management disclosed that trading was “at record levels” during H1 2017A, with the group continuing to see strong demand for the core IP devices offering. In line with management expectation, revenue for the half is expected to be £40.1m +22% over H1 2016A or +6% on a constant currency basis. Although no further detail was provided, management note that margins were “strong” during the period.
Impressive cash generation: Amino closed H1 2017A with a net cash position of £13.1m. This represents a £6.9m improvement on the FY 2016A figure and reflects the timing of delivery of a number of larger devices orders prior to the period end. Assuming our forecasts of stable capex and no new capital raisings are confirmed in the full H1 2017E results, this implies an impressive level of operating cash flow during the period.
Business mix transitioning to new products: Management flag their expectation that the second half will see the business mix migrate towards new products (primarily in IP TV devices), resulting in a lower blended margin. Note, our forecasts already assume some margin compression for FY 2017E, with adjusted EBIT margins some 50bp below the FY 2016A figure.
In our view, Amino has executed strongly in the first half of FY 2017E. The group reported record revenues for FY 2016A and that momentum has continued into the current financial year. The signal of lower margins in H2 is in accordance with the Group’s previous comments on the impact of new product launches and larger volume customers. With management confident in the financial outlook for FY 2017E, we take their cue and leave forecasts unchanged at present and await further detail on the group’s progress with the interim results release on July 11.