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The Interims are as flagged in the July update; global lockdowns helped End User Spend (EUS) over the platform rise by 59% YoY to £743m. Encouragingly, the H1 revenue growth closely matched that rise; increasing 50% YoY, to a record £4.8m. With operational gearing in the platform, group profitability continues to rise rapidly as revenue grows; H1 adj. EBITDA of £1.1m, more than double the whole of FY 2019 earnings. The major deals delayed in FY 2019 also arrived in H1, for Platform and Bango Marketplace; notably, the purchase of a controlling stake in Audiens by Korean tech giant, NHN, assisting management focus while retaining a 40% stake in a business set to be boosted by funding and IP from its new parent. Operating activities were cash positive and capex was more than covered by an NHN investment, lifting net cash to £4.2m. This is an exciting year, with deals signed in H1 expected to help EUS reach £2bn in 2020 and leaving BGO on track to meet our FY forecasts of strong revenue growth and material profitability.
Companies: Bango Plc
RBG Holdings had H1 revenues of £12.0m, up 17% against H1’19, of which £11.7m came from the Group’s law firm, RBL. On a LfL basis (excl. £2m of discretionary gains from litigation assets in H1’19), Group revenues were up c.46% YoY. EBITDA of £2.6m offers still-compelling margins of 22%. Transaction delays in Convex and a period of investment in LionFish held back ST performance for these higher margin divisions, yet pipelines remain healthy for Convex. Management is bullish on its ability in H2 to divest litigation assets in order to fund new investment, and in line with strategy. Continued uncertainty over timings around Convex transactions completing, and COVID headwinds, means we keep forecasts withdrawn, however suggest an intrinsic value of 90p is comfortably achievable for the shares.
Companies: RBG Holdings Plc
Water Intelligence (WI) operates in a sizable and expanding market. The Group provides minimally invasive water leak services and is building a distribution platform to leverage its installed and growing customer base. The company is a designated Essential Service Provider during CV19 and expects to see increasing demand for its products as the Green Economy gains traction. WI's management has a proven track record of developing new revenue streams and the Group's core services are uncorrelated to either the geopolitical or economic climate. Management is selectively reacquiring franchises and converting them to corporate-operated locations. This converts indirect revenue to a direct, higher-margin income stream under the same brand, and results in improved profitability and significant earnings accretion. We believe the shares trade at a substantial discount to fair value and initiate coverage with a target price of 452p. Our scenario analysis on page 20 demonstrates that the shares could rerate at closer to 600p based on the Group's current reacquisition strategy
Companies: Water Intelligence Plc
WATR reports interim results this morning which reflect no slackening in the group's positive momentum, and which evidence again the effective business model. Adjusted PBT grew by a healthy 20% (statutory PBT growth of 33%), suggesting that the business continues to operate strongly and in such a way as to meet and exceed its targets again notwithstanding the challenges imposed on businesses generally by Covid. Within the overall growth momentum, both the franchise business and the Corporate division saw impressive margin gains, while franchise royalty succeeded in growing notwithstanding reacquisitions reducing the pool of franchises, a positive outcome. FY2020E forecasts are reaffirmed, although conservatively we leave them unchanged at this point. WATR is the only national US operator providing a leak detection service across the US, and this is a seriously large market – the insurance sector alone worth $US13bn p.a. above and beyond the traditional markets WATR has served. Now spanning clean and dirty water (Covid-19 opportunities), the company operates as an integrated entity and continues to generate new, value-added products. At current levels, we see significant upside to our 500p-plus fair value assessment, and note WATR's aspiration towards $US250m of underlying sales.
FRP has announced the £5.3m acquisition of JDC Group, a corporate finance and forensic services firm with a strong presence in East Anglia, Essex and London. The deal, paid in cash (upfront & deferred) and new FRP equity, adds scale FRP's corporate finance and forensic capabilities, while widening FRP's geographical spread in its core restructuring activities. Given the multiple paid and minor dilution, the deal is accretive to both FY21E (+3%) and FY22E (+5%) earnings per our newly updated forecasts. We see JDC as a highly complementary bolt-on.
Companies: FRP Advisory Group Plc
Against a backdrop of global economic turbulence driven by COVID-19, Bango’s H1 20A results confirm robust growth in End User Spend (“EUS”) and revenues, alongside record EBITDA and a solid improvement in operating cash flow. Execution in the payments business remains strong, and growth in Bango Marketplace in our view demonstrates the group’s increasing traction in data monetisation. The outlook statement is positive, and we make no changes to underlying estimates following the announcement. Overall, we continue to believe that momentum remains strong, and that the group is well placed to deliver its FY 20E targets.
The results are in line with the July post-YE update. Revenue beat our pre-update expectations, growing an impressive 56% YoY despite lockdown in Q4. PCIP’s cloud delivery meant the pandemic had little effect on project delivery, with 23 new customers live in Q4. The uncertainty of COVID-19 delayed some Q4 contract decisions, but that has eased for new deals, although some of the delayed ones are yet to recommence. Following the £5m equity placing in March, PCIP is very well funded and can continue to roll out its leading secure payments proposition; a cloud-based solution deployed remotely to assist call centres particularly who handle a high amount of customer data. The strong revenue growth on relatively fixed platform costs is steadily reducing losses and we see EBITDA in FY 2022. Thereafter, its operational gearing should see profit scale rapidly.
Companies: PCI-PAL PLC
Restrictions relating to COVID-19 have had a mixed effect on Boku’s H120 performance, with the Payments business benefiting from increased demand for digital content, while some Identity customers saw weaker demand for their services. Despite this, Boku reported adjusted revenue growth of 9% y-o-y and, demonstrating the operational leverage of the business, adjusted EBITDA growth of 84% y-o-y. With guidance unchanged for FY20, we maintain our EBITDA forecasts.
Companies: BOKU, Inc.
RBG Holdings pre-close trading update to June 30th confirms a strong H1 performance for RBL, the Group’s law firm, with revenues up 36% like-for-like to c.£11.4m YoY. Convex, the CF boutique, understandably has faced COVID headwinds, with most of its H1 pipeline deferred indefinitely, whilst Litigation Finance continues to grow its pipeline and financing commitments on a longer term view. Due to continued uncertainty from COVID we withdraw our forecasts this morning, with a view to reinstating once more clarity on H1 outturn and momentum into H2 is available.
The COVID-19 pandemic has had a significant impact globally in many areas. While primarily a health issue, it has had wide-ranging implications for stock markets, which have now rallied after the plunge in share prices in mid-March when the full severity of the emerging pandemic became more widely appreciated. Nonetheless, the FTSE 100 Index remains almost 20% off its late February 2020 figure.
Companies: AVO ARBB ARIX CLIG DNL GDR ICGT NSF PCA PIN PXC PHP RECI STX SCE TRX SHED VTA YEW
Post results we consider key takeaways from the presentation and introduce our FY23 forecasts for the first time. YTD trading shows a clear recovery with the full benefit of operational gearing still to come through. We are confident that recent initiatives to streamline operations have left DWF with a strong and better managed platform on which it can deliver significant future growth.
Companies: DWF Group Plc
Keystone Law has reported good top line growth YoY for the first half albeit with PBT below last year. In the context of Covid-19 and lockdown in the UK, we see this as a solid performance. The stock has underperformed significantly in the past couple of months suggesting to us that market expectations were low heading into the results and the recommencement of the dividend should support better performance going forward.
Companies: Keystone Law Group Plc
What’s new: SimplyBiz’s 1H results show digital acceleration as Defaqto and Intermediary Services have limited the impact of lockdown on revenue and EBITDA. Full year guidance remains at adj EPS of no less than 11p. Key points:
1H20 revenues of £28.9m (0.7% lower than 1H19: £29.1m), with Defaqto acquisition in March 2019 offsetting a significant reduction in valuation revenue caused by lockdown restrictions.
25.5% EBITDA margin benefited from cost management (1H19: 27.5%).
Cash conversion improved to 65% (1H19: 43%).
Net debt at 30 June 2020 of £25.8m; was well within banking covenants.
Guidance remains 2020 adjusted EPS shall be no less than 11p (FY19: 13p).
Intermediary Services division continues to deliver all its services to customers without disruption … and continues to recruit new member firms.
Distribution Channels division was significantly impacted by the lockdown restrictions in the second quarter, with the volume of valuations and surveys moderately increasing in June with slow recovery expected.
Companies: The SimplyBiz Group Plc
Heading into the pandemic, we had argued that Next Fifteen’s broad spread of digital capabilities and heavy exposure to technology led clients should be a source of relative strength. The H1 trading update has underscored just how resilient the group has been. Yes, there have been impacts but the inevitable hit to organic revenue growth has not been as severe as first thought. Combined with the contribution from strongly performing acquisitions made over the last two years, Next Fifteen will be reporting H1 revenue and profit comfortably ahead of the prior year, which is a remarkable outcome against such a backdrop. Next Fifteen has also announced the acquisition of the innovation consultancy, Mach49, which marks the first concrete step in building the fourth pillar underpinning the group portfolio. The group balance sheet remains a source of strength (H1 net debt to be less than £1m); reflecting both the better than expected profit performance as well as effective cash preservation and working capital management. This positions the group well for any further accretive M&A. The current FY1 PE of 13.0x, falling to 11.3x for FY22 feels undemanding given the positive performance through the pandemic and the subsequent positioning heading into any sustained recovery. The rating also looks undemanding relative to others in the immediate peer group and the broader Small Cap Media sector.
Companies: Next Fifteen Communications Group Plc
Avacta (AVCT.L): Adeptrix COVID-19 Diagnostic Test update | Diaceutics (DXRX.L): New contract win
Companies: Avacta Group Plc Diaceutics Plc