Iliad

After its stock suffered a hellish descent throughout 2018 and then a new sharp drop since the beginning of 2019, Iliad has released its 2018 results. As expected, the Q4 numbers are not very convincing about a return to growth. Q4 revenues were down by 0.5% yoy but, most importantly, they declined by 3.1% yoy in France excluding sales of terminals. Remember, they were flat in H1 18 and down by 2% yoy in Q3. So a slight acceleration in the decline, more noticeable on the mobile side (-1.2% yoy excluding sales of terminals while they had grown by 3.4% in H1 and were flat in Q3) than on the fixed side where the trend remains the same compared to the previous quarter (-3.2% yoy vs -2.2% in H1 but -3.8% in Q3). In Italy, since launching its mobile business at the end of May, Iliad has succeeded in winning 2.84m subscribers (of which 635k in June, 1.6m in Q3 and 610k in Q4) to generate eventually €70m in revenues in Q3 (c.€9 per subscriber per month). The annual EBITDA stood at €1.75bn, down by 1.2% yoy (and by 1.5% in H2). Note, however, that in France, excluding the Italian losses, EBITDA was up by 1.7% yoy (but by only 1.2% in H2). The French EBITDA margin was indeed quite resilient at 37.9% in 2018 vs 36.5% in 2017 (and at 38.5% in H2 18). But, with the logical increase in D&A (21.5% of the sales while the real capex represented in 2018 32.5% of the sales in France), operating profit and net profit were both down by c.20% for the whole year.

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Pelatro

Pelatro has launched its exciting new Data Monetization Platform (DMP) product with a revenue-share contract from an existing customer. A multi-year contract worth $0.5m in year one it is part of the expected pipeline and builds up the base of recurring revenue. Data monetisation – selling mobile subscriber data analysis and marketing services to B2C clients – is at an early stage globally but will become an important revenue and earnings generator for telcos as ARPU continues to slide; opening up the huge mobile advertising market. This is a significant move and we raise our TP by 5% to reflect the long-term opportunity.

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K3 Business Technology Group

Prelims to November 2018 are in line with the positive trading update of 17 December, which had reported performance pleasantly ahead of market expectations: free cash flow of £4.4m (£4.0mE) from adjusted PBT of £4.0m (£3.6mE), reducing net debt to £0.6m (£1.0mE). The strategic initiatives over the prior two years have delivered a return to strong positive operational momentum via completion of unification of operations into a single group, away from the historic confederacy of acquired businesses. Through a combination of a growing subscription model, a focus on K3’s own IP margins; a growing sales and services channel with international success; and the platform-agnostic, cloud-based K3 | Imagine, recurring revenue is strengthening earnings quality, and cashflow, with a much improved balance sheet. Encouraged by evident delivery of the checklist of strategic aims, we lift our target price to 290p (275p).

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Bango

This morning, Bango announced final results for the year to December 2018. During the period End User Spend (EUS) continued the trend of recent years and has more than doubled to £558.2m and revenue up 60% to £6.6m (FY18: £4.2m). Adjusted LBITDA improved to -£0.9m (FY18: -£1.6m), with positive EBITDA achieved during Q4/18. Following the Audiens acquisition in early 2018 and investment in further development, December 2018 saw launch of Bango Marketplace. This is a new business segment, adding a potentially significant and high margin revenue stream, monetising the extensive and growing amount of transactional data from the Bango Platform. There remains a growing pipeline of new MNO/App Store integrations and further Google Play upgrades, representing a significant pipeline of over US$4 billion in EUS.

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COG ESG KBT PTRO NAH

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eServGlobal

There have been a few developments with Mastercard this month. Having lost out to its rival, Visa, in the auction for Earthport, Mastercard has unexpectedly signed an agreement to purchase Transfast, another cross border account-to-account network. Like HomeSend (ESG’s JV with Mastercard), the Transfast network also supports the Mastercard Send service. HS has much wider reach across multiple markets and channels, already fully integrated with transactions flowing. However Mastercard seeks to address a huge global market and Transfast will add much needed capacity.

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Crossword Cybersecurity

Crossword Cybersecurity has announced the appointment of a new Advisory Board made up of senior figures from academia, the corporate world and government. The new Advisory Board, chaired by former GlaxoSmithKline & NHS Chief Information Security Officer, Dr Robert Coles, will provide a range of unique perspectives on cyber security that will benefit Crossword clients and inform Crossword’s product development strategy.

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K3 Business Technology Group

K3 has achieved a return to profitability – delivering an adjusted operating profit of some £4.6m – and marking a material turnaround from the difficulties of a couple of years ago. The group continues its march to higher levels of own-intellectual property sales, and towards a greater level of recurring income. We make no material changes to FY19E estimates, and introduce FY20 forecasts for the first time.

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Starcom

Starcom, the developer of wireless solutions for the remote tracking, monitoring and protection of assets and people, has announced FY results in line with January’s trading update. A combination of increased revenue and higher gross margin resulted in a $0.2m reduction in adj. EBITDA loss to $8k and the company was breakeven in H2. 2018 saw progress commercially and in the product set and newsflow post period end has been encouraging with contracts for the existing products (Helios, Kylos and Tetis) and the forthcoming Watchlock Lokie has generated considerable levels of interest. As a result, further higher margin revenue growth should result in Starcom moving into sustainable adj. EBITDA profit in FY19. The balance sheet remains tight, however, although the situation has improved somewhat with the receipt part of the funds from the North Africa contract announced last November.

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ECSC FBT STAR MWE

ECSC Group plc* (ECSC.L, 110p/£10.0m) - Finals: Better utilisation drives gross margin (13.03.19) | Forbidden Technologies plc* (FBT.L, 7.25p/£21.0m) - Finals: Growth in North America (12.03.19) | Starcom plc* (STAR.L, 1.3p/£2.8m) - Finals: Positive newsflow for 2019 (18.03.19) | MTI Wireless Edge Ltd* (MWE.L, 21p/£11.5m) - Finals: Diversified growth opportunities (13.03.19)

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