At a glance
Small-cap tech news roundup
Telit Communications, the telecoms hardware and services business focused on internet of thing (IoT), reported H1 revenues 7.4% lower at US$166.9mlm, reflecting the impact of COVID-19, while adjusted EBITDA increased by 12.5% to US$18.0mln. The group closed the period with net cash of US$56.2mln. The business has undergone a major transformation over the last two years, including disposing of its automotive division, and now is focused on the industrial IoT (internet of things) market based around its OneEdge platform that offers both hardware and services solutions.
Essensys, a provider of software-as-a-service (SaaS) platforms and on-demand cloud services to the flexible workspace industry, said that revenue and adjusted EBITDA for the year ending July 31 were in line with expectations. Revenue grew by 9% to GBP22.4m, while recurring revenue increased by 18% to GBP19.3m, representing 86% of the total. The annual recurring revenue (ARR) run-rate rose by 14% over the 12 months to stand at GBP19.7m. Cash at year-end was GBP8.4m and the group has no debt. Despite the Covid-19 challenges, the group delivered 15 new Connect sites in Q4, closing the financial year with 419 live Connect sites, an increase of 17% year-on-year. Essensys has a further 26 new Connect sites contracted, the majority of these scheduled to be delivered in H121.
Tracsis, which provides of software and services for the rail, traffic data and wider transport industries, said that the revenue decline in its Traffic & Data Services division, due to the COVID-19 pandemic, was much less than originally feared. It is now expecting to report group revenues in the year to July of c GBP48m, down c 2%, which reflects a c GBP10m impact from the pandemic, mainly in the Traffic & Data Services division. Meanwhile, the Rail Technology & Services division traded very well throughout the pandemic, underpinned by high levels of recurring software revenue. Management says that the Remote Condition Monitoring business along with all the Rail Technology & Services divisions software businesses have been performing strongly. iBlocks, the smart ticketing business which was acquired in March 2020, has been trading well, and integration is progressing. The group’s adjusted EBITDA margin (IFRS 16 basis) is expected to be 100bp lower on the year at c 20%. The cash position as at the end of July stood at c GBP18m.
Shearwater, which provides cybersecurity advisory and managed security services, said that revenue and underlying EBITDA are tracking in line with expectations, driven through contract renewals from its existing customer base and supplemented by new business wins. The company continues to see a robust level of incoming new business enquiries both domestically and internationally. The group had unaudited gross cash of GBP4.1m as at 31 July 2020 along with an undrawn revolving facility of GBP4.0m.
Small-cap software & services market roundup
Small-cap software stocks pushed to post-pandemic highs last week, despite a languishing FTSE-100 which fell by 1.4% over the week. Larger cap software stocks were also solid, supported by gains from Learning Technologies Group PLC (LON:LTG) and Blue Prism Group PLC (LON:PRSM), which both increased by c 5%.
Source: Indices are unweighted, with number of constituents in brackets
Recent UK tech sector fundraisings
No significant new fundraisings in small-cap tech were announced last week.
|Est’d gross amount||Announced||Method||Price||Discount/ (prem) to prior day (%)||Est’d % of new capital||Comment|
|Pelatro||GBP2.1mln||04-Aug||Placing/subsc||49p||12.1||12.2||Strengthen sales and marketing|
|TERN||GBP1.5mln||20-Jul||Subscription||8.5p||19.0||5.9||To expand the portfolio|
|Nanoco||GBP3.4mln||16-Jul||Placing||17.5p||2.8||6.4||Address opportunities, while maintaining b/s during lawsuit|
|Ethernity||GBP0.78mln||13-Jul||Placing/subsc||12p||37.0||16.6||To support engagements for its 5G offering|
|Deepmatter||GBP2.1mln||13-Jul||Placing/subsc||1.5p||18.9||16.2||Invest in sales, marketing, distribution, support|
|Redcentric||GBP5.755mln||26-Jun||Placing/subsc||110p||-7.8||3.3||Part funds settlement with the FCA|
|Instem||GBP15.75mln||26-Jun||Placing||435p||4.4||17.7||Accelerate the acquisition strategy|
|Boku||GBP20.1mln||17-Jun||Placing||85p||7.1||8.4||Part finances US$41m acquisition of Fortumo|
|Wandisco||US$25mln||11-Jun||Placing||650p||12.2||6.0||Strengthen b/s and working capital|
|Learning Tech||GBP81.8mln||29-May||Placing||127p||7.6||8.8||Accelerate growth and gain market share|
|accesso technology||GBP32.9mln||22-May||Placing||290p||13.4||29.1||Strengthen balance sheet as CV19 continues|
|accesso technology||GBP6.2mln||22-May||Open offer||290p||1 for 13 ratio|
Source: Data from regulatory news and company websites
Interim results season continues in the UK small cap space and runs through September. There is also a scatter of final results from companies with periods ending March, May and June.
|Early Sep||Craneware||Final results||30-Jun|
|07-Sep||SRT Marine Systems||Final results||31-Mar|
|Mid-Sep||Beeks Financial Cloud||Final results||30-Jun|
|29-Sep||Alfa Financial Software||Interim results||30-Jun|
|29-Sep||Blancco Tecnology||Final results||30-Jun|
|30-Oct||Seeing Machines||Final results||30-Jun|
Source: Data from regulatory news and company websites
Small-cap software & services valuations
The sector ratings look fair in comparison with the UK 350 large caps, given the significantly stronger growth potential, combined with the relatively strong balance sheets. Earnings upgrades last week included First Derivatives and Tribal.
|Shr Price Pence||Market Cap GBPm||Net debt/ (cash) GBPm||Enterprise Value GBPm||EV/sales Year 1||EV/sales Year 1||P/E Year 1||P/E Year 2|
|Aptitude Software Group||430||242||(30.9)||211.1||3.7||3.8||33.5||36.2|
|Alfa Financial Software Holdings||72.2||217||(58.5)||158.5||2.7||2.6||100.3||55.5|
|Alpha Financial Markets Consulting||200||202||(14.1)||187.9||2.0||1.8||14.6||13.3|
|Blancco Technology Group||195||147||(6.7)||140.3||4.2||3.8||47.9||40.6|
|Accesso Technology Group||260||107||(24.5)||82.5||2.6||1.2||(4.7)||(50.1)|
Source: Data from regulatory news and market sources