FY10 financial results
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FY10 financial results and analyst report

FY10 financial results and analyst report

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FY10 financial results FY10 financial results Document Transcript

  • Ideagen*27 July 2011 Healthy prelims; Datum becomes Ideagen Ticker IDGP CORP Price 10.5p Target Price 15.0p Prelims to April include little of the benefit of Datum’s March acquisition of Ideagen, a name the entire group has since taken. Nevertheless, Upside 50.0% performance exceeded expectations in terms of revenue of £2.3m (+3%), Market Cap £7.3m adjusted PBT of £0.5m (+20%), and net cash of £0.8m (+42%). The new Index PLUS Ideagen brand accompanied the strategic alignment of each of the recent Sector Technology acquisitions, which now operate as Ideagen Capture, Ideagen Content and Hardware & Equipment Ideagen Compliance. Cross selling has already been achieved in practice, Net Cash £0.8m driving increased contract sizes of recent notable wins, benefiting from the Shares in Issue 70m reassurance of the group’s greater critical mass, balance sheet, and Next Results Dec/Jan interims evident shareholder support. Ideagen expects to move up to the AIM market in calendar 4Q 2011. Whats changed From To  Trading highlights: a busy year included the integration of Root3, the Adj. EPS (FD) 0.8p 1.2p acquisition of Ideagen, the recruitment of a heavyweight sales director and Recommendation significant contract wins leading to first year contributions of £325k (ACCA) and Target Price 15.0p n/c £580k (unnamed UK water company). Contracts also lead to follow on maintenance and support revenue, with a 95% renewal rate, and a developing Share Price Performance recurring revenue base. Ideagen now has more than 250 customers, with a strong blue chip client roster.  Financial highlights: Prelims include only one month of the acquisition of Matlock-based Ideagen. As shown above, the company delivered results ahead of our forecasts, setting a reassuring precedent for future confidence, and creating a catalyst for improving multiples. Net cash of £0.8m is expected to grow, with the company cash positive and an appreciable 30% EBITDA margin.  Ideagen intends to be the leading supplier of compliance-based Enterprise Content Management solutions to the UK market, bringing order Source: Thomson Reuters to the majority of corporate content which exists outside formal databases or structures. The UK market is fragmented and we expect continuing % 1M 3M 12M opportunities for acquisitive and organic growth. Actual -9.1 -7.0 +17.6  At 12x April 2012 EPS, equivalent to 7x EV/EBITDA, our target price remains Relative -11.4 -6.8 +0.5 comfortably achievable at 15p, against the current 10.5p. Analyst: Year ending April (£m) 2010A 2011A 2012E 2013E Andrew Darley 020 7220 0547 adarley@finncap.com Data Sales: Sales (£m) 1.0 2.3 3.6 4.4 Chris Jeffrey 020 7220 0524 Adj EBITDA (£m) 0.2 0.5 1.0 1.4 cjeffrey@finncap.com Adj PBT (£m) 0.2 0.5 0.9 1.3 Michael Bell 020 7220 0521 mbell@finncap.com Tax rate (%) nm nm 5 12 Rhys Williams 020 7220 0522 Adj EPS (FD) (p) 0.3 0.9 1.2 1.5 rwilliams@finncap.com Dwight Burden 020 7220 0525 DPS (p) 0.0 0.0 0.0 0.0 dburden@finncap.com Ratios Elizabeth Johnson 020 7220 0523 ejohnson@finncap.com EV/Sales (x) 6.5 2.8 1.8 1.5 EV/EBITDA (x) 32.5 13.0 6.5 4.6 Sales Traders: 020 7220 0531 STX 73240 P/E (x) 35.0 11.6 8.7 7.1 Yield (%) 0.0 0.0 0.0 0.0 Cash flow yield (%) -20.7 -19.4 89.1 104.4 EPS growth (%) n/a 239.8 31.5 27.8*Denotes corporate client of finnCap . This research cannot be classified as objective under finnCap research policy. Visit www.finncap.com
  • Ideagen* 27 July 2011Healthy prelims; Datum becomes IdeagenKey Financials Income Statement Cash FlowYear ending April (£m) 2010A 2011A 2012E 2013E Year ending April (£m) 2010A 2011A 2012E 2013ESales 1.0 2.3 3.6 4.4 EBITDA 0.2 0.5 1.0 1.4Gross profit 0.9 2.0 3.4 4.2 Net change in working capital -0.3 -0.5 -0.1 -0.4Operating expenses -0.7 -1.5 -2.4 -2.8 Other items -0.1 -0.1 0.0 0.0Adjusted EBITDA 0.2 0.5 1.0 1.4 Operating cash flow -0.2 0.0 0.9 1.0Depreciation/Amortisation 0.0 0.0 -0.1 -0.1 Cash interest 0.0 0.0 0.0 0.0Adjusted EBIT 0.2 0.5 0.9 1.3 Tax paid 0.0 0.0 -0.1 -0.2Associates/Other 0.0 0.0 0.0 0.0 Capex 0.0 -0.2 -0.1 -0.1Net interest 0.0 0.0 0.0 0.0 Free cash flow -0.2 -0.2 0.7 0.7Adjusted PBT 0.2 0.5 0.9 1.3 Disposals 0.0 0.0 0.0 0.0Adjustments -0.1 -0.1 -0.1 -0.1 Acquisitions -0.2 -0.8 -0.5 0.0Reported PBT 0.1 0.4 0.9 1.2 Dividends 0.0 0.0 0.0 0.0Taxation 0.0 0.2 -0.1 -0.2 Other 0.0 0.0 0.0 0.0Tax rate (%) nm nm 5 12 Issue of share capital/(Buyback) 0.9 1.6 0.0 0.0Reported earnings 0.1 0.6 0.8 1.0 Net Change in cash flow 0.4 0.6 0.2 0.7Average no.shares (FD) 34.4 55.5 69.7 69.7 Opening net (debt)/cash -0.2 0.2 0.8 1.0Adj. EPS (FD) (p) 0.3 0.9 1.2 1.5 Closing net (debt)/cash 0.2 0.8 1.0 1.7DPS (p) 0.0 0.0 0.0 0.0 Balance Sheet Ratio AnalysisYear ending April (£m) 2010A 2011A 2012E 2013E Year ending April 2010A 2011A 2012E 2013ETangible assets 0.1 0.1 0.1 0.2 GrowthGoodwill 0.0 1.9 1.9 1.9 Revenue growth (%) n/a 133.3 59.9 21.7Other intangible 3.1 1.2 1.4 1.2 EBITDA growth (%) n/a 172.8 96.2 34.5Other 0.0 0.2 0.2 0.2 EPS growth (%) n/a 239.8 31.5 27.8Non current assets 1.3 3.4 3.6 3.5 DPS growth (%) n/a n/a n/a n/aInventories 0.0 0.0 0.0 0.0Trade receivables 0.4 1.1 1.1 1.4 ReturnsCash 0.2 0.8 1.0 1.7 Gross margin (%) 93.4 88.1 95.0 95.0Other 0.0 0.0 0.0 0.0 EBITDA margin (%) 19.9 23.2 28.5 31.5Current assets 0.6 1.9 2.1 3.1 EBIT margin (%) 19.1 21.9 26.3 29.0Trade payables 0.5 1.0 1.1 1.1 RoE (%) 8.4 15.5 18.0 18.7Other current liabilities 0.3 1.2 0.8 0.7 RoCE (%) 15.9 13.4 21.1 23.0Short term debt 0.0 0.0 0.0 0.0Net current assets -0.2 -0.3 0.2 1.3 LiquidityLong term debt 0.0 0.0 0.0 0.0 Net debt/equity (%) n/a n/a n/a n/aPension 0.0 0.0 0.0 0.0 Net debt/EBITDA (x) n/a n/a n/a n/aOther/Minorities 0.3 0.0 0.0 0.0 Interest cover (x) nm 93.6 n/a n/aNet assets 0.9 3.1 3.8 4.8 Net working capital to sales (%) 98.1 93.1 60.7 56.7 Cash conversion (%) -114.7 -40.2 96.4 84.1 Dividend cover (x) n/a n/a n/a n/aNAV per share (p) 1.3 4.4 5.4 6.9NTA per share (p) -4.8 -3.4 -2.3 -0.42
  • Ideagen* 27 July 2011Healthy prelims; Datum becomes Ideagen Valuation We maintain our target price of 15p, based on an average of a forward year 1 multiple of 12x adjusted earnings and 7x EV/EBITDA. Comparative multiples for listed enterprise risk management software (Active Risk: 20x), document capture software (Kofax: 20x), compliance and supply chain software (Kewill: 10x) and specialist business process automation (IDOX: 9x) all comfortably exceed the March 13 Ideagen multiple, showing clear opportunity for upside. Datum becomes Ideagen In order to better define the strategic direction of the product set acquired or developed with Ideagen, the company has undergone a rebranding exercise. As below in figure 1, the company is now made up of Ideagen Capture, Ideagen Content and Ideagen Compliance. The logic remains consistent with previous explanations, with a ‘foot in the door’ approach often leading to product creep across further divisions within the same organisation, or the sale of further Ideagen products within the customer divisions. Figure 1: The new Ideagen structure InfoWorker Core Repository & formal WorkBench Document Management. KnowledgeCapture Compliance & Data capture tools & Quality Mgmt Over 20 Yr’s Experience Process Worker Business Workflow & Integrations Available as traditional On-Premise solution Or as Software as a Service (SaaS) delivered via “the cloud” Ideagen Capture Ideagen Content Ideagen ComplianceSource: Ideagen 3
  • Ideagen* 27 July 2011Healthy prelims; Datum becomes Ideagen The effect of the integration of Root3 and Ideagen has been the creation of a unified sales force under the new Sales Director, who is ex-Kofax. Sales leads are being generated and contracts won through a clearly defined quality sales process. The original product sets are increasingly integrated such that Root3 (Ideagen Capture) and KnowledgeWorker (now Ideagen Content) fully interact, with live clients already in place (eg City & Guilds, and the Chartered Institute of Environmental Health). Key vertical markets have been identified. Regulated, compliance-led industries offer the best opportunities, especially where Ideagen Compliance is initially introduced, allowing follow-on from Capture and Content cross sales. Pharmaceuticals, aerospace & defence, financial services and utilities are particularly suited to the offerings: Ideagen customers include Astra Zeneca, the MOD, Allianz, and Severn Trent, as well known examples in each sector. Ideagen Compliance enables industry standard quality standards to be met and KPIs to be delivered. Within the target markets, approximately 10% of data will require management within the Ideagen Compliance suite. Typically this data is subject to rigorous audit and regulation. Ideagen Capture and Content complements Compliance through the management of more general data to provide a unified central repository. Development As the cloud continues to develop, if not yet fully adopted across the board, Ideagen continues to develop its own cloud solution in order to continue with its current modus operandi of offering divisional solutions within an overarching group enterprise structure. Further planned enhancements include support for mobile devices, integration with other well known platforms, and performance enhancements to allow the further scaling of the product platform and encourage intuitive use. KnowledgeWorker (Capture & Content) will be launched in January 2012. News flow in the period is symptomatic of the quality Datum’s average contract size continues to underline the credibility of the product set. Following the September 2010 contract with the Association of Chartered Certified Accountants (ACCA), with a contract value of £325k over 12 months, the company has announced further new and renewed relationships with both Bombardier and the Royal Mail (announced in February). The April announcement of a £580k contract with a major UK company, the majority recognisable over 12 months, delivered further momentum.4
  • Ideagen* 27 July 2011Healthy prelims; Datum becomes Ideagen Commentary on financial statements We note the company has changed to reporting under IFRS from UK GAAP. The financial results are very much in line with our forecasts. Boosted by a full year of Root3 (now Ideagen Capture) and one month of Ideagen itself, headline revenues have shown exceptional growth of 133%. Underlying this, the organic growth has been driven as expected by the success of KnowledgeWorker (up 40% in the period). With the operational gearing, headline EBITDA grew 172%, to £0.5m and adj. PBT grew 135%, again at £0.5m. These results were delivered largely as forecast, underpinning our confidence in expectations for FY 2012 and 2013. Performance: 2011 prelims (£m) Forecast Result Revenue 2.2 2.3 Gross profit 2.0 2.0 EBITDA 0.5 0.5 Profit before tax 0.4 0.4 Adjusted pre tax 0.4 0.5 Source: Company reports, finnCap estimates With the increased profitability and the £1.7m placing in March to fund the acquisition of Ideagen, the financial position has been significantly improved. Net assets at 30 April 2011 were in excess of £3m (2010: £0.9m) including a cash balance of £0.8m (2010: £0.2m). Also of note in the year, a capital reduction transferred £3.2m from the share premium account into retained earnings, eliminating the negative balance. Renewals and recurring revenue On a recurring basis the two contracts named previously generate a further £200k per annum of recurring support revenue for the period of the 3-year contracts, as well as the follow-on potential of expansion across the customer group, which has already taken place within one of the significant customers. Total recurring revenue is currently at about £1.7m per annum. 5
  • Ideagen* 27 July 2011Healthy prelims; Datum becomes Ideagen Income StatementYear ending April (£m) 2010A 2011A 2012E 2013ESales 1.0 2.3 3.6 4.4Sales growth (%) n/a 133.3 59.9 21.7Cost of sales 0.9 2.0 3.4 4.2Gross profit 0.9 2.0 3.4 4.2Gross margin (%) 93.4 88.1 95.0 95.0Operating expenses -0.7 -1.5 -2.4 -2.8Adjusted EBITDA 0.2 0.5 1.0 1.4Depreciation/Amortisation 0.0 0.0 -0.1 -0.1Adjusted EBIT 0.2 0.5 0.9 1.3Adjusted EBIT margin (%) 19.1 21.9 26.3 29.0Associates/Other 0.0 0.0 0.0 0.0Net interest 0.0 0.0 0.0 0.0Adjusted PBT 0.2 0.5 0.9 1.3Adjustments -0.1 -0.1 -0.1 -0.1Reported PBT 0.1 0.4 0.9 1.2Taxation 0.0 0.2 -0.1 -0.2Tax rate (%) nm nm 5 12Post tax profit 0.1 0.6 0.8 1.0Minorities 0.0 0.0 0.0 0.0Reported earnings 0.1 0.6 0.8 1.0Weighted average no.shares 34.4 55.5 69.7 69.7Average no.shares (FD) 34.4 55.5 69.7 69.7Stated EPS (p) 0.2 1.0 1.2 1.5Adj. EPS (FD) (p) 0.3 0.9 1.2 1.5DPS (p) 0.0 0.0 0.0 0.0Source: Company reports, finnCap estimates6
  • Ideagen* 27 July 2011Healthy prelims; Datum becomes Ideagen Cash FlowYear ending April (£m) 2010A 2011A 2012E 2013EEBITDA 0.2 0.5 1.0 1.4Net change in working capital -0.3 -0.5 -0.1 -0.4Share based payments 0.0 0.0 0.0 0.0Profit/loss on disposal 0.0 -0.1 0.0 0.0Net pensions charge 0.0 0.0 0.0 0.0Change in provision 0.0 0.0 0.0 0.0Other items -0.1 0.0 0.0 0.0Operating cash flow -0.2 0.0 0.9 1.0Cash interest 0.0 0.0 0.0 0.0Tax paid 0.0 0.0 -0.1 -0.2Capex 0.0 -0.2 -0.1 -0.1Free cash flow -0.2 -0.2 0.7 0.7Disposals 0.0 0.0 0.0 0.0Acquisitions -0.2 -0.8 -0.5 0.0Dividends 0.0 0.0 0.0 0.0Other 0.0 0.0 0.0 0.0Issue of share capital/(Buyback) 0.9 1.6 0.0 0.0Net Change in cash flow 0.4 0.6 0.2 1.1Opening net (debt)/cash -0.2 0.2 0.8 1.0Closing net (debt)/cash 0.2 0.8 1.0 1.7Source: Company reports, finnCap estimates 7
  • Ideagen* 27 July 2011Healthy prelims; Datum becomes Ideagen Balance SheetYear ending April (£m) 2010A 2011A 2012E 2013ETangible assets 0.1 0.1 0.1 0.2Goodwill 0.0 1.9 1.9 1.9Other intangible 1.3 1.2 1.4 1.2Other 0.0 0.2 0.2 0.2Non current assets 1.3 3.4 3.6 3.5Inventories 0.0 0.0 0.0 0.0Trade receivables 0.4 1.1 1.1 1.4Cash 0.2 0.8 1.0 1.7Other 0.0 0.0 0.0 0.0Current assets 0.6 1.9 2.1 3.1Trade payables 0.5 1.0 1.1 1.1Other current liabilities 0.3 1.2 0.8 0.7Short term debt 0.0 0.0 0.0 0.0Net current assets -0.2 -0.3 0.2 1.3Long term debt 0.0 0.0 0.0 0.0Pension 0.0 0.0 0.0 0.0Other/Minorities 0.3 0.0 0.0 0.0Net assets 0.9 3.1 3.8 4.8NAV per share (p) 1.3 4.4 5.4 6.9NTA per share (p) -4.8 -3.4 -2.3 -0.4Source: Company reports, finnCap estimates8
  • Ideagen* 27 July 2011Healthy prelims; Datum becomes Ideagen Key Shareholders Management Summary % David Hornsby CEOBluehone 21 Les Paul CTOJM Finn Nominees 19 Graeme Spenceley Finance Director(including Directors) Jonathan Wearing Non Exec ChairmanDavid Hornsby (dup.) 14 Darren Spillane Sales DirectorLes Paul 14Pershing Nominees 13Jonathan Wearing 8 Company DescriptionDarren Spillane (dup.) 6 Ideagen PLC specialises in the development of world class software solutions for on-Robert Allerston 4 demand Information and Business Process Management. Ideagen Capture is a specialist data capture company with over 20 years of experience in developing and deploying high volume Optical Character Recognition capture projects; Ideagen Content is the developer of the Enterprise Content Management system KnowledgeWorker, the leading ECM SaaS solution for the UK mid-size enterprise Distribution of Ratings market; Ideagen Compliance is developer of the Workbench Compliance solution % used by companies throughout the world to help maintain compliance with many internationally recognised standards and business processes such as ISO9000, FDABuy N/A 21 CFR Part 11, OHSAS 18001 Health and Safety and many others.Hold N/ASell N/A 9
  • Ideagen* 27 July 2011Healthy prelims; Datum becomes Ideagen NOTES10
  • Ideagen* 27 July 2011Healthy prelims; Datum becomes Ideagen NOTES 11
  • Research Contacts David Buxton 020 7220 0542 dbuxton@finncap.com Mark Paddon 020 7220 0541 mpaddon@finncap.com Duncan Hall 020 7220 0546 dhall@finncap.com Dr Keith Redpath 020 7220 0550 kredpath@finncap.com Andrew Darley 020 7220 0547 adarley@finncap.com David Stoddart 020 7220 0549 dstoddart@finncap.com Will Arnstein 020 7220 0543 warnstein@finncap.com Lorne Daniel 020 7220 0545 ldaniel@finncap.com Martin Potts 020 7220 0544 mpotts@finncap.com Corporate Broking Contacts Tom Jenkins 020 7220 0511 tjenkins@finncap.com Stephen Norcross 020 7220 0513 snorcross@finncap.com Joanna Weaving 020 7220 0514 jweaving@finncap.com Simon Starr 020 7220 0516 sstarr@finncap.com Brian Patient 020 7220 0515 bpatient@finncap.com Mia Gardner 020 7220 0512 mgardner@finncap.com Victoria Bates 020 7220 0518 vbates@finncap.com Corporate Sales Contacts Michael Bell 020 7220 0521 mbell@finncap.com Tony Quirke 020 7220 0517 tquirke@finncap.com Sales Contacts Chris Jeffrey 020 7220 0524 cjeffrey@finncap.com Rhys Williams 020 7220 0522 rwilliams@finncap.com Dwight Burden 020 7220 0525 dburden@finncap.com Elizabeth Johnson 020 7220 0523 ejohnson@finncap.com Sales Trading Contacts Mick McNamara 020 7220 0521 mmcnamara@finncap.com Mike Nally 020 7220 0534 mnally@finncap.com Jeremy Smith 020 7220 0536 jsmith@finncap.com Ben Tonnison 020 7220 0535 btonnison@finncap.com Danny Smith 020 7220 0533 dsmith@finncap.com A marketing communication under FSA Rules, this document has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. This research cannot be classified as objective under finnCap Ltd research policy. Visit www.finncap.com The recommendation system used for this research is as follows. We expect the indicated target price relative to the FT All Share Index to be achieved within 12 months of the date of this publication. A ‘Hold’ indicates expected performance relative to this index of +/-10%, a ‘Buy’ indicates expected outperformance >10% and a ‘Sell’ indicates expected underperformance of >10%. Approved and issued by finnCap Ltd for publication only to UK persons who are authorised persons under the Financial Services and Markets Act 2000 and to Professional customers. Retail customers who receive this document should ignore it. finnCap Ltd uses reasonable efforts to obtain information from sources which it believes to be reliable, but it makes no representation that the information or opinions contained in this document are accurate, reliable or complete. Such information and opinions are provided for the information of finnCap Ltds clients only and are subject to change without notice. finnCap Ltd’s salespeople, traders and other representatives may provide oral or written market commentary or trading strategies to our clients that reflect opinions contrary to or inconsistent with the opinions expressed herein. This document should not be copied or otherwise reproduced. finnCap Ltd and any company or individual connected with it may have a position or holding in any investment mentioned in this document or a related60 New Broad St investment. finnCap Ltd may have been a manager of a public offering of securities of thisLondon EC2M 1JJ company within the last 12 months, or have received compensation for investment bankingTel 020 7600 1658 services from this company within the past 12 months, or expect to receive or may intend to seekFax 020 7600 1659Email info@finncap.com compensation for investment banking services from this company within the next three months.Web www.finncap.com Nothing in this document should be construed as an offer or solicitation to acquire or dispose offinnCap is registered as a company in England with any investment or to engage in any other transaction. finnCap Ltd is authorised and regulated bynumber 06198898.Authorised and regulated by the Financial Services the Financial Services Authority, London E14 5HS, and is a member of the London StockAuthority. Member of the London Stock Exchange Exchange.