FY23: Double-digit growth, record ACMRR

Beeks Financial Cloud Group, the cloud computing, connectivity and analytics provider for financial markets, has delivered FY23 results in line with the September trading update. Revenue (+22% YoY) and profit (underlying EBITDA +33% YoY) both grew strongly, which we view as a highly respectable performance given ongoing investment being made in the platform and new product development. The group made strong operational progress during the year, and commentary on the outlook is positive. We leave FY24 earnings estimates unchanged following the announcement and introduce FY25 forecasts.

FY23: Double-digit growth, record ACMRR

Beeks’ FY23 trading update (12 months to 30 June) confirms that the group delivered impressive growth in revenue and profits during the year (revenue +20% YoY, underlying EBITDA +35%). Although this outcome is ahead of our forecast at the EBITDA level, we understand revenue progression was impacted by the shifting of certain Exchange Cloud revenues into FY24. The release signals a ‘strong’ start to FY24, with record ACMRR of over £25m and good visibility on FY24 revenue. Cash performance during FY23 was solid, with the group delivering positive free cash flow in H2 23 and closing the year with a £4.4m net cash balance.

Growth in FY23, strong start to FY24

Aferian’s H1 23 results (to 31 May) demonstrate significant improvements in both revenue visibility and earnings quality. The group continues to deliver impressive growth in software revenues, which now contribute 60% of sales. Annual Recurring Revenue (ARR) once again reached record levels, driving improved revenue quality and visibility. The release signals management’s confidence in the full-year outlook, with net debt forecast to have peaked and improved performance from the devices business expected in H2. We leave our (recently reintroduced) forecasts unchanged.

H1 23: Improved visibility and earnings quality

Aferian has successfully concluded the placing of 26m new ordinary shares at a price of 12p/share, raising $4.0m before expenses. The proceeds are to be used for general working capital purposes, replacing the need for further drawdown of the group’s shareholder loan from Kestrel Partners. Aferian has also confirmed that trading remains in line with its update from 28 June, and management has reiterated FY23E guidance. Overall, we view these announcements as positive for the group and investor sentiment. Affirmation of Aferian’s materially improved financial position should be well-received by the investment community.

$4m placing, FY23E guidance reiterated

Aferian’s update yesterday, for the six months to May 2023, confirmed that trading remains in line with comments provided in the 31 May commentary. With demand in the 24i business remaining strong, earnings quality and visibility continue to improve. Furthermore, the release signals management’s expectation of a return to growth (sequentially) in devices in H2 23. The cost base has been significantly reduced, and the release also confirms that the group remains in compliance with its banking covenants. Overall, we believe this is a positive announcement from Aferian and we reintroduce forecasts on the back of renewed confidence.

Trading in line; forecasts reintroduced

Beeks has today announced the signing of a contract with the Johannesburg Stock Exchange (JSE) for the deployment of an advanced managed Infrastructure-as-a-Service (IaaS) solution. The announcement contains no detail on the potential contract size, and we make no changes to forecasts at this stage. Nevertheless, we believe the JSE is a useful reference client win and being the second (blue-chip) Exchange customer for the Exchange Cloud suite, the deal further highlights the momentum building in the Beeks business.

Reference client signed in South Africa

Aferian’s update, released today, signals that group trading remains broadly in line with commentary in the FY22 results announcement. 24i’s (software) solutions continue to see strong demand, offset by the market-driven challenges facing the Amino (devices) division. In mitigation, management has identified an additional c.$3m of annualised cost savings and remains confident in Amino’s ‘strong’ medium-term sales pipeline. The update also confirms that the group remains in compliance with covenants on its senior loan facilities and has secured additional funding via a new £3.25m shareholder loan facility.

Trading in-line, additional funding secured

Aferian’s FY22 results release heralded a record performance from the software business, while confirming that market conditions in the Amino (devices) segment remain challenging. With the increasing contribution from software, Aferian’s revenue quality and visibility continues to improve. Commentary on the outlook is positive towards 24i, and the business has been restructured to address ongoing challenges in devices. Guidance of FY23 group revenue and EBITDA being significantly below FY22 levels was reaffirmed, albeit with positive and material EBITDA. While facing macro and financial challenges described further in this note, Aferian has made good progress in its transition to a software-led business model.

Record software performance; hardware challenges persist but may be abating

Aferian on Friday provided an update on current trading, reaffirming the previous commentary around the FY22 outcome and describing strong early momentum in FY23 for the 24i (software) business. However, customer destocking in the Amino (devices) business has been more prolonged than previously expected and previously signalled. Management now expects FY23 revenue and adjusted EBITDA to be ‘substantially below its original expectations’. We withdraw our FY23 estimates in advance of further detail at the time of the FY22 results, which appear likely to be delayed as the group works with its banks to ensure compliance with future covenant tests. We note that the group ended FY22 with net cash of $4m, that cost savings of some $5m have been implemented, and that management still expects a ‘positive material adjusted EBITDA’ for FY23.

Hardware-related headwinds persist

Beeks Financial Cloud Group, the cloud computing, connectivity and analytics provider for financial markets, has delivered impressive H1 23 results, in our view. Revenue growth (+35% YoY) and margin expansion (underlying EBITDA +48% YoY) were highlights of the release, with financial performance benefitting from recent investment in the platform and product set. The group made strong operational progress during the half, and commentary on the outlook is positive. Overall, we believe the announcement will maintain confidence in the Beeks growth story.

Operational progress continues in H1 23

Aferian has released a positive update on trading for the year ending November 2022. The group finished the year in line with the Board’s recently-lowered expectations, with FY22 revenue now expected to be approximately $91m, with record levels of ARR and a stronger-than-expected cash balance. Management reiterated its expectation of reporting adjusted EBIT in the $7.8m-$8.8m guidance range. We leave estimates unchanged ahead of the full results announcement due in February, and continue to believe the group remains well placed to capture growth from the ongoing structural shifts in global TV consumption.

A strong end to FY22

Aferian has this morning given a trading update for the year to 30 November 2022. Revenue and profit will both be impacted by a shortfall within the devices business as customers reduce inventory levels, ironically due to an easing of concerns over supply chain logistics. We reduce our estimates for both FY22E and FY23E following the announcement. The group has also announced that it has been in discussions around a ‘significant acquisition opportunity’, which has been aborted.