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

Thruvision‘s H1 24 trading update, to 30 September, describes a strong H1 performance, but notes that the Customs sector has suffered a setback. An anticipated order from US Customs and Border Protection (CBP) was not awarded during the US Government fiscal year, due to budgetary challenges. In our view, this is a timing issue, and we would hope to see material CBP orders in September 2024, although these will fall outside Thruvision’s current financial year. Despite this, Customs revenue grew 16% half on half, benefitting from a major contract win, while Entrance Security experienced a bounce-back in demand. Retail Distribution has continued to win clients and is gaining traction with a growing number of leading retailers and global logistics providers. Despite the resilient update, and a £1m order backlog, we reduce FY24E estimates to reflect the absence of the CBP order.

CBP shortfall but strength elsewhere

RBG has reported a solid set of H1 23 results for the six months to 30 June, with revenue impacted by the economic conditions but still delivering a positive adjusted EBITDA. Legal Services (RBGLS) has delivered a remarkably robust six months, and we believe that the group will benefit from its managerial and structural refocus back to the core services side of the business. The statement highlights that Convex performance in H2 will be key to delivery of full-year results. Clearly risks remain within our estimates, but we choose to leave our forecasts unchanged at this time.

Signs of stabilisation

This morning’s AGM statement by ZOO confirms that trading is still being impacted by the two market issues detailed at the recent prelims. First, the industry-wide strikes that have halted new productions have not been fully resolved. A deal has been reached with the writers (WGA) but talks are still ongoing with the actors’ union, given the complexities surrounding AI. Second, workflow is still disrupted as the major streaming providers realign business models to increase profitability. However, we believe this presents a unique opportunity for ZOO to seize market share with its unique end-to-end offering and growing local presence. We have adjusted our estimates for FY24 to reflect the near-term headwinds and feel it is prudent to remove FY25 forecasts until visibility improves.

AGM flags continued workflow disruption

The purchase of Emapsite, a leading UK geospatial software and data business, announced on 21 August, is an exciting step forward in Idox’s land and property strategy. Our forecast revisions indicate that the deal will be earnings accretive, while the announcement suggests that, with further debt available, the acquisition pipeline is both healthy and deliverable.

Emapsite acquisition – accretive, strategic

Xaar’s results for the six months to 30 June show strong strategic progress. Despite a difficult trading environment, H1 performance was in line with expectations and management is confident that it is on track to meet FY23 guidance. Revenue in H1 23 was down 6% to £34.5m due to a combination of economic conditions and a strong comparative in the prior year. Adjusted profit before tax for the period was up 29% to £1.8m, benefitting from the sale of non-core IP, and the gross margin remained steady at 40%.

H1 on course, with designs for future growth

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

Gamma Communications’ H1 results, released today, show strong performance in the two UK business units and very encouraging revenue and profit growth in Europe. Revenue of £256.2m was up 9% (H1 22: £234.7m), while adjusted EBITDA also improved by 9% to £56.5m (H1 22: £51.9m) and adjusted EPS grew by 5% to 37.5p (H1 22: 35.6p), or by 11% on a constant-tax basis. Gamma’s strong cash generation was once again a highlight. Net cash (pre-leases) at the period-end was £121.7m, up from £92.5m at the start of the year.

Switch-on to the PSTN switch-off

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

The H1 23 results, published today, show impressive progress on both the operational and product fronts. SaaS ARR is up 63% on H1 22. Accolade continues to win new clients while Acclaim Projects and Acclaim Ideas are gaining revenue traction, and the recently launched online sales channels for Acclaim Ideas and Acclaim Products are already achieving ‘benchmark run rates’ for signup activity. The outlook statement is confident. In our view, the pieces appear to be falling into place for significant growth in InnovationOps software in FY25 and beyond.

Transition to growth

Tern has delivered a solid set of first-half results against a challenging backdrop, with ARR up 43% year on year and other KPIs continuing to show an improvement. As flagged, valuations across the global technology landscape have been challenged due to risk appetite and long-term value expectations. Therefore, despite a significant improvement in metrics across Tern’s portfolio, the valuation decreased to £21.8m (FY22: £23.9m). The portfolio is gaining commercial traction, highlighted by Wyld Networks’ post-period agreement with SpaceX to explore areas of collaboration. During H1, Tern focused on supporting the growth and development of its existing portfolio, funded by cash realisations of its existing holding in Wyld Networks and a £0.5m loan. In a difficult environment for early-stage technology companies, we believe that Tern’s ‘hands on’ funding-to-exit model can produce positive outcomes in the mid to long term.

Further progress in H1 23

ZOO has announced FY23 results in line with the guidance given in the recent trading update. Increased market share and the scaling up of its international operations have delivered revenue growth of 28% to $90.3m (FY22: $70.4m), with good margin progress and profitability. ZOO’s key growth drivers remain intact, content budgets remain large and the focus by the key streaming players on monetisation models represents a material opportunity, underpinned by the roll-out of ZOO’s strategic geographic hubs. However, short-term trading has been affected by two temporary market issues: cost cutting among major streaming providers holding back order flows, and the ongoing industry-wide strikes impacting localisation and media services work on new titles. We maintain headline estimates for FY24, which we adjusted at the recent trading update to reflect the near-term headwinds. We also maintain our FY25 estimates, with revenue of $115m and adjusted EBITDA at $19m.