Market backdrop remains favourable

With the global economic situation increasingly uncertain, we have taken the opportunity to review recent industry forecasts on the streaming video market. The message remains positive: the industry continues to expect robust growth in the near/medium term, despite the challenging macro backdrop. We have also taken a deep-dive into Netflix Inc’s Q1 22 release, which revealed that the industry leader in streaming video is facing a number of headwinds. In our view, one difficult quarter for Netflix is not a sign of turbulence for the global video streaming market, nor an indication of more challenging conditions for the markets addressed by Aferian.

Market backdrop remains favourable

IG Design’s FY22 results reflect both a challenging cost environment and the group’s unwavering service commitment to its customers, with the former unable to be recouped and the latter incurring significant incremental costs. The priority now turns to building a more robust business model.

Rebuilding a more resilient model

Today’s AGM statement confirms that, with strong trading so far this year, Kape is on track to deliver in line with guidance ( revenue of $610-624m and adjusted EBITDA of $166-172m ( for FY22. The statement makes clear management’s confidence in the outlook for the business and the potential for it to drive growth both organically and through acquisitions. The update reaffirms our confidence in Kape and the company’s long-term prospects.

Executing against key objectives

Idox’s half-year results for the six months ended 30 April 2022, released yesterday, contained no major surprises given the contents of the trading update issued on 19 May. We are not changing our revenue or profit forecasts. Revenue was up 7% at £33.2m (H1 FY21: £31.1m) and adjusted EBITDA was up 8% at £11.0m (H1 FY21: £10.1m). The Public Sector business has provided the robust result we expected, with percentage revenue growth in the double digits, while the Engineering business has had some impact that can be attributed to wider economic concerns. Based on current trading, contracts, pipeline and prospects, management remains confident that the business will deliver on the solid growth in revenue and adjusted EBITDA that are suggested by our forecasts.

Moving forward

Aferian’s update for the six months ending 31 May 2022 highlights a strong performance from the (higher margin) software and services business, with management actively mitigating the short term supply disruption being experienced by the devices segment. At the group level, earnings quality continues to improve, as does earnings visibility. Management strikes a confident tone in the outlook commentary, and we leave estimates unchanged. In our view, the release demonstrates further progress towards delivering the 2025 strategy, and we continue to believe that Aferian is strongly placed to benefit from the ongoing structural shifts in the TV industry.

Strong performance in software and services

Sopheon’s AGM Statement, issued today, provides a reflection upon a busy FY2021 and looks forward to what has already started as a year of progress in FY2022. In FY2021, Sopheon grew recognised revenues and annual recurring revenues by 15%, beating market expectations in the process. The year also saw a new CEO and a reinforcement of the management team, along with the acquisition of ROI Blueprints. FY2022 appears to have started well, with six new customer wins (all SaaS based) already, compared with 10 in all of FY2021, and with the acquisition of Solverboard, announced in May. We are leaving our forecasts unchanged and continue to be impressed by Sopheon’s expansion and SaaS transition as management grows a more substantial business with greater long-term revenue visibility.

Strong start to another year of progress

Today’s H1 trading update from Idox confirms that the first half of the year has seen a solid financial and operational performance, in line with management’s expectations. We leave our forecasts intact and look forward to the results in June as an opportunity to find out more about the strong operational progress that the business is making.

H1 update – robust, positive performance

Gamma has today issued a Q1 trading update, coinciding with its AGM. The update confirms that the year has started positively, with revenue growth across all operating segments. Management expects this positive momentum to continue throughout the year, with full-year adjusted EBITDA and adjusted EPS being in the upper half of market estimates. We have tweaked our FY22 revenue estimate down (£495m to £488m) but left our earnings figures intact.

Q1 update – on course for another growth year

Sopheon has today announced the acquisition of the business and assets of Solverboard, a UK-based SaaS software business that provides innovation management software focused on the early stages of product development. This is an interesting transaction that should speed up Sopheon’s transition to a full SaaS business. Solverboard is an early-stage business with relatively low costs, and we are not adjusting our estimates at present.

Solverboard acquisition speeds SaaS transition

Shearwater has published a trading update for the year ended 31 March 2022. As a result of a strong H2, revenues for the full year are materially ahead of our, and market, expectations, with management now expecting £35.5m for FY22, up 12% on FY21 and £2.0m ahead of our forecast. The update also states that EBITDA is expected to be in excess of £4.2m, ahead of our forecast of £4.1m. This statement, alongside recent contract wins, shows that management’s hard work in recent years is paying off. We have adjusted our FY22 figures to reflect this good news, and look forward to the final results in July as an opportunity to find out more and revisit our FY23 estimates.

Trading significantly ahead of estimates

Instem has reported FY21 results consistent with the January trading statement and in line with our forecasts. Despite the ongoing macroeconomic turbulence from Covid-19, the group continues to report impressive revenue growth, both headline and organic. With three major acquisitions, the group also made a strategic step change in its platform during 2021. While the release contains positive commentary on the outlook, we adjust FY22E and FY23E profit forecasts to reflect revised opex assumptions.

FY21 Strong financial performance, strategic transformation

ZOO has announced a trading update for the full year to 31 March 2022. Good momentum has continued since the previous update, with what we understand to have been a strong performance from all areas of the group. The full year is now expected to be ahead of previous guidance, and we upgrade FY22 estimates. This note also provides some comment around recent subscriber challenges for Netflix. We see these as a positive for ZOO, whose content-related services are likely to experience increased demand as streaming-platform customers battle each other to produce premium content in the right geographies and languages.