FY23 trading update and outlook

Shearwater yesterday issued a trading update further to its previous trading update for the year ending 31 March 2023. Shearwater continues to expect revenue of c.£27.0m (FY22: £35.9m) with adjusted EBITDA at around breakeven (FY22: £4.4m), but net cash at year-end is expected to be around £4.0m, ahead of the previous guidance of £3.4m. Importantly, the company has seen an improving outlook and order pipeline since the year-end. In Q4 the business was impacted by delays and deferrals of orders and work in both the Software and Services businesses, leading to significant cuts to expectations. With the recent launch of new software products and a robust balance sheet, the statement suggests that the company has regained its poise and is positioned to move forward. We are publishing revised forecasts, and look forward to more detail on management plans to drive growth and profits at the results in August.

FY23 trading update and outlook

Sopheon’s AGM statement, issued today, revisits the successes of FY22 but also updates on the encouraging progress made so far in FY23. The statement is positive and confident in tone. Since the start of the year, Sopheon has secured five new SaaS client wins with Accolade, alongside a number of order extensions. ARR is up by an impressive 18% on this time last year. Revenue visibility of $31m and an active pipeline of both new and existing customers underpins management’s confidence in full-year prospects. We maintain our forecasts for FY23 and FY24, and look forward to revenue and profit growth in FY25 as momentum builds for the twin-pronged approach for Acclaim and Accolade.

AGM statement – FY23 starting well and to plan

Idox has today reported a strong set of half-year results for the six months ended 30 April 2023. Revenue grew by 8% to £35.8m from £33.2m in H1 FY22 and adjusted EBITDA of £12.1m was 10% above H1 FY22’s figure. Recurring revenues grew broadly in line with the headline revenue figure, while the adjusted EBITDA margin was slightly ahead at 34% (H1 FY22: 33%). The half saw Idox move from net debt (FY22: £-6.7m) to net cash (H1 FY23: £1.1m). Order intake grew, with the overall figure of £52m being a 23% increase on H1 FY22. Against a backdrop of a building orderbook, and having delivered to expectations in the first half, management expects FY23 results to be in line with previous expectations.

Long-term value generation becomes clearer

Oxford Metrics’ interim results, published today, show strong performance with a very encouraging outlook. Revenue of £21.3m is an increase of 69.6% on H1 FY22, 62.5% on a constant currency basis, while adjusted PBT of £4.1m is a significant advance on the £0.3m reported in H1 FY22 and the £2.3m in H2 FY22. It is clear from the results and statement that supply chain issues have receded. These results include the £3.5m of output that could not be delivered in FY22 due to component shortages. The outlook statement is positive and guides to year-on-year revenue growth in H2, with a full-year performance ahead of current market expectations; we raise our FY23 revenue and adjusted EBITDA forecasts to reflect this. Despite the strong operational performance, the destination of the £63.6m of cash (as at 31 March) remains a focus of much investor attention – management’s track record on acquisitions and disposals gives us confidence on this front.

Excitement builds

Today’s AGM trading update confirms that Gamma has continued to show growth across all three business areas. Management expects the strong start to the year to continue and for FY23 adjusted EBITDA and adjusted EPS (fully diluted) to be in line with market expectations. UK Direct and Indirect both continue to perform well, and in Europe the H2 22 improvements have continued into FY23. New products have helped growth in Europe, while in the UK Gamma has launched its Simple Swap product for SME customers to convert their legacy data and voice services as PSTN switch-off approaches. Despite the strong balance sheet, excellent cash generation and an impressive growth outlook, Gamma’s shares appear to trade on undemanding multiples.

AGM update – ticking all the right boxes

The trading update for the year ended 31 March, issued today, confirms that CML expects to report revenue and PBT in line with market expectations, and that, with a healthy order book, the group continues to look forward to more strong growth in FY24. US regulatory clearance for the Microwave Technology acquisition is progressing, and integration planning has begun. CML continues to deliver on all fronts, and we look forward to FY24 and beyond as it builds out its technology and market position in 5G and other next-generation wireless technologies.

Firing on all cylinders

Today’s FY22 results reflect a year of significant progress, with revenue and EBITDA coming in above the market expectations prior to the January update. Sopheon completed two acquisitions and launched three products, broadening its family of InnovationOps solutions and expanding the addressable market to $3bn. FY22 also saw Sopheon’s largest single deal to date: the $11m US Navy contract. Revenue of $36.8m was 7% ahead of $34.4m in FY21, or $38.1m on a constant currency basis, representing 10% organic growth. The outlook statement shows management as confident and on the front foot. As momentum builds for the twin-pronged approach for Acclaim and Accolade, revenue and profit could rise dramatically in FY25 and beyond. Enterprise value is currently only c.1.5x FY23E revenue and would appear to us to not yet reflect this potential.

A year of strategic and product progress

Today’s AGM trading update, covering the period from 1 November to date, confirms that Idox continues to perform well, having made an encouraging start to the financial year and with excellent visibility on revenues for FY23. The robust story and positive outlook we have seen growing in recent years looks set to continue.

Trading well, with no signs of turbulence

Gamma’s results for the year ended 31 December 2022, released today, are in line with expectations and guidance, and show a strong performance with 8% growth in revenue (£484.6m vs FY21 £447.7m), 10% improvement in adjusted EBITDA (£105.1m vs FY21 £95.4m) and 12% increase in adjusted diluted EPS (71.8p vs FY21 64.0p). Cash generated by operations was up by 10%, resulting in year-end net cash (pre-leases) of £92.5m (FY21 £49.5m). Trading in the UK, in both the Indirect and Direct businesses, was strong, with Germany leading the way in Europe. The impressive and consistent progress, and notable drive on investment in technology, suggest to us that Gamma’s recent derating is unjustified.

Continuing UK growth drives profit and cash

A release from CML, published today, states that conditional planning approval has been granted at its 29-acre site at Oval Park in Maldon, Essex. Final approval is subject to completion of Section 106 Unilateral Undertakings, which should be a formality, and is expected to happen shortly. This is excellent news for CML and a clear demonstration of management delivering value. Exact figures are still undisclosed, but the development strengthens CML’s balance sheet yet further and gives the company greater capacity to invest in the next-generation wireless opportunity.

Property value realisation – going to plan

Idox’s results for the year ended 31 October 2022, released on Thursday 26 January, showed a strong performance in line with guidance given in the November trading update. Revenue of £66.2m was an increase of 6% on FY21, driven by strong growth in the public sector business; within this, recurring revenues grew by 12% to £40.5m. Adjusted EBITDA of £22.5m, up by 15% from £19.5m in FY21, was at an improved 34% margin (FY21: 31%) driven by operational improvements, acquisitions and mix. Year-end net debt of £6.7m was reduced slightly (FY21: £8.1m), impacted by Covid VAT deferrals, tax payment timings and acquisition payments. Following this strong FY22 performance and guidance that the start of FY23 has been encouraging, we leave our FY23 and FY24 forecasts intact and introduce estimates for FY25, retaining our forecast of double-digit organic growth for the year ahead – growth that could well be augmented by further acquisitions.

Flying start to FY23

Oxford Metrics has provided a trading update alongside its AGM to be held today. The group started the year with a record order book (previously disclosed as £24m) and today’s update describes the current order book level as ‘substantial’ and underpinning ‘100% visibility’ on FY23 revenue expectations. We make no changes to forecasts, but clearly this is positive news and risks to estimates (both ours and consensus) are likely to be on the upside.