Yotta cash to invest for lotta returns?

Oxford Metrics has today reported a strong set of FY22 results particularly given the supply constraints set out in the September trading update. Demand is clearly strong with another record order book – over £24m at the year end. The statement discloses that management see the supply chain constraints relaxing, but they are not taking this for granted. We see it as too early to upgrade our FY23 trading forecasts to include the £3.5m of revenues delayed in FY22 on top of existing forecast volumes, although we are upgrading interest income expectations. Location Based Entertainment has performed particularly well – accounting for 9% of revenues. We note that the recent commentary from the semiconductor majors and the strong order book balance the risk in our forecasts to the upside – and investors are rightly focussed on what can be achieved with the £67.7m in cash.

Yotta cash to invest for lotta returns?

Interim results for the six months ended 30 September 2022 show that Shearwater has delivered a robust trading and operational performance. The Services division saw an increase in revenue, while Software division revenue was once again impacted by the impending new product launches and revisions. Current trading is strong, with newly released software products generating encouraging interest. The financial performance was, however, affected by a significant unrealised forex charge and working capital drag. We have revised our forecasts to reflect these transient negatives and sustainable positives. Cyber and Shearwater are long-term stories with dynamics that are significantly more attractive than mainstream software and services; Shearwater’s market valuation does not appear to reflect this.

Robust trading despite macro headwinds

CML’s interim results for the six months ended 30 September 2022 have significantly exceeded management’s own expectations. We do not publish half-year forecasts, but with revenue in the first half 22% ahead of H1 FY22, the Reported PBT result (£1.8m) was not far from our forecast for the full year (£2.1m). We have therefore raised our forecasts significantly for FY23 and FY24. CML’s focus on wireless communications markets, working in non-consumer, high-performance applications where customer service allows it to differentiate, is clearly demonstrating its value.

Exceptionally strong results

Xaar announced on Wednesday the release of its Aquinox printhead for use with water-based inks. This is a major step forward for Xaar and for aqueous inkjet printing. Aquinox is the latest printhead to work on Xaar’s ImagineX platform and helps open up new markets, most notable packaging and textiles. It also enables Xaar to take advantage of increasing demands in other markets, notably ceramics.

Aquinox – a turning point in inkjet technology

Idox has today released a trading update for the year ended 31 October 2022. The statement reports a strong performance, with particularly encouraging news on order flow and sales of Idox Cloud. We have adjusted our forecasts for FY23 and FY24 to reflect new assumptions around cash payments and working capital. Management expectations for FY23 are maintained and the year has started well. The update reflects the progress over recent years and the strong position Idox holds, which should allow further organic and acquisition-driven growth.

Trading update shows strategy driving results

MJ Hudson has today issued a statement that, following feedback from and discussions with EY regarding the ongoing audit for FY22, management does not expect the forthcoming FY22 results to match the guidance for adjusted EBITDA of at least £8.3m due to audit adjustments. The potential adjustments are all non-cash in nature and have no impact on the operating performance of the current financial year (FY23). The discussions with auditors continue and the company is expected to issue an update in due course. In the meantime, we are withdrawing our forecasts. The statement concludes by stating that current trading is encouraging.

Guidance changes following audit adjustments

The acquisition of LandHawk Software Services for £1.5m, announced yesterday, marks a continuation of Idox’s existing acquisition strategy, building on the purchases in 2021 of Aligned Assets, thinkWhere and ExeGesIS. LandHawk is a land mapping software and GIS data business that currently specialises in the UK renewable energy industry. The transaction brings an interesting, growing business to Idox, while also increasing Idox’s client base and allowing cross-selling opportunities into the group’s current local authority customer base. We leave our earnings forecasts unchanged for now, although the statement suggests that the transaction should be earnings enhancing in its second year.

Sharp eye for acquisitions

SRT Marine has today issued a trading update for the six months ending 30 September 2022. H1 23 revenue of £18.8m was up considerably (300%) on the £4.7m reported at H1 22. The principal driver of this growth is the fact that the Systems division passed a number of key milestones, generating revenue of c.£13.6m, up from £0.5m the year before. Management estimates that a minimum profit before tax of £1.5m was generated in the period, versus a loss of £3.1m at H1 22. The statement confirms management’s messaging that SRT’s markets are recovering and that the company is showing growth in both AIS and maritime surveillance and security systems. We look forward to the interim results in November as an opportunity to find out more about SRT’s progress and to gain further insight into its financial prospects.

Revenue realised as milestones passed

Oxford Metrics’ full-year trading update stated that supply chain problems have led to £3.5m of shipments being deferred from FY22 into H1 FY23. However, demand remains strong, with Oxford Metrics once again having a record order book. We have adjusted our forecasts to reflect the impact on FY22. Elsewhere the Location-based Entertainment market continues to grow, with contract wins and leading customers continuing aggressive roll-outs. This is a frustration but does not alter the positive, technology application and adoption driven investment case.

Supply chain issues vs strong demand

The trading update issued today by CML states that for the full year ending 31 March 2023 both revenue and earnings are expected to be ahead of market expectations based on the current rate of trading and current exchange rates. We are not revising our forecasts at this point but look forward to the interim results in November as an opportunity to review the strength of the progress being made. We note that the investment case for CML remains based on the delivery of longer-term growth from next-generation wireless communications, but newsflow such as this and the recent announcement on property planning applications demonstrates management’s ability to deliver, which reinforces our positive view.

Performing ahead of expectations

The interim results for the six months ended 30 June 2022, released today, provide further evidence that Xaar is back on a growth path. H1 22 revenue was up 39% on H1 21 and 11% on H2 21. Organic growth was a very impressive 14% H1 on H1. These figures actually mask even stronger underlying progress, as the Printhead business was significantly constrained by the continued Covid-19 lockdown restrictions in China. Xaar is on track to launch its new aqueous printhead product in Q4 2022. The recent FFEI and Megnajet acquisitions are performing well, and all business units delivered positive adjusted EBITDA in the period.

Strong results; stronger underlying progress

Kape’s Interim Results for the 6 months to 30 June published today follow the Trading Update in July and are comfortably in line with full-year expectations. Strong cash generation, coupled with revenue growth of 217% and 210% pro forma Adj EBITDA growth, is consistent with the update, and management remains confident of full-year results in line with market expectations. We are towards the lower end of the range and continue to see risk to forecasts on the upside.