At a glance

Tracsis PLC (LON:TRCS), which rose 10%, was a notable gainer after trading news relieved some concerns about the impact of the coronavirus (COVID-19) on the transport technology business.

Small-cap tech news roundup

Last week saw interim results from Telit Communications PLC (LON:TCM) and trading updates from Essensys Group PLC (LON:ESYS), Tracsis and Shearwater Group PLC (LON:SWG).

Telit Communications, the telecoms hardware and services business focused on internet of thing (IoT), reported H1 revenues 7.4% lower at US$166.9mlm, reflecting the impact of COVID-19, while adjusted EBITDA increased by 12.5% to US$18.0mln. The group closed the period with net cash of US$56.2mln. The business has undergone a major transformation over the last two years, including disposing of its automotive division, and now is focused on the industrial IoT (internet of things) market based around its OneEdge platform that offers both hardware and services solutions.

Essensys, a provider of software-as-a-service (SaaS) platforms and on-demand cloud services to the flexible workspace industry, said that revenue and adjusted EBITDA for the year ending July 31 were in line with expectations.   Revenue grew by 9% to £22.4m, while recurring revenue increased by 18% to £19.3m, representing 86% of the total. The annual recurring revenue (ARR) run-rate rose by 14% over the 12 months to stand at £19.7m. Cash at year-end was £8.4m and the group has no debt. Despite the Covid-19 challenges, the group delivered 15 new Connect sites in Q4, closing the financial year with 419 live Connect sites, an increase of 17% year-on-year. Essensys has a further 26 new Connect sites contracted, the majority of these scheduled to be delivered in H121.

Tracsis, which provides of software and services for the rail, traffic data and wider transport industries, said that the revenue decline in its Traffic & Data Services division, due to the COVID-19 pandemic, was much less than originally feared.  It is now expecting to report group revenues in the year to July of c £48m, down c 2%, which reflects a c £10m impact from the pandemic, mainly in the Traffic & Data Services division. Meanwhile, the Rail Technology & Services division traded very well throughout the pandemic, underpinned by high levels of recurring software revenue. Management says that the Remote Condition Monitoring business along with all the Rail Technology & Services divisions software businesses have been performing strongly. iBlocks, the smart ticketing business which was acquired in March 2020, has been trading well, and integration is progressing. The group’s adjusted EBITDA margin (IFRS 16 basis) is expected to be 100bp lower on the year at c 20%.  The cash position as at the end of July stood at c £18m.

Shearwater, which provides cybersecurity advisory and managed security services, said that revenue and underlying EBITDA are tracking in line with expectations, driven through contract renewals from its existing customer base and supplemented by new business wins. The company continues to see a robust level of incoming new business enquiries both domestically and internationally. The group had unaudited gross cash of £4.1m as at 31 July 2020 along with an undrawn revolving facility of £4.0m.

Small-cap software & services market roundup

Small-cap software stocks pushed to post-pandemic highs last week, despite a languishing FTSE-100 which fell by 1.4% over the week. Larger cap software stocks were also solid, supported by gains from Learning Technologies Group PLC (LON:LTG)  and Blue Prism Group PLC (LON:PRSM), which both increased by c 5%. 

UK Technology plays

Source: Indices are unweighted, with number of constituents in brackets

Recent UK tech sector fundraisings

No significant new fundraisings in small-cap tech were announced last week.

 

  Est’d gross amount Announced Method Price Discount/ (prem) to prior day (%) Est’d % of new capital Comment
               
Pelatro £2.1mln 04-Aug Placing/subsc 49p 12.1 12.2 Strengthen sales and marketing
TERN £1.5mln 20-Jul Subscription 8.5p 19.0 5.9 To expand the portfolio
Nanoco £3.4mln 16-Jul Placing 17.5p 2.8 6.4 Address opportunities, while maintaining b/s during lawsuit
Ethernity £0.78mln 13-Jul Placing/subsc 12p 37.0 16.6 To support engagements for its 5G offering
Deepmatter £2.1mln 13-Jul Placing/subsc 1.5p 18.9 16.2 Invest in sales, marketing, distribution, support
Redcentric £5.755mln 26-Jun Placing/subsc 110p -7.8 3.3 Part funds settlement with the FCA
Instem £15.75mln 26-Jun Placing 435p 4.4 17.7 Accelerate the acquisition strategy 
Boku £20.1mln 17-Jun Placing 85p 7.1 8.4 Part finances US$41m acquisition of Fortumo
Wandisco US$25mln 11-Jun Placing 650p 12.2 6.0 Strengthen b/s and working capital
Learning Tech £81.8mln 29-May Placing 127p 7.6 8.8 Accelerate growth and gain market share
accesso technology £32.9mln 22-May Placing 290p 13.4 29.1 Strengthen balance sheet as CV19 continues
accesso technology £6.2mln 22-May Open offer 290p     1 for 13 ratio

Source: Data from regulatory news and company websites

Tech calendar

Interim results season continues in the UK small cap space and runs through September. There is also a scatter of final results from companies with periods ending March, May and June.  

Across the pond, tech-related companies expected to report earnings this week include Autodesk, Hewlett Packard Enterprise, Intuit, Salesforce, NetApp, Splunk, Box, HP Inc, Workday and Dell.

 

Date Company Event Period ending
       
01-Sep Centralnic Interim results 30-Jun
03-Sep NCC Final results 31-May
Early Sep Craneware Final results 30-Jun
07-Sep SRT Marine Systems Final results 31-Mar
07-Sep Blackbird Interim results 30-Jun
09-Sep EMIS Interim results 30-Jun
15-Sep Bango Interim results 30-Jun
15-Sep Kape Interim results 30-Jun
16-Sep Accesso Interim results 30-Jun
Mid-Sep Beeks Financial Cloud Final results 30-Jun
21-Sep Tern Interim results 30-Jun
22-Sep Ideagen Final results 30-Apr
29-Sep Alfa Financial Software Interim results 30-Jun
29-Sep Blancco Tecnology Final results 30-Jun
Late-Sep Attraqt Interim results 30-Jun
30-Oct Seeing Machines Final results 30-Jun

Source: Data from regulatory news and company websites

Small-cap software & services valuations

The sector ratings look fair in comparison with the UK 350 large caps, given the significantly stronger growth potential, combined with the relatively strong balance sheets. Earnings upgrades last week included First Derivatives and Tribal.

 

  Shr Price Pence Market Cap £m Net debt/ (cash) £m Enterprise Value £m EV/sales Year 1 EV/sales Year 1 P/E Year 1 P/E Year 2
First Derivatives 3040 835 49.4 884.4 3.8 3.4 50.1 38.3
EMIS Group 1026 645 (44.1) 600.9 3.8 3.7 21.7 20.0
SDL 602 548 (35.1) 512.9 1.4 1.3 25.2 20.0
NCC Group 174 485 5.0 490.0 1.9 2.0 25.5 29.4
Ideagen 210.5 477 32.4 509.4 9.0 8.2 38.8 33.4
Craneware 1685 452 (38.7) 413.3 7.6 7.3 35.7 35.6
DotDigital Group 135.5 404 (25.4) 378.6 8.0 7.5 34.7 36.7
Iomart Group 345 376 37.3 413.3 3.6 3.4 20.9 19.8
IMImobile 402.5 331 (2.0) 329.0 1.9 1.9 26.7 27.0
Kape Technologies 190.5 302 24.2 326.2 3.5 3.1 18.5 16.2
WANdisco 574 301 (17.6) 244.4 15.1 10.6 (23.0) (37.6)
Aptitude Software Group 430 242 (30.9) 211.1 3.7 3.8 33.5 36.2
Redcentric 143 220 13.5 233.5 2.6 2.5 20.7 18.1
Alfa Financial Software Holdings 72.2 217 (58.5) 158.5 2.7 2.6 100.3 55.5
IDOX 47.55 212 14.0 226.0 3.4 3.1 21.8 18.1
Alpha Financial Markets Consulting 200 202 (14.1) 187.9 2.0 1.8 14.6 13.3
Tracsis 630 183 (11.0) 172.0 N/A N/A N/A N/A
Eckoh 67 170 (11.6) 158.4 4.3 3.9 37.6 30.9
Quartix Holdings 347 166 (10.0) 156.0 6.1 6.2 30.2 33.4
Centralnic Group 86.5 166 62.1 228.1 1.5 1.4 19.0 16.5
Blancco Technology Group 195 147 (6.7) 140.3 4.2 3.8 47.9 40.6
Loopup Group 225 125 5.4 130.4 2.3 2.3 15.3 28.8
Tribal Group 60 123 (6.7) 116.3 1.6 1.6 14.7 14.8
Oxford Metrics 93.5 118 (14.2) 103.8 2.8 2.5 21.6 16.0
Bango 145 108 (4.2) 103.8 8.8 N/A 85.3 N/A
Instem 527.5 108 (23.2) 84.8 2.9 2.7 29.3 30.9
Accesso Technology Group 260 107 (24.5) 82.5 2.6 1.2 (4.7) (50.1)
Seeing Machines 3 101 (25.0) 76.0 3.5 3.1 (6.1) (8.8)
Cerillion 328 97 (4.8) 92.2 4.5 4.2 31.5 27.8
Sopheon 920 94 (17.3) 76.7 N/A N/A N/A N/A
D4t4 Solutions 227.5 92 (12.8) 79.2 3.6 3.3 33.4 28.3
Essensys 148 78 (8.4) 69.6 N/A N/A N/A N/A
Gresham Technologies 107 73 (5.1) 67.9 2.7 2.7 46.7 53.5
                 
Averages         3.1 2.7 50.8 32.2

Source: Data from regulatory news and market sources