Secure profits with Accumuli

Accumuli, which is also a favourite of IC columnist Simon Thompson, provides exposure to the $34bn (£21.7bn) global cybersecurity market and the rising threat of data theft and online fraud - security breaches rose by about two-thirds last year and exposed 552m identities. Government legislation could be another growth catalyst, as Parliament plans to obligate internet service providers to maintain records of internet address usage - a task suited to Accumuli's DDAM software.

Accumuli offers its clients the option of outsourcing their network security. It also provides cybersecurity consultancy services and resells software. A key feature of the company's growth to date has been its 'buy and build' strategy, which involves snapping up multiple software companies. In such a fast-moving area, Accumuli's strategy holds some real promise, and its purchase of IT security group Signify and 'big data' analytics specialist Eqalis last year helped to widen its gross profit margin from 53 per cent to 60 per cent while expanding its customer base from 300 to more than 700. And analysts expect December's £8.9m acquisition of IT risk group RandomStorm to contribute £1m in annual cash profits.

Accumuli has also been ramping up capacity to meet rocketing demand. It recently upgraded its 24-hour operations centre and expanded its professional services team. It is also selling additional services to existing customers - the proportion taking multiple products rose from 15 per cent to more than a fifth in the six months to end-September 2014. Furthermore, it has developed proprietary technology that helps different IT products to communicate, reducing the risk of it falling into the role of an expendable middleman. The multi-pronged strategy has helped it land several contracts worth around £1.5m in gross profit since the end of the first half.

Investors can take some comfort from the fact that 64 per cent of gross profits are recurring, which has helped provide a solid foundation for growth - first-half sales rose more than a third, and broker FinnCap expects full-year cash profits to rise 31 per cent to £3.8m. Yet Accumuli's shares trade at 12 times forecast underlying EPS of 2.1p for the year to end-March 2016, and offer a tasty prospective yield of 3.5 per cent. That looks excellent value compared with its peers in cybersecurity and IT managed services.

True, Accumuli's insatiable appetite for acquisitions does present a risk - it has hoovered up nine companies in the past four years - and amortisation and depreciation charges eclipsed underlying profits in the first half. But the deals have created cross-selling and cost-saving opportunities - Accumuli unearthed £0.6m in annualised savings through restructuring last year. Nor should investors worry about a fall in first-half sales of technology solutions, which stemmed from large projects slipping into the second half of the year. If Accumuli fulfilled all its orders in the period, like-for-like divisional gross profit would have risen more than 30 per cent.