Big Technologies turning surveillance into cash

Big Technologies (BIG), a producer of electronic tags for monitoring people’s location, listed last summer. It profits for the most part from helping governments keep track of criminals, but it also sells into the care sector. Last year, the criminal justice sector accounted for more than 98 per cent of reported revenue.

Overall revenue grew by 27 per cent to £37.6mn, thanks mostly to 41 per cent growth in the Asia Pacific and Americas regions. European revenues fell 23 per cent because one large Covid-related contract from 2020 wasn’t renewed. Apart from this one contract, the rest of the European customers increased spending – with revenue rising 56 per cent.

Adjusted cash profit increased by 31 per cent to £20.6mn, helped along by scale benefits on the operating front. With profit growth outpacing revenue growth, the adjusted operating margin expanded 2 percentage points to 47.7 per cent.  

As with most companies at the moment, there are some supply chain issues. To manage those efficiently, inventories have increased by around 50 per cent to £3mn. With more working capital tied up in the business, this means that cash conversion fell from 107 per cent to 89 per cent.

With healthy operating margins and strong cash generation, it is unsurprising that the company is currently trading on a forward PE of 32, particularly in view of the lofty tech ratings we have seen in recent times. However, in April last year, Apple released an Air Tag to help people monitor the location of their possessions. Apple's technology seems capable of performing the same task for governments, and the juicy margins on offer will surely attract further competition. Even with contract agreements already in place, the surveillance market in all its forms is an increasingly crowded space. Sell.

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