The quality of Ideagen’s (IDEA)* top line improved during the six months to October 2019. Recurring revenues constituted nearly three-quarters of total sales, underpinned by strong software-as-a-service (SaaS) growth. Organic revenues were up by 7 per cent – more or less in line with the uptick seen a year earlier – and the group’s annual recurring revenue (ARR) book climbed by a fifth to £43.9m, signalling greater future visibility.
The period saw Ideagen – a supplier of integrated risk management software – buy ‘RegTec’ business Redland Solutions, which provides software for the financial services industry, for £15.8m. It also purchased SaaS-based health and safety compliance company Optima Diagnostics – which has approximately 80 customers across highly-regulated markets – for £1.8m.
These acquisitions have, the group says, enhanced its product portfolio – although the £19.8m spent on these transactions led net debt to escalate from £1.3m to £18m. Still, this represents just 0.9 times house broker FinnCap’s forecast cash profits for the year to April 2020 (£19.8m). Looking ahead, management is standing by its ‘buy and build’ approach – with a focus on recurring revenues and “compelling product offerings”.
Helping to diversify the group’s revenue sources, international expansion continued – with 90 per cent of its 206 new SaaS client wins occurring outside of the UK. The wins in question included Emirates Group, the Washington Department of Transport and insurance and investment company Royal London among others.
FinnCap expects adjusted pre-tax profits of £15.7m and EPS of 5.9p for the year to April 2020, up from £12.2m and 4.8p in FY2019. Analysts here have lifted their target price from 180p to 200p, “with 2019’s relative M&A doldrums out of the way, and increased regulatory potential from Brexit and associated trade deals”.
| IDEAGEN (IDEA) | ||||
| ORD PRICE: | 190p | MARKET VALUE: | £430m | |
| TOUCH: | 188-192p | 12-MONTH HIGH: | 196p | LOW: 93p |
| DIVIDEND YIELD: | 0.2% | PE RATIO: | 170 | |
| NET ASSET VALUE: | 33p* | NET DEBT: | 24%** | |
| Half-year to 31 Oct | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2018 | 21.0 | -0.64 | -0.27 | 0.09 |
| 2019 | 27.3 | 0.09 | 0.15 | 0.10 |
| % change | +30 | - | - | +16 |
| Ex-div: | 27 Feb | |||
| Payment: | 18 Mar | |||
*Includes intangible assets of £109m, or 48p a share **Excludes lease liabilities of £3.2m | ||||
