Following an October profit warning that wiped more than two-fifths of Castleton Technology’s (CTP) market value, there were few surprises in the social housing software specialist's half-year results. Organic revenue declined by 13 per cent amid lower hardware sales and fees from professional services.
As customers transition to cloud services, the need to update their physical technology infrastructure has declined. Hardware and one-off revenue dropped by more than half to £1.4m, exacerbated by one customer halting their hardware capital expenditure while it reviewed cloud alternatives. A more modest increase in recurring revenue was unable to make up the shortfall, but the shift in the mix means higher-margin category of services now comprise two-thirds of total sales, up from 55 per cent at the same point last year.
The protracted merger of managed services and software solutions was completed in September and management believes the simplified structure will drive further cross-selling opportunities. With almost three-quarters of new sales were made to existing customers, more than half the group’s 595 housing association customers took more than one product or service.
House broker FinnCap forecasts adjusted pre-tax profit of £5m and EPS of 5.7p for the full year, rising to £5.6m and 6p in 2021.
| CASTLETON TECHNOLOGY (CTP) | ||||
| ORD PRICE: | 72p | MARKET VALUE: | £58.8m | |
| TOUCH: | 71-73p | 12-MONTH HIGH: | 112p | LOW: 49p |
| DIVIDEND YIELD: | 1.4% | PE RATIO: | 14 | |
| NET ASSET VALUE: | 31p* | NET DEBT: | 16%** | |
| Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2018 (Restated) | 12.9 | 0.50 | 0.68 | nil |
| 2019 | 11.6 | -0.20 | 0.63 | nil |
| % change | -10 | - | -7 | - |
| Ex-div: | na | |||
| Payment: | na | |||
| *Includes intangible assets of £32.7m or 40p a share **Excludes lease liabilities of £1m | ||||
