In the age of emails and instant messaging, one might question whether people still feel the need to speak on the phone – let alone hold conference calls. Enter the remote meetings software market, which UK-based provider LoopUp (LOOP) values at £5bn. LoopUp floated on Aim in August 2016, and offers a cloud-based software platform that “makes it easier to collaborate in real time”. This works with users’ everyday computer tools (such as Microsoft Outlook and other email servers). Participants can ask the application to call them, so they don’t need to ‘dial in’ – and they can share their screens while they’re on the phone. They can see who else has joined the meeting and whether it is being recorded. No training is required. Given how straightforward all this sounds, it's perhaps unsurprising that demand is strong and the company already has more than 2,000 customers.
Strong top-line growth
Improving profitability
Healthy stream of new business
Debt-free balance sheet
Very high forward earnings multiple in the short-term
Relatively small player in remote meetings software market
LookUp's top line is growing rapidly. In the first half of 2017, revenue (excluding discontinued business) improved by 44 per cent year on year. This was a higher growth rate than each of the two previous full years. And while profit is still small, it is growing fast with a seven-fold rise in first-half pre-tax profit to £510,000. Strong customer loyalty is contributing to this momentum, helped by the company’s focus on reliability and security. At the half-year stage, net sales to clients that had used LoopUp for more than a year rose by 9.1 per cent, up from 8.3 per cent growth in 2016.
New business wins are what is really driving sales, though. A higher number of ‘pods’ – mini sales teams – has propelled annualised recurring revenues (ARR) upwards. There was an average of 7.7 pods during the first half, each costing £0.49m to operate and each generating ARR growth of £0.51m. The US is the group’s strongest region for sales, constituting 52 per cent of the top line, which means reported numbers have benefited from sterling's weakness.
Despite this fast expansion, the net cash position remains encouraging. And while there are big names competing in the remote meetings space, such as tech giants Google, Citrix and Amazon and telecom behemoths such as BT and AT&T, the onus these providers put on high-end features has left LoopUp with a lucrative niche aimed at providing easy-to-use solutions for non-tech savvy users.
Investors may see some concern in a recent 260p placing that saw five top managers, including the two co-chief executives and finance director, offload 1.6m shares for £4.1m. However, the co-chief executives are still the fifth and sixth largest holders of stock
| LOOPUP (LOOP) | ||||
| ORD PRICE: | 275p | MARKET VALUE: | £116m | |
| TOUCH: | 270-280p | 12-MONTH HIGH: | 300p | LOW: 112p |
| FORWARD DIVIDEND YIELD: | nil | FORWARD PE RATIO: | 39 | |
| NET ASSET VALUE: | 20.5p* | NET CASH: | £1.6m | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m)** | Earnings per share (p)** | Dividend per share (p) |
| 2015 | 10.1 | 0.2 | na | nil |
| 2016 | 12.8 | 1.1 | 0.5 | nil |
| 2017** | 17.5 | 3.1 | 3.7 | nil |
| 2018** | 23.5 | 5.7 | 7.0 | nil |
| % change | +35 | +68 | +110 | nil |
| Normal market size: | 1,500 | |||
| Matched bargain trading | ||||
| Beta: na | ||||
*Includes intangible assets of £5.7m, or 13.6p a share ***Panmure Gordon forecasts, adjusted PTP and EPS forecasts | ||||
