Ideagen adds fuel to rapid growth

Ideagen provides information management software to highly regulated industries, spanning aviation, aerospace, healthcare and banking, among others. And such is the opportunity in the GRC space that management has opted to redeploy resources away from its other business – content and clinical. So, while overall revenues rose considerably in the last financial year, the smaller division endured a 26 per cent decline to £3.3m, constituting just 9 per cent of total sales.

While the company’s top line was buoyed by 11 per cent organic growth over the respective 12 months, acquisitions were integral to its accelerating momentum. Four businesses bought in the prior year were fully integrated. And, marking a significant milestone, Ideagen made its first ever US-based acquisition in April. Medforce, purchased for $8.7m, is a profitable and cash-generative healthcare software specialist, offering workflow and compliance software to more than 300 US healthcare customers.

More recently, in September, the group bought InspectionXpert – a North-Carolina-based business providing a digital quality inspection solution for the engineering and manufacturing industry. This deal – worth $7m – has further consolidated Ideagen’s nascent foothold in the US. Like Medforce, it also prompted top and bottom line analyst upgrades.

Both American transactions offer excellent recurring revenues, which is a key focus for Ideagen. Indeed, the group has been shifting away from a licensing model, towards a software-as-a-service (SaaS) subscription model. Last year recurring revenues represented 62 per cent of the total, up from 57 per cent, which was underpinned by a 76 per cent rise in SaaS revenues to £8.4m.

Turning to the balance sheet, Ideagen’s net cash fell from £4.2m to £0.8m in the acquisitive year to the end of April. But that picture is out of date because, on 13 September, the group placed around 14.1m shares with institutional investors at 142p each – representing 6.9 per cent of the issued share capital – to raise £20m.

The proceeds are intended for specific acquisition targets. First up is a competing GRC software provider in the UK and the US, with an estimated current revenue run rate of £5.3m and cash profits of £1.7m, for which Ideagen expects to pay around £21m. This is likely to complete within four weeks of the fundraising. Two other, longer-term, GRC targets are focused on aviation and environmental health and safety. With revenues of around £1m each and cash profits of £0.3m-£0.5m, these would cost approximately £2m-£3m.