Blancco Technology Group

http://www.blancco.com/en TICKER: BLTG     EXCHANGE: AIM

Blancco Technology Group is a leading, global provider of mobile device diagnostics and secure data erasure solutions.

LATEST REPORTS

 
Blancco at the Equity Development investor forum September 2018
Published: Oct 03 2018

Blancco Technology Group's new executive team, Matt Jones CEO and Adam Moloney CFO talk about the new focus within the business and its targeting of mobile, enterprise and ITAD for its data erasure software.
 
exciting times ahead
Published: Sep 25 2018

Blancco is the world’s leading developer of ‘data erasure’ software, used to protect governments and corporates from ID/data theft, ransomware and cyber-crime, along with being a pioneer in mobile device diagnostics. 
Despite the stock being rated at a modest 2.2x CY EV/turnover (adjusted for JVs) vs 6.0x for the cyber-security sector, we are encouraged by this morning’s upbeat prelims, improving momentum (H2’18 sales +5.3% vs -1.4% H1), “strong” start to FY19 and the Board’s well balanced ’Growth Strategy.’ 
There was a slightly better than expected FY18 out-turn, where adjusted EBIT came in 4% higher (17% CC) at £3.3m (margin 12.1% vs 11.9% LY) on revenues up +2.1% (5% CC) to £27.5m. Driving adjusted EPS to 4.7p (vs 2.8p), with net debt closing June at a comfortable £2.7m (vs £3.4m Dec’17) and falling further since the period end - reflecting tight cost control and good working capital management (cash conversion 123% vs 100% LY). 
Going forward, the trick to unlocking this hidden value will be re-energising the top line. Grabbing share in its “priority”’ verticals where there is greatest near-term opportunity - alongside bolstering those areas where Blancco already enjoys a formidable economic ‘moat’ (eg ITAD). Altogether, feeding through into enhanced economies of scale, more investment available for R&D/S&M, faster growth, superior returns and (in theory) a much higher stock price. 
Equally, we’re confident that after a rocky couple of years, the ‘tin helmets’ can now safely be taken off, since the business is gaining real traction with an experienced management team at the helm. As evidenced recently by a slew of new contract wins/renewals with a host of household names. Providing excellent customer endorsements and revenue visibility.
Our valuation has been upgraded from 106p to 140p/share. And, assuming things go to plan, we see no reason why eventually Blancco can’t generate 20%+ EBIT margins in line with peers. Meaning that by FY 2022, the stock even at 140p would still look significantly undervalued – trading once again at a frugal 2.2x EV/sales.
 
FY19 set up for much better year
Published: Jul 11 2018

Blancco is the world’s leading developer of ‘data erasure’ software, used to protect governments and corporates from ID/data theft, ransomware and cyber-crime, along with being a pioneer in mobile device diagnostics.
Long term Blancco shareholders are undoubtedly a hardy bunch. An essential trait given the difficulties (some self-inflicted) the company has endured over the past 2 years. The good news is that the bleeding now seems to have stopped, with real progress being made under the new leadership team.
Firstly, stabilising the ship in H1’18, and then delivering 7% LFL top line growth in H2’18 (constant currency), alongside better than expected FY18 adjusted operating margins of 11% (estimated split 7% H1 vs 15% H2: 12% LY) thanks to tight cost control. Importantly too, underlying cashflow improved, with net debt closing June 2018 at £2.8m, or >£0.5m lower than Dec’17 after good debt collection.
Additionally, we believe the headline results would have actually been much higher had it not been for an estimated -4% forex headwind in H2, and more significantly “a number of [prior period] non-repeat volume deals, where revenue was recognised up front on the sale of software covering multiple future years.”
Therefore, looking forward we still expect double-digit revenue growth of 12.6% in FY19, albeit have rebased our numbers using the slightly lower than anticipated out-turn for FY18 sales of £27.15m (+1% on £26.9m LY). Likewise FY19 adjusted EBIT is set to come in at £3.4m (11.2% margin) on turnover of £30.6m, with net debt closing June 2019 at £2.6m (assuming no further deferred payments relating to past acquisitions).
While our valuation declines from 114p to 106p/share, we are cautiously optimistic and see scope for future upgrades as CEO Matt Jones completes his root & branch review, with findings scheduled for 25th September at the prelims. Matt Jones commenting “I have been really encouraged by what I have found across the business since I joined in March 2018.''
 
An interview with the management of Blancco Technology Group at Equity Development
Published: Mar 26 2018

Simon Herrick, interim CEO and Chris Hunter, Head of Finance discuss the Group's recent results announcement and lay out their proposed plans for the business in the future.
 
Turnaround quietly gaining traction
Published: Mar 20 2018

Blancco is the world’s leading developer of ‘data erasure’ software, used to protect governments and corporates from ID/data theft, ransomware and cyber-crime, along with being a pioneer in mobile device diagnostics. The business is roughly 7x larger than its closest competitor, and led by interim CEO/CFO Simon Herrick and Chairman Rob Woodward.
After  many challenges, this morning’s ‘in-line’ H1’18 results suggest that the worst is now over and we sense that management are becoming quietly more confident. A message further supported by interim CEO Simon Herrick saying the group is “better organised and controlled…in the best possible state to welcome a new CEO. ”
In terms of the numbers, H1’18 LFL turnover (incl. -£0.2m forex headwind, and stripping out the discontinued Mexican JV, £0.5m LY), adjusted EBIT, OCF and net debt came in at £12.6m (c. 95% recurring vs ED £12.5m, £12.8m LY), £0.8m (£0.5m ED, £2.5m), £0.9m (£0.5m ED, £0.8m LY) and £3.4m (-£4.0m ED, £1.7m LY) respectively. In turn generating 110% cash conversion, better than expected cost/cash control (eg lower headcount) and a 28% jump in mobile erasure (to £3.6m thanks to new client wins) - offset by several large multi-period deals recognised LY.
Looking ahead, H2 (turnover £15.9m) should benefit from the usual seasonal uplift in renewals on top of the 35 new channel partners signed (further boosted by Ingram Micro post period end), with cashflow being roughly neutral despite absorbing c. £750k of deferred consideration (£2.2m FY19). Consequently we reiterate our FY’18 estimates of adjusted EBITA of £2.9m on sales of £28.5m (+5.9%, margin 10.2%), rising to £4.3m and £32.7m (+14.6%, margin 13.2%) 12 months later, and net debt closing Jun’18 flat at £3.5m.
Likewise there is no change to our 114p/share valuation, but we note the significant upside possible if the new CEO can engineer a complete turn-around. Characterised by sustainable double digit top-line growth and 20%+ operating margins – metrics more typical of a leading, niche software developer, operating in the rapidly expanding cyber-security space. With regards to valuation at 65p, the stock trades at a material discount to the sector, especially with regards to CY EV/sales. 
 
Getting back on its feet
Published: Jan 19 2018

Blancco is the world’s leading developer of ‘data erasure’ software, used to protect governments and corporates from ID/data theft, ransomware and cyber-crime, along with being a pioneer in mobile device diagnostics. The business is roughly 7x larger than its closest competitor, and led by interim CEO/CFO Simon Herrick and Chairman Rob Woodward.
Intel CEO Brian Krzanich said last month that "it's almost impossible to predict the future, but I am 100% sure that data is a company’s most valuable asset." The only problem being how to secure it. Particularly given the latest cyber threats doing the rounds, namely the ‘Spectre and Meltdown’ flaws built into most of the world’s microchips (Re Intel, AMD and ARM).Highlighting once again the strategic importance of Blancco’s erasure and diagnostic software - helping protect governments/businesses from data/ID theft, ransomware, hackers and other forms of online-crime. 
This morning the firm issued a trading update saying that H1’18 revenues (ED Est £12.5m) from continuing activities were “marginally” below LY - vs restated £12.8m and reported £14.2m - due to the non-recurrence of one-off erasure contracts (Est £2m), adverse forex (strengthening £) and considerable management resource being tied-up in stabilising operations following departure of the previous CEO in September, 2017. 
Within this, Mobile Erasure delivered “substantial growth” thanks to numerous new client wins, whereas Diagnostics was flat (as expected) and End of Life Erasure declined. However, stripping out the above one-offs and Mexico (now discontinued), we suspect the top line actually expanded LFL by mid-single digits.
We now anticipate Blancco will achieve H2 revenues of around £16.0m (underpinned by the usual strong Q4 renewals). Or up 6% (continuing) to £28.5m FY18 (vs LY £26.9m ex Mexico - £27.7m reported), and ~10% if further adjusted for non-recurring deals (£1m LY, which will impact reported, but not underlying, retention rates). 
 
Factoring all this in, our valuation drops from 127p to 114p/share, but the stock remains trading at a material discount to the sector, especially with regards to CY EV/sales. 
 
Results webinar, 14th November 2017
Published: Nov 15 2017

Simon Herrick, interim CEO and Chris Hunter, Head of Finance present the Group's recent results announcement.

ARCHIVE

2017
Rebuilding trust and stability
Published: Nov 14 2017

Blancco is the world’s leading developer of ‘data erasure’ software, used to protect governments and corporates from ID/data theft and cyber-crime, along with being a pioneer in mobile device diagnostics (formerly known as Xcaliber). The business is roughly 7x larger than its closest competitor, and led by interim CEO/CFO Simon Herrick and Chairman Rob Woodward.
Patient shareholders are probably more than a little cheesed off, having endured a 70% slide in the stock price since March. Nevertheless, after the recent results we see reasons for optimism: after conducting an exhaustive review of customer contracts (hence results were delayed by 1 month), the slate should now be clean as evidenced by Tuesday’s ‘in-line prelims’. Now the Board are fully committed to rectify the situation, with a permanent CEO hopefully being announced in the near future. 
Adjusted EBIT came in at £3.4m (vs £4.6m LY) on turnover up 31% to £27.7m (or 17% constant currency and 6% LFL) – the split being £23.5m Erasure (+3% LFL) and £4.2m diagnostics. Invoiced orders similarly jumped 30% to £29.3m (or 15% constant currency and 3% LFL), delivering a book:bill ratio of >1, with favourable forex boosting the top and bottom lines by £3m and £0.2m respectively.
Adjusted cash conversion was a creditable 80% (vs 130% LY after restatements), with 97% of revenues being collected by 30 September 2017. Going forward, we anticipate this should nudge up towards 90% by FY20 as a function of the greater SaaS mix, partly offset by higher enterprise volumes (re longer payment terms).
So, underlying demand remains strong, with FY18 LFL sales growth expected to be between 10-20% (or 6-16% reported) delivering adjusted EBIT margins (pre SBPs) of 8%-12%. Here, profitability is being temporarily impacted by investments in software and sales capability (headcount +24 to 125) to take advantage of the buoyant conditions. Ultimately, though, margins should revert back to historical norms of say 20%+ as the business scales.
In light of Blancco’s breadth of certifications, IPR, customer references and global reach , we reckon that the company possesses a wide competitive ‘moat’ and will be a chief beneficiary of multiple secular tailwinds. Our revised forecasts and 130p/share valuation are conservatively pitched, with management aiming to ‘meet if not beat’ their guidance. Plus, as global data volumes balloon and malware becomes much harder to detect/remove - then the cost of storage, guarding against theft and/or illegal hacking likewise will continue to mushroom, underpinning Blancco’s fortunes for possibly decades ahead.
NB Blancco’s acting CEO will present to investors via webinar TODAY, 14 Nov at 4.30pm. Register here to participate: 
Strong H2'17 offset by one-off £2.2m charge
Published: Jul 06 2017

Blancco is the world’s leading developer of ‘data erasure’ software, used to protect governments and corporates from ID/data theft and cyber-crime, along with being a pioneer in smartphone diagnostics (Xcaliber).
This morning’s pre-close trading statement was a bit of a curate’s egg. On the one hand, FY17 revenues soared 40% YoY (~30% constant currency) - in line with expectations – to an estimated £31.4m from £22.4m LY. The vast majority of this growth being organic, and reflecting buoyant demand for its proprietary data erasure software, augmented by the roll-out of its award-winning smartphone diagnostics product (Xcaliber) across up to 6,000 retail stores in North America.  
However, on the other hand came less pleasing news that an outstanding £3.5m debt from >12 months ago, relating to a single large customer, was being fully provided for - of which £2.2m would be charged to the P&L, and another £1.3m debited to ‘deferred income’ on the balance sheet. Management flagged this possible issue (re 2 LATAM contracts – 1 direct and the other via IBM/6Sigma JV) at the interims in March, so this bad news shouldn’t come as a total surprise.
The Company says adjusted FY17 EBIT should now come in at “not less than £5.5m”, with EBITDA likewise “not less than £7.0m”. We think that this guidance is prudent, and suspect actual results might be slightly higher when the prelims are released on 3rd October. So our FY18 forecasts have been broadly held intact, given the debt write-off is a one-off issue.
From our calculations, after rebasing to the lower closing cash position of £1.5m (ED estimate), we believe that the shares are now worth 184p each (from 220p before),
'Very well supported' £9.8m placing
Published: May 04 2017

Blancco is the world’s leading developer of ‘data erasure’ software, used to protect governments and corporates from ID/data theft and cyber-crime, along with being a pioneer in smartphone diagnostics (Xcaliber).
Following the 25th April trading statement, Blancco announced this morning that it had raised £9.8m (gross) in fresh equity, after placing 5.8m new shares at 169p each. We understand this top-up funding was very well received by existing investors, who were keen to support the board’s ambitious, yet realistic, expansion plans.
Such was the level of interest, that the size of the placing was more than double what had been originally envisaged 2 weeks’ ago (ie minimum of £4m), with the book building exercise concluded at no discount to yesterday’s closing price.
Importantly, by gold-plating the balance sheet the extra cash should help win further blue-ribbon contracts with large corporate and government clients worldwide, who inevitably request longer payment terms, and tend to only deal with suppliers with strong credit positions. June FY17 closing net cash is now expected to be around £4m, as opposed as to -£5.5m previously.
We make no change to our FY17/18 forecasts other than to reduce the interest charge and lift the share count accordingly (~10%, or 9.1% of the enlarged group)) – which together has nudged down the valuation to 220p per share, from 230p before.
£4m+ top-up funding being sought
Published: Apr 25 2017

Blancco is the world’s leading developer of ‘data erasure’ software, used to protect governments and corporates from ID/data theft and cyber-crime, along with being a pioneer in smartphone diagnostics (Xcaliber).
This morning it said that net debt is set to close June 2017 at around -£5.5m, or £2m higher than consensus. This temporary cash squeeze has arisen primarily as a result of the payment of previous acquisition earn-outs and advisors' fees, the expected deferred settlement of a £3.5m receivable (re Central American government contract) and the slippage of other license deals into June. 
Granted, this news comes somewhat out-the-blue, yet even so the shortfall should be manageable (say via a standard RCF) in the context of a highly profitable and cash generative £99m market cap business, growing organically at over 30% pa.
In fact, the business is still going like a train with FY17 sales and adjusted EBIT projected to be in line with consensus, boosted by Q3 revenues up 48% yoy (constant currency), split 36% Erasure and 189% (pro forma) Diagnostics.  
Going forward, we make no change to our profit estimates, albeit the valuation has been reduced from 290p to 230p/share, reflecting the new debt position and greater short term uncertainty. In terms of the dividend, we have assumed last year’s 2p payout is held, although as part of the forthcoming lender discussions, this might have to be trimmed/suspended – more as a gesture of goodwill, than financial necessity.
View the Results Webinar
Published: Mar 21 2017

You can now hear Pat Clawson, Chief Executive Officer, and Chris Hunter, Financial Controller, present the half year results for the six months ended 31 December 2016 on behalf of Blancco Technology Group plc.
To view simply click on the video below. 
Mobile Diagnostics going gangbusters
Published: Mar 14 2017

Blancco is the world’s leading developer of ‘data erasure’ software, used to protect governments and corporates from ID/data theft and cyber-crime, along with being a pioneer in smartphone diagnostics (Xcaliber).
What’s the answer to protect ourselves against cyber-crime? One possibility is to introduce ‘kill switches’ that render rogue computers ‘safe’ again in the event of hacking. Enter Blancco with its proprietary erasure software, which can remotely and securely delete any corrupted data and/or malicious code, whilst importantly not damaging the (often expensive) hardware. 
Even better, investors do not have to wait, since headline results are already going like a train. In H1’17 turnover and adjusted operating profit (AOP) soared 43% to £14.2m (or 28% constant currency) and 33% (20% CC) to £3.6m respectively. Driving gross margins to 97% (vs 89%) and underlying EPS up 61% to 3.90p (vs 2.43p), with the interim dividend raised 10% to 0.73p (vs (0.66p).
From a divisional perspective, Erasure sales at £12.4m were up 25% (10% constant currency) whilst Diagnostics (acquired in Jan’16) chipped in with a maiden £1.8m (+200% vs £0.6m pre-ownership) - thanks to continued buoyant demand (especially in mobile and Live/Active erasure), geographical expansion (eg new offices in China and Singapore), new product launches, increasing regulation and forex benefits (weaker £). In total, 53 new customers were signed in the 6 months to Dec’16, along with 23 partner/distributor agreements.
Further out, we think management should be able to maintain the core cash conversion rate within the 80% - 90% range, due to the tightening regulatory environment and attraction of the firm’s applications. Moreover, net borrowings are set to drop to £3.5m by June, assuming of course settlement of the LATAM contract and robust underlying cash generation, partly offset by circa £2.2m of deferred consideration from previous acquisitions (eg Taberbus/Xcaliber, Blancco).
Bearing all this in mind, we make no changes to our FY17 turnover and EBITA forecasts of £32.0m and £8.1m respectively, but bump up the DCF valuation to 290p/share (from 275p) based on improving gross margin, retention (92% vs 88%) and ARPU (£59.5k vs £48k) metrics. There could also be substantial investor interest over the next year or so, thanks to new data privacy laws. Not least in Europe, where the Global Data Protection Regulation (EUGDPR), including the “Right to be forgotten”, comes into force in May 2018.
NB the CEO, Pat Clawson is hosting a webinar for investors this Thursday 16th at 5.30pm  REGISTER HERE

Estimated 43% H1 sales growth drives FY17 upgrades
Published: Jan 18 2017

Blancco is the world’s leading developer of ‘data erasure’ software, used to protect governments and corporates from ID/data theft and cyber-crime, along with being a pioneer in smartphone diagnostics (Xcaliber).
Cyber-crime is not only the scourge of corporates, consumers and governments alike, but also the bane of many politicians. The good news is that there’s help at hand from the likes of Blancco, who we estimate delivered a thumping 43% jump in H1’17 revenues (~25% LFL) to £14.2m (vs £9.9m), on the back of a buoyant data erasure market, better than expected diagnostics growth and forex tailwinds (weaker £).
Likewise, we predict H1 adjusted EBITA came in at a healthy £3.6m (up 28% vs £2.7m LY), despite a period of heavy sales, marketing and R&D investment, including the filing of two UK patents to further strengthen the group’s IPR and competitive ‘moat’. 
On the balance sheet, we understand underlying cash generation was strong, albeit offset in H1 by the payment of prior period expenses and one-off M&A costs – thus leaving net debt of £6m as at 31st Dec ’16 (vs £1m net cash June ’16).
We have lifted our FY17 turnover and EBITA forecasts to £32.0m (+5.1%) and £8.1m (+8.0%) respectively, as well as bumping up our valuation to 275p/share (from 255p).
2016
On track for another strong year
Published: Nov 29 2016

Blancco is the world’s leading developer of ‘data erasure’ software, used to protect governments and corporates from ID/data theft and cyber-crime, along with being a pioneer in smartphone diagnostics (Xcaliber). It is roughly 7x larger than its closest competitor, and led by CEO Pat Clawson, who has 20 years’ experience in technology/IT security.
Once again, like clockwork, came positive news this morning that Blancco continues to deliver strong top line growth on the back of a buoyant data erasure market, excellent customer retention rates and increasing ARPUs. Here, we anticipate FY17 revenues will jump 25% organically, generating adjusted EBIT margins of 25.5%
This has been achieved despite investing heavily in product development, sales heads and brand recognition. Furthermore, given Sterling’s weakness against the $ (circa 40% of sales from the US) following the BREXIT vote, we suspect that there may even be some scope for upgrades in due course.
The stock at 215p appears lowly rated compared to other cyber-security peers, particularly in light of its top quartile growth rates, EBIT margins and FY17 PEG ratio of 0.44x.Indeed, although we make no change to our forecasts, the sum of the parts (SOTP) does rise to 255p/share from 245p , reflecting the group’s strong start to the year, updated sector comparatives and ongoing momentum. 
Finally, after 6 transformative years at the helm, Non-Exec Chairman and turnaround specialist, Matthew Peacock, has decided to step down (probably sometime in Q1’17) - and will be officially replaced after an orderly handover. We see this as a logical move given the €103.5m disposal of the Repair Services division in April and the firm’s successful transition into a pure-play software developer.
View the Results Webinar
Published: Sep 30 2016

You can now hear Patrick Clawson, Chief Executive Officer, and Jog Dhody, Chief Financial Officer, present the full year results for Blancco and answer investor questions.To view simply click on the video below.
'Blowing the doors off'
Published: Sep 20 2016

Blancco is the world's leading developer of 'data erasure' software, used to protect governments and corporates from ID/data theft and cyber-crime, along with being a pioneer in smartphone diagnostics (Xcaliber). It is roughly 7x larger than its closest competitor. The Erasure division includes the Blancco business which enables customers to test, diagnose, repair and repurpose IT devices with certified software.
The company posted impressive figures this morning for the 12 months ending June 2016. Turnover climbed 35% organically to £22.4m (or +49% including acquisitions) - delivering a 1.09x Book:Bill ratio, adjusted EBIT of £6.1m (+51%, with 27% margins) and EPS of 5.6p (+97%). Better still, recurring revenues, underpinned by 1-4 year contracts, now generate approx 25% of sales, thus providing good visibility, as evidenced by the doubling of the year-end deferred income balance to £4.8m. 
Going forward, since Blancco today possesses a full suite of 'best-in-breed' software applications, we suspect most of its future growth will be organic - augmented by the odd one or two cherry-picked acquisition. For all intents and purposes, Blancco is already the 'gold standard' for secure, certified and automated data erasure within their <£100m pa niche.
We think Blancco can grow turnover, adjusted PBT and EPS to £59.5m, £17.3m and 19.8p respectively by FY20. In turn putting the shares (at 230p) in 4 years' time, on attractive PE and PEG ratios of 11.6x and 0.4x, which would look extremely cheap for such a high quality, science rich stock. 
On valuation, we have pushed up our price target to 245p/share (from 225p), mirroring Blancco's excellent results and slightly higher proceeds (€4.5m)  from the Digital Care disposal.
Blancco delivers 34% organic growth
Published: Jul 13 2016

Blancco is the world's leading developer of 'data erasure' software, used to protect governments & corporates from ID/data theft and cyber-crime, along with being a pioneer in smartphone diagnostics (Xcaliber).
With the £ collapsing 12% and 9% respectively vs the $ and € in just 3 weeks, then those UK listed stocks generating the bulk of their profits abroad should benefit handsomely from the sharp currency devaluation. One such firm is Blancco, the world's leading developer of 'data erasure' software - who despite deriving almost 90% of its sales from outside the UK, has oddly seen its shares fall 6% since the EU Referendum.
What's more, this morning the group said that FY16 revenues had jumped 34% LFL (or 49% including the Tabernus and Xcaliber acquisitions), with both sales and profits being in line with market expectations. Not to mention another senior hire as Chief Revenue Officer.
Looking ahead, we expect similar levels of strong demand to continue, since we understand Blancco's addressable market is worth ~$2 billion pa for end-of-life devices alone. This is on top of the LEE opportunity, which could add $100ms more. Consequently, overall, we envisage turnover will climb from £22.1m last year to £59.3m by FY20 (see below) - representing a CAGR of 27.9% - along with putting the stock (at 190p) on modest PE and PEG ratios of 9.2x and 0.32x in 4 years' time. 
On the numbers, we have held our previous projections intact, and reiterate the 225p/share Price Target. Furthermore, we do not think it is too far-fetched to speculate that takeover interest might be aroused at current price levels. 
Blancco - Equity Development Investor Forum June 2016
Published: Jul 05 2016

Jog Dhody, Chief Financial Officer,gives an overview of the business and touches on the effect of Brexit on Blancco.
Snaps up top-notch mobile diagnostics firm
Published: Apr 18 2016

Blancco is the world's leading global developer of 'data erasure' software, used to protect governments & corporates from ID/data theft and cyber-crime, along with being a pioneer in smartphone diagnostics (Xcaliber).
Historically, you would normally have to send a broken mobile off to a repair centre, which could literally take weeks. Fortunately there is now a much faster, cheaper and simpler option - by plugging the device into Xcaliber's clever diagnostics software, which identifies and fixes the vast majority of common handset faults.
So good are the applications that today Blancco announced it had bought the remaining 51% stake of Xcaliber Technologies that it did not already own, for up to $5.5m in cash. $0.8m was paid on completion in March, with the other $4.7m spread over the next 3 years, dependent on the achievement of pre-determined revenue targets. 
Not only operating is Xcaliber active in a global addressable market perhaps worth >$200m pa: after a successful 6 month trial covering 200 in-store kiosks, it has signed a ground-breaking 3 year licensing agreement (non-exclusive) with a major North American telco network (as yet unnamed) that will see its programs rolled-out across >5,000 of the customer's US outlets. 
We have accordingly upgraded our forecasts, and believe that the acquisition will be earnings enhancing within the first 12 months. That said, the stock has risen by >10% since our previous note in March, meaning that the strike price for the forthcoming £50m tender offer (run as a Dutch auction with a 215p-250p range) is likely to be nearer 230p/share, as opposed to our original thoughts of 200p. Consequently with a higher assumed sharecount (ie post buyback), we have trimmed our share price target from 240p to 225p. 
View the Results Webinar
Published: Mar 11 2016

You can now hear Jog Dhody, Chief Financial Officer of Regenersis and Patrick Clawson, CEO of Blancco, present the half year results for Regenersis Plc (RGS) and answer audience questions.
To view simply click on the video below.
Blancco 'knocks the ball out the park' again
Published: Mar 07 2016

Blancco is the world's leading global developer of 'data erasure' software, used to protect governments & corporates from ID/data theft and cyber-crime, along with being a pioneer in smartphone diagnostics (Xcaliber). The wider Regenersis group is in the process of selling its Depot Solutions (repair and refurbishment of electronic devices), Digital Care (insurance against damage to mobile phone screens) and set-top-box diagnostic operations.

Strong H1 results today delivered Headline Operating Profit (HOP) margins (pre central costs) of 35.4%, compared to our estimates of 33%, and trading was said to be in line with FY expectations. Indeed, we think there is a decent chance that Blancco could exceed our FY16 adjusted PBTA of £5.0m, having delivered £2.4m in H1.

Cyber-crime is so serious that corporates and governments are ploughing billions into protecting their IT networks - a market estimated to be worth $109bn this year and expanding at an 11.3% rate. Blancco has carved out an almost impregnable position in the 'sweet spot' of data erasure. Consequently, for the 6 months ending December, Blancco - assisted by the SafeIT and Tabernus acquisitions - saw turnover, HOP and adjusted EPS soar 46% (£9.9m), 109% (£2.7m), 285% (2.43p) respectively.

Blancco also achieved a world first by launching its 'smartphone erasure-and-diagnostics solution' incorporating Xcaliber technology (49% owned, and co-located in Atlanta). Xcaliber is moving towards EBITDA breakeven in H2'16, and as such we suspect it might become majority controlled by Blancco sometime in FY17. Strategically too, once the disposals of the non-core Repair Services Business (RSB to CTDI for €103.5m, or £78.4m) and Digital Care have been concluded, the group will be a 100% pure play software developer, backed by unique IPR.

Net debt closed December at £8.9m (vs net cash of £7.8m in June 2015), as a result of acquisitions (Tabernus), transaction fees, lower than expected cash conversion at the discontinued activities (50%) and dividends. However, we expect this to bounce back in H2, with net cash seen closing June 2016 at £9.9m, reflecting the receipt of the £78.4m in RSB proceeds, offset by the £50m tender offer.

We predict turnover to jump 43% this year to £21.5m and by another 29% to £27.7m in FY17, along with delivering adjusted EPS growth of >30% pa for the foreseeable future. Our valuation of Blancco nudges higher to £120m  on the back of the higher H1'16 margins and stronger FY17 top line growth. This is equivalent to a FY17 EV/sales multiple of 4.6x and generates an updated share price target of 240p per share (vs 227p before).

NB you can see the RGS management present at a webinar this Thursday 10th at 4.45pm:  Click here to register

 

Clean exit from Repair Services at a premium price
Published: Feb 07 2016

Regenersis (RGS) is the global number 1 player for 'data erasure' software to protect individuals/corporates from ID/data theft and cyber-crime, along with being a pioneer in the use of diagnostics for mobile phones (Xcaliber).
Last Friday it was announced that Communications Test Design Inc (a family-owned US engineering, repair and logistics enterprise) had agreed to buy RGS' non-core Repair Services business (RSB, incorporating Depot solutions and set-top box diagnostics) for €103.5m (£79.6m at £:€1.30) - representing an estimated exit multiple of 8.2x FY16 EV/EBITA. Completion is scheduled for Q2, but certainly no later than the long stop date of 5th August 2016.
We think this is a very satisfactory outcome, particularly in light of the potential impact on future M&A volumes/values due to the recent bout of stock market turbulence. More specifically the disposal allows RGS to make a clean break from a non-strategic asset, which suffered a major European contract loss last year (c. £22m turnover) - while the gross proceeds are towards the top end of our original expectations.
Further good news is that a large chunk of the proceeds - less deal fees and capital gains taxes (c.£8m in total) - will be returned to shareholders via a one-off £50m tender in Q2 (offer price tbc). RGS will have successfully completed its migration to become a pure play software developer, backed by strong IPR and unique technology. Here, it will be the world's undisputed leader (7x bigger than its closest rival) in the rapidly expanding data erasure space, be renamed Blancco Technology and led by CEO Pat Clawson. 
Despite the sharply reduced valuations across the cyber-security domain, our overall price target has only marginally dropped to 227p/share (from 232p), offset by the better-than-expected RSB disposal proceeds, assumed lower sharecount (ie post £50m stock buyback) and June proforma net cash of £5m-£10m. Over time additional upside could be significant, based on our 'none-too stretching' DCF scenario analysis.
Fighting the global cybercrime epidemic
Published: Jan 13 2016

Cybercrime has become the business world's #1 threat according to a recent poll by the BBC. In fact, at the last count in June 2014, the US Center for Strategic and International Studies reckoned that online theft costs the global economy an eye-watering $400bn annually, or 0.5% of GDP. This clearly demands urgent attention, such as deploying Blancco's proprietary data erasure software. 
Blancco is an extremely high quality asset, possessing an almost impregnable position in this rapidly expanding data erasure niche - especially after the strategic acquisition of #2 player Tabernus in September 2015. As such, we value the division at 6x sales (equivalent to 18.2x FY16 EBITA, excluding corporate expenses) which is conservatively 10% less than its US cyber-security peers (average 6.7x), despite being more profitable and growing at a faster pace.
The disposal of Aftermarket Services (ie Depot Solutions, 'Set Top box' diagnostics and DigitalCare) is progressing according to plan with "several indicative offers" already received. We anticipate this process will close by 31st March, and generate gross proceeds of between £60m-£80m.
In terms of trading, RGS said this morning that it was on track to hit its FY16 targets (consensus adjusted PBT of £13.9m), with Executive Chairman Matthew Peacock adding that both divisions were trading "in line with expectations".
Consequently, we make no change to our forecasts or 232p/share price target.
2015
View the recent results webinar
Published: Sep 23 2015

You can now hear the presentation given yesterday by Matthew Peacock, Executive Chairman and Jog Dhody, Chief Financial Officer, as well as the ensuing Q&A with investors. 
To view simply click on the video below.
Blancco LFL sales up 40.9% in buoyant market
Published: Sep 21 2015

Today's results showed group FY15 turnover (y/e June) at £202.6m (+2.6%, or +16.5% in constant currency), headline operating profit of £15.4m (+40%, or +52.7% CCs) and closing net cash at £7.8m. All of these outcomes were in line with our estimates, and this was despite suffering significant forex headwinds (stronger £ vs €, Polish Zloty and other EM currencies).

Encouragingly too, Headline Operating Profit margins rose from 5.6% to 7.6%, as a greater proportion of profits were generated from Software and Advanced Solutions. Cash conversion improved to 75% from 41% LY in spite of opening of several new locations - while the dividend was hiked 25% to 5p/share, equivalent to a 3.6% yield and >3x covered by adjusted EPS of 16.19p.

Looking ahead, both YTD trading and the outlook for the remainder of FY16 are said to be "in line with expectations" - with Blancco expanding rapidly and delivering "excellent margins in a buoyant market". FY17 should witness a significant jump in profits, as the drag from the legacy Nokia Europe contract diminishes.

Most importantly, the Board also announced that it was "exploring various strategic alternatives, including the potential sale" (or perhaps even spin off) of its Depot Solutions, set-top-box diagnostics and DigitalCare (handset screen insurance) operations - under the umbrella of a new Repair services organisation, headed by CEO Ian Powell.

This will help focus attention on Blancco, Regenersis' unique 'data erasure' division. It is the undisputed world leader in this field (>7x bigger than closest rival) which reported: FY15 turnover of £15.0m up 30% (or +40.9% LFL in constant currency), adjusted EBITA of £5.4m and  margins of 36%. On its own, we think the software division is worth 166p per diluted share, or more than the market capitalisation of the entire group; based on a 6x FY16 sales multiple for the enlarged software arm (ie including today's $12m acquisition of US rival Tabernus), along with adding another $4.9m for RGS' 49% stake in mobile diagnostics firm Xcaliber. This is conservatively pitched towards the bottom end of cyber security peers, which trade on an average of 8.4x revenues.

Adopting a similar cautious view with regards to our sum-of-the-parts (SOTP), and valuing the Repairs unit at £71.4m, we still reach a revised target price for the whole group of 232p per diluted share, which is 66% above yesterday's level.

 

REMINDER - Matthew Peacock and Jog Dhody will discuss these results and changes in a webinar tomorrow, Wednesday 23rd, at 11.45am 

 Click to register

 

92% upside despite loss of Depot contract
Published: Jul 14 2015

Regenersis provides a suite of product life cycle support services designed to help companies and their customers successfully deploy, protect, sustain, retire and re-use digital technology.
 
Today's trading update says that Group performance for the year ending June 2015 is set to be in line with consensus. This will be despite absorbing another hit from adverse forex movements (mostly due to £ appreciation vs the €, Polish Zloty and EM currencies).
Encouragingly, Blancco (propriety 'data erasure' software) is going like a train - posting year on year FY15 revenue growth (in €s) of 27%, accelerating in H2 vs H1, and driving its headline operating profit (HOP) up +45%. However, the Company also reported that post-period its Depot Solutions division had unfortunately lost a pan-European contract with one of its major customers - who we guess is Nokia.
For the financial year just finished we have re-aligned our HOP and adjusted EPS figures to £15.3m (from £15.8m) and 17.1p respectively. HOP margins are projected to have climbed nicely from 5.6% LY to 7.5%, reflecting ongoing momentum in Software & Advanced Solutions (S&AS).
Looking ahead, due to continued forex headwinds and the above contract loss, the Board envisage a "modest" rise in HOP for FY16, which we have interpreted as meaning growth of c. +2%, with adjusted FY16 EPS seen coming in at 17.9p (vs 21.9p before). That said, FY16 cash conversion is likely to be better than expected at 85% (from 70%) thanks to the natural flow-back of working capital as the Nokia deal unwinds. Then, as the latter's impact on the wider Group is anticipated to be short-lived,  strong growth is predicted in FY17 and beyond from S&AS (accounting for >60% of HOP) as the division becomes the dominant profit engine in Regenersis.
At yesterday's close of 200p the stock trades on a FY15 EV/HOP multiple of 9.9x (vs a sector average of 13.2x), and a FY17 PEG of only 0.4x. Some of this discount reflects present uncertainties, yet even so we think these ratings look far too cheap for such a technology-rich business. That is borne out by our sum of the parts fair value share price at  385p, reduced from 450p but still almost twice current levels.
View the recent results webinar
Published: Mar 19 2015

You can now hear Matthew Peacock, Executive Chairman and Jog Dhody, Chief Financial Officer, present the interim results for Regenersis Plc (AIM: RGS) and address audience questions. 
To view simply click on the video below.
Profiting from the $400bn cybercrime wave
Published: Mar 17 2015

Regenersis provides a suite of product life cycle support services designed to help companies and their customers successfully deploy, protect, sustain, retire and re-use digital technology. 
Today's H1 results show the company on track to achieve our FY15 Headline Operating Profit (HOP) target of £15.8m, despite being buffeted by strong forex headwinds as the £ rose vs the €, Polish Zloty and Emerging Market currencies. Revenues were £101.9m (+2.2%) and HOP £6.0m (+30.4%) with negative currency movements of £10m and £0.7m respectively.
Encouragingly, HOP margins still improved to 5.9% (vs 4.6%), and should exit FY15 at c.7%. Net funds closed December at a healthy £12.1m, reflecting improved cash conversion of 70% (vs 59%), and the interim dividend was hiked up by a healthy 25% to 1.65p.
The stock trades on 10.6x EV/HOP, equivalent to a 18% discount, which appears too low in light of the high quality "Software & Advanced Solutions" asset base whose excellent fundamentals have not yet fed through into the financials. We think there is still significant potential for the shares to rerate, not only vs our 450p price target, but also on a relative basis compared to the sector.
NB Regenersis Results Webinar: This Thursday (19 March) at 2.45pm
Matthew Peacock, Executive Chairman, and Jog Dhody, Chief Finance Officer will present the H1 results.
REGISTER HERE: https://attendee.gotowebinar.com/register/5356252567974984449
On track for another strong year
Published: Jan 13 2015

Regenersis provides a suite of product life cycle support services designed to help companies and their customers successfully deploy, protect, sustain, retire and re-use digital technology. It is also the global #1 for 'data erasure' software to protect individuals/corporates from ID/data theft and cyber-crime.
 
This morning the Board confirmed that H1'15 results for the 6 months to 31 December 2014 would be "in line with expectations". For FY15 we are forecasting turnover, adjusted PBT and EPS of £229m (+15.9%), £16.1m (+55%) and 18.0p (+11.6%) respectively.
 
Looking further ahead, we reckon adjusted EPS could climb at a 20% CAGR between 2016-20, driven by margin expansion and revenue growth of 8-9% pa - split ''Depot Solutions'' (+5%) and "Software and Advanced Solutions " (+15%). 
On valuation, we reiterate our 500p/share target price (twice current levels) where we estimate the 'Software and Advanced Solutions' division represents 75% of the total enterprise value.
2014
Depot solutions seals £15m pa of new business
Published: Oct 26 2014

Regenersis announces a slew of new business worth in excess of £15m pa (annualised) for its depot solutions division
These include repair and refurbishment contract with Sony Mobile in Mexico, another with HTC in Poland, and several new repair contracts for leading insurers to be completed in Poland and Romania
These significant competitive wins underpin our FY15 forecasts, which anticipate double digit organic top line growth with improving profit margins
We're unaware of any other UK stock that presently offers this level of consistent sales growth (FY15 would be the 6th year in a row) - yet can be purchased on such a modest 10.7x PER; falling to 9.3x once the distortive effects of the cash pile are stripped out. 
Regenersis Prelim Results Webinar
Published: Sep 23 2014

Matthew Peacock, Executive Chairman, and Jog Dhody, CFO, present their full year results followed by Q&A.
The future is software
Published: Sep 23 2014

Regenersis is EMEA's leader for the repair and refurbishment of electronic devices, split into Depot solutions (52% FY14 EBITA) and Advanced Solutions (48%). Excitingly the purchase of Blancco has taken the group into the rapidly expanding are of data protection.
The company also increased its stake in Xcaliber and snapped up SafeIT, a data erasure business. These unique software assets position the company at the nerve centre of the digital economy. 
Clearly in our opinion Regenersis should not simply be viewed as a play on the proliferation of electronic gadgets, but as a key software enabler acting at the 'pinch point' of areas such as M-commerce, data protection and cyber-crime. 
Our target share price remains at 500p per share.
NB   Join us for a webinar with Regenersis management tomorrow (Wednesday) at 1pm:  https://attendee.gotowebinar.com/register/4751228698074130433
Double-digit delivery
Published: Jul 15 2014

Regenersis is EMEA's leader for the repair and refurbishment of electronic devices and today gave a reassuring trading update on the year just closed.
Market expectations will be matched, meaning that the Group has again delivered double-digit increases on sales and profits. Nor has this been achieved at the expense of margin, which is also stated to have improved at the operating level.
The most recent purchase, Blancco, looks increasingly well-timed, providing the Group with an excellent product offering for the increasingly newsworthy segment of Data Protection. Initial hopes of the acquirer have been surpassed and the future looks exciting.
The investment in 2013 into Xcaliber Technologies looks small at just $1.2m. However, on the back of revenues won and significant pilot projects, Regenersis will raise their stake to 49% of Xcaliber through the provision of a further $3.5m capital. 
Ahead of results to be released on 23 September, we make no change to our existing forecasts, and reiterate our target share price of 500p.
Regenersis Investor Forum Presentation
Published: Jun 11 2014

Jog Dhody, CFO, gives a dynamic performance laying out the growth plans for the business, taking it to a billion pounds of turnover.
Management explain attractions of Blancco acquisition
Published: Apr 15 2014

Matthew Peacock and Jog Dhody outline the opportunities available to Regenersis following the approval of the Blancco acquisition at the EGM. 
Acquisition of Finnish cyber expert
Published: Mar 30 2014

Regenersis is EMEA's leader for the repair and refurbishment of electronic devices, split into 3 divisions: Emerging Markets, Western Europe and Advanced Solutions.
Today it announced that it was acquiring Blancco Oy Ltd, the undisputed leader in 'data erasure' for €60m (on a cash/debt free basis) - with the transaction funded via a £100m placing at 345p/share. 
We believe this nascent data erasure market has the potential of delivering exponential growth, with researchers penciling in smart-phone and tablet shipments of 2.2 billion in 2014.
An EGM will be held on 16th April to formally approve the transaction, but we have nudged up our turnover and HOP forecasts to £213.5m and £10.9m respectively for FY14, climbing to £293.5m and £22.5m by FY16. This equates to a 54% leap in adjusted EPS over the two year period.
Our target share price rises 16% from 430p to 500p. Of which 65% is now derived from the strategically important Advanced Solutions division. 
Next stop, global leadership
Published: Mar 16 2014

Regenersis is EMEA's leader for the repair and refurbishment of electronic devices, split into 3 divisions: Emerging Markets, Western Europe and Advanced Solutions.
Interim results show H1'14 in line with forecasts. Sales rose +11% to £99.7m (+17% constant currency) with Headline Operating Profit steady at £4.6m. Looking ahead, our FY14 PBT has been nudged down 3% to £9.8m reflecting a higher interest charge - albeit equally offset by a lower tax rate, leaving EPS unchanged at 17.9p. The dividend moves up to 4.0p (from 2.8p), thanks to an impressive 97% hike in the interim payout to 1.32p. 
We anticipate another major profit surge, especially after winning a string of blue ribbon contracts in H1'14. This can generate "mid-teens" organic growth in H2, and a 56% jump in adjusted EPS by FY16. Margins should expand on operational leverage and investment in Advanced Solutions.
The stock currently trades on a sector PER of 20x, declining to 12.8x by FY16. Our share price target remains at 430p
Breaking new ground with major mobile operator
Published: Mar 06 2014

Regenersis is EMEA's leader for the repair and refurbishment of electronic devices, split into 3 division Emerging Markets, Western Europe and Advanced Solutions.
This morning Regenersis has announced a series of new business wins worth at least £10m pa (annualised), thus teeing the group up for 20%+ adjusted EPS growth in FY15. One contract in particular, with a major global mobile network operator in Germany, involves breaking new ground in terms of client collaboration, value-add and decision support.
This landmark agreement, once implemented, is expected to contribute materially to next year's results. What's more, the solution is scalable and going forward we believe there is significant scope to roll out similar propositions in other geographies for the same operator, as well as with different mobile networks.
Elsewhere, Regenersis has also won several other notable contracts in Europe and South Africa, on the back of its newly developed closed loop refurbishment and insurance fulfilment services. These will be executed from facilities across the world including Romania, Scotland and Sweden. 
In terms of the numbers, FY14 remains unchanged, but our FY15 sales and Headline Operating Profit (HOP) forecasts increase to £248.5m (+£12.5m) and £13.6m (+£1m) respectively. The assumed 8% HOP margins from the above incremental business, nudges FY15 adjusted EPS up to 21.6p from 20.0p. Our target price accordingly rises from 400p to 430p/share.
In our view this deepening of client relationship augments Regenersis' competitive position, builds in extra barriers to entry/exit, and further boosts recurring revenues. 
Riding on the back of a digital revolution
Published: Jan 17 2014

Regenersis is EMEA's leader for the repair and refurbishment of electronic devices. It serves tier 1 OEMs such as HTC, Nokia, Samsung, LG and Toshiba, and increasingly Network Operators like Orange and Telefonica.
In their pre-close trading update for the 6 months to December 2013, the company reported that H1 results would be "in line with expectations", delivering double-digit sales and profit growth. The standout performance is coming from Advanced Solutions where headline operating profit margins were 14% < and are trending towards 15% in H2.
Going forward, we are forecasting a 40:60 split between H1:H2 profits, with FY14 turnover and HOP predicted to be £211m and £10.8m respectively. A 14% jump in underlying profits from £9.5m in FY13 is despite absorbing a c.£1m forex hit and a doubling of central costs to £4.4m in order to scale up the business and its senior management. 
We have valued RGS on a DCF basis and arrive at a target price of 400p/share, slightly trimmed from 406p in light of the higher forecast net borrowings, but well ahead of current 320p level.
2013
Seizing the moment in aftermarket services
Published: Nov 27 2013

Regenersis has built on its strong position as a strategic outsourcing partner in consumer technology with a clear focus on the growth in Emerging Markets and on delivering innovation from its Advanced Solutions division.
Aggressive cross-selling across a continually enlarging network should see the company emerge as a global leader in this field, particularly as it digs deeper into emerging markets in Europe, Africa, Asia and South America.
A best-in-class M&A team, a robust balance sheet, and access to cash, put the company in a strong position to pursue accretive acquisitions that expand and populate the matrix of services and territories underpinning strategy.
The current market value does not reflect the company's strengths and potential. On the basis of current conservative forecasts but an increasing rating, we derive a target price of 406p, and see this as but the next step in a future comprehensive revaluation.
Management Webinar on our Regenersis page (company search above); for ED note click here
Published: Sep 25 2013

Regenersis Prelim Results Presentation 26th September 2013
Published: Sep 25 2013

Matthew Peacock and Jog Dhody give an update on their latest set of results for the year. If you would like to see some research on the business please visit our website equitydevelopment.co.uk
Repaired and prepared
Published: Sep 25 2013

Regenersis released an excellent set of results for the year ended 30 June 2013. Revenue increased by 28% to £179.7m, headline Operating Profit rose by 22% to £9.5m, and adjusted EPS grew by 20% to 16.8p. As a sign of its confidence in the future, the full year dividend is increased by 127% to 2.5p; the Finance Director has also just purchased further shares.
In less than 3 years the Group has been transformed. It has the people, the global reach and deal-making skills to drive earnings forward and to merit a higher rating on those earnings than the current 13.7x forward PER.
Internal restructuring, external JV
Published: Jul 07 2013

Regenersis is driving forward its strategy of identifying and delivering innovative products and services in the after-market service sector for mobile devices: services which enjoy higher margins.
A new business unit was launched today, 'Renew', that combines Recommerce, Refurbishment and Digitalcare activities. Renew will allow Regenersis to offer financially attractive solutions and revenue generating opportunities across the broad range of its customers, from network operators and retailers to insurance companies.
Regenersis has also announced a JV with Ecoasia Technologies Ltd to pursue Refurbishment opportunities. With facilities operating in Hong Kong, China, Mexico and the Philippines, EcoAsia has many years' experience in this market and good relationships with IP creators. 
Given the attractive market and geographic focus, and sound execution of its strategy, we still regard RGS shares as undervalued. We reiterate that a fair value per share of 247p looks deserved.
Capital Hill Sell in May
Published: May 03 2013

Porvair at Equity Development Investor Forum 17th April 2013
Ticking all the boxes
Published: Mar 18 2013

Regenersis is a provider of an integrated, brand support, outsourcing solution to product and service providers, has emerged strongly following an overhaul of strategy and a comprehensive reorganisation.
Their impressive growth trajectory has been confirmed in the recent strong interim results, showing that financial performance is on track with double-digit organic revenue and profit growth, and that the growth strategy is succeeding, with the main focus on emerging markets and Advanced Solutions delivering results.
Regenersis now has modest debt levels and good access to debt-finance. It has significant capacity to grow and invest, and the proven pedigree in M&A of the management team should mean an exciting future.
Applying a 2014E EV / EBITDA multiple of 9.2x indicates a fair value share price of 247p, versus 196p today, and we expect to see deals and contract wins that will further improve prospects and forecasts.