Disruptive technology is turning the world upside down. Look anywhere from online retailing, autonomous vehicles and social media, to big data, augmented reality and artificial intelligence. Life is changing, and fast. Similarly we think Elektron’s Checkit service is set to transform the workplace, simplifying everyday tasks such as cleaning schools, monitoring food safety and testing patient blood samples, whilst simultaneously delivering substantial time/cost savings, along with improving customer service and regulatory compliance.
So far 281 customers have signed up, generating annualised revenues of >£1m (vs £780k Jan’18 & £540k Jan’17) - including John Lewis, the NHS, Claridges, Alton Towers, Compass, Cambridge University and Center Parcs. The latter decided only last month to extend coverage from 2 to all of its 5 UK locations – “freeing up more than 20,000 hours of resource per year”.
Elsewhere, we think there are material opportunities in leveraging the data, where Checkit already collects >35m measurements/month. For instance, providing industry benchmarking services (re continuous improvement), and ‘anomalous’ data sets to other 3rd parties, say for advertising purposes.
So how is the business performing? Well encouragingly, the firm reported this morning that it is set to beat consensus estimates, thanks to record H1’19 sales (+14%)/orders at Bulgin, a 144% jump in turnover at Checkit to £0.4m (re contract implementations) and a 33% leap in EET revenues, reflecting the pull-through of orders and improved distribution.
All told, group H1’19 sales came in at £15.9m or 16.9% above LY, driving est PBT to £1.4m and closing net cash of £6.8m, boosted by the £0.8m disposal of Queensgate Nano. CEO John Wilson, adding “strong double digit growth during H1’19 is representative of the multi-year transformation of our business. We now expect to be ahead of market expectations."
Lifting estimates & SOTP valuation to 66p/share
Accordingly, we have increased our FY19 turnover and adjusted PBT forecasts by 4% and 17% respectively to £31.9m (£29.8m LY) and £2.7m (£2.7m). We have nudged up the Jan’19 closing net cash position to £8.3m (£5.2m) and lifted the sum-of-the-parts (SOTP) valuation by 6.5% (or 4p) to 66p/share (see below) - split 46p Bulgin, 14p Checkit, 3p EET and 3p net funds.