Like it or not, but we're on the verge of a golden era of technological innovation, thanks to rapid advances in artificial intelligence, big data, robotics, 5G and cloud services. Presenting huge opportunities for sharp-eyed investors across almost every walk-of-life.
One such (albeit lesser known) example is the digital transformation of mission critical, Health & Safety and other regulated tasks eg cleaning kitchens/toilets, preparing meals, performing healthcare tests and maintaining schools, shops & leisure facilities. This is where Checkit's best-in-class SaaS platform fits in - automating, controlling and enhancing these everyday activities.
In terms of today's H120 numbers, revenues climbed 175% to £4.4m (£1.6m LY) boosted by 50% organic growth at Checkit Europe, and augmented by 2.5 months contribution from Next Control Systems (renamed Checkit UK, CUK), which was acquired for £8.8m in mid-May (or 6.6x 2018 EV/EBITDA). Exec Chairman Keith Daley adding that the UK has performed in line with expectations, and we are pleased with the progress made in integrating the business and in the opportunities for cross selling.
That said, sales at Checkit Europe (£0.6m) were flat sequentially (ie H120 vs H219) due largely to difficulties across the UK restaurant/casual dining sector. Likewise adjusted LBIT rose to -£2.8m from -£2.2m LY, mirroring higher headcount, ongoing software development and a bigger allocation of central overhead following the Bulgin disposal to Equistone Partners for £105m (or £94m net), representing a 11.2x FY19 EV/EBITDA multiple. Elsewhere optometry equipment maker EET made good progress, delivering a small profit of £0.1m on turnover flat at £1.2m.
Finally with regards to the balance sheet, net cash closed July at £1.5m (vs £10.1m Jan’19) after absorbing the NCS acquisition and £3.0m of underlying cashburn, offset by positive Bulgin EBITDA. Going forward, net funds are set to be ~£14m, post both the forthcoming £81m 2-for-3 tender offer at 65p/share and the £95m of net proceeds from the Bulgin disposal. Potentially further bolstered by the anticipated divestment of EET, which we suspect could bring in another £2m or so.
We make no change to either our financial forecasts or 70p per share valuation.
