Thomas Edison was one of the founding fathers of modern day electricity, after inventing the world’s 1st light bulb in 1879. Equally 140 years on, Chairman Keith Daley, ex-CEO John Wilson and CFO Andy Weatherstone have harnessed the power of the ‘Elektron’, and delivered an 8-fold return for shareholders over the past 3 years.
The good news, is that – even following the £104.7m disposal of Bulgin to Equistone Partners Europe - this winning team remains largely in place (albeit Mr Wilson moves to a non-exec role). With the Board once again aiming to materially out-perform the benchmarks by rapidly scaling Checkit’s (formerly Elektron Technology) real-time cloud-based operations management software & services.
What’s more, there’s plenty of capital too, with proforma net cash of £94m (worth c.50p/share) - plus maybe another £2m or so, from the future sale of the non-core EET (Eyecare) unit.
The intention is to distribute the majority of these funds to shareholders in the form of a 2-for-3 £81m Tender Offer at 65p. The rest is ear-marked to further exploit Checkit’s 1st mover advantage, with perhaps a little left over for bolt-on M&A.
To us, this strategic pivot towards software & services makes perfect sense. Although in the short run the Bulgin divestment will be earnings dilutive, with our sum-of-the-parts valuation declining from 83p to 70p/share.
Additionally, the disposal will enable far greater resource (especially management time) to be focused on the slimmed down group – ie to accelerate product innovation, marketing and international expansion. The first day of trading in the new shares (AIM: CHK) begins today at 8am.
