Strong demand pushes pipeline up 18% in 6 months

Big Data Procurement, AI & Customs Management software firm Rosslyn is making good progress after its £6.8m (net) oversubscribed placing in May’20 and has cultivated a bumper crop of ‘ready-to-pick’ prospects. Indeed Rosslyn’s qualified ‘sales hopper’ climbed by 18% in H1’21 – or 39% annualised. This should deliver mid-teens % ARR growth (£6.2m Oct’20 vs £6.0m LY, £6.3m Apr’20) for the foreseeable future.

Back to the present, the company reports no orders were cancelled in H1’21, and H2 has “begun well ”, after “a number of new customer wins as well as good levels of upsell ”. Including a host of bookings for the group’s leading 100% cloud-powered Customs software (re Brexit).

Some larger deals are understandably taking longer to be awarded, but today’s H1’21 results were broadly in line. Posting revenues up 14.6% to £3.57m (£3.11m LY) reflecting the Sept’19 Langdon acquisition, flat YoY adjusted EBITDA (pre SBPs) at -£144k vs -£155k LY and low 4.5% churn. Moreover there’s plenty of cash (net £6.1m Oct) to continue to invest in top line growth.

In terms of FY21, we are forecasting a small -£200k EBITDA (pre SBPs) loss on sales of £7.5m (+6% YoY), rising to +£280k and £8.5m (+13%) respectively in FY22, and 13%+ revenue expansion thereafter.

At 6.5p, we think the shares not only appear undervalued vs peers (re 2.2x CY EV/sales vs >6x) - but also trade at a wide discount to our 10p/share valuation.