Blue Prism Group PLC

Blue Prism Group PLC (LON: PRSM) is an AIM-listed software company, which is also a pioneer and market leader in RPA (Robotic Process Automation. The company enables a wide range of customers around the globe to intelligently automate their business processes, in order to cut costs by automating repetitive tasks and freeing up hours of work. The group’s operations are differentiated in three geographical segments: EMEA Operations, The Americas Operations and APAC Operations.

On 17^th March 2020, the company’s Annual General Meeting (AGM) is scheduled.

Recent News
On 4^th February 2020, the company announced a partnership with EXL (NASDAQ: EXLS). EXL is prominent operation analytics and management company. The partnership will see EXL integrate analytics, machine learning (ML), artificial intelligence (AI), and more innovative technologies into Blue Prism Group PLC’s connected-RPA platform.

Financial Highlights (for the full year ended 31 October 2019, £ million)

(Source: FY19 Results, Company Website)

For the fiscal year 2019, the company’s revenue was reported at GBP 101 million, an increase 83 per cent as compared to GBP 55.2 million reported last year, due to decent sales and upsell activities of the company. The monthly exit run rate (MRR) is the amount of recurring revenue in the last month of the reporting period. The metric, and its comparator, reflect the full month impact of revenues won during the last month of the period so that it accurately reflects the Group's progress. The MRR recognised as at 31 October 2019 amounted to £10.6 million, an increase of £4.4 million from the previous year (FY18: £6.2 million).

The company recorded a loss from operations for the period (including share-based payments) increased to £81.4 million as compared to a loss of £26.0 million in FY18. The increase primarily related to investment in the Group's international growth strategy, with significant investments in sales, marketing, product, professional services and underlying business infrastructure as outlined at the time of the equity fundraising in January 2019. The adjusted EBITDA loss also increased to GBP 71.9 million against loss of GBP 21.6 million in FY2018. Net cash at the end of FY2019 was GBP 74.1 million versus GBP 50.5 million in FY2018. In the current period, the cash flow from operating activities stood at negative 57.9 million.

Share Price Performance

Daily Chart as at February-11-20, before the market closed (Source: Thomson Reuters)

Blue Prism Group PLC shares were trading at GBX 1,691.50 the time of writing before the market close (at 10:54 AM GMT) on 11^th February 2020 and were down by 1.37% versus the previous day closing price. Stock 52 weeks High and Low are GBX 2,030.00/GBX 774.25. The group’s stock is reflecting the higher volatility as against the benchmark index based on the company’s beta of 1.96.On a week to date basis, the stock price has given negative 3.59 per cent returns (approx.). The shares of the company have delivered a negative return of 8.12 per cent in the last week and negative return of 6.03 per cent in the last nine months.

Valuation Methodology

*Peers: iomart group PLC, Sage Group PLC, Craneware PLC, and AVEVA Group PLC.

Conclusion
During the financial year 2019, the company has delivered decent financial performance. The company is facing some principal risks and uncertainties, which could impact the overall business of the company. Excessive dependency on channel partners, software reliability and performance, could affect the growth of the company. Market and technological changes could affect the business of the company. However, the company has surpassed the market expectations and delivered decent financial as well as operational performance. Its customer base has been growing at a decent pace, and it has an encouraging upselling performance. The company is making acquisitions which would boost or decline its growth.

Presently, the United Kingdom is facing the biggest slowdown in productivity. As per the National Institute Economic Review, the company will attribute to the slowdown, with a combination of three distinguished factors, namely Brexit, the “waning impact of communications and information technology”, and the continuing impact of the 2008 financial crisis.

The company’s profitability remained in the negative zone in the financial year 2019. Being a technology company, Blue Prism needs to invest heavily in innovation and system maintenance and, any failure to do so will impact the brand royalty and may affect the company’s financial performance. The company’s Price/Earnings, Price/Cash flow, and EV/EBITDA multiples are in negative zone as compared to the industry multiples. Presently, the company is trading near the 52-week High, raising doubts at its upside potential at the current price level.

Based on the risks associated and support from valuation done using the above method, we have given a “Sell” recommendation at the current price of GBX 1,721 (as on 11^th February 2020, before the market close at 8:05 AM GMT), based on 6.50x NTM EV/Sales (approx.) on FY20E sales (approx.).
 
*All forecasted figures and peers have been taken from Thomson Reuters.

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