Blue Prism Group PLC

AIM-listed Blue Prism Group PLC (PRSM) is a Robotic Process Automation (RPA) provider, which 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 company’s operations are differentiated in three geographical segments: EMEA Operations, The Americas Operations and APAC Operations.
On 23^rd January 2020, the company will announce the 2019 full-year results.

Financial Highlights (for the six months ended 30^th April 2019, £million)

(Source: Interim Report, Company Website)

Recognised revenue for the period expanded by 76% to GBP 40.4 millionwhile group revenue, under the IAS 18 standard, grew by 82% to GBP 41.6 million. Driven by new sales and upsells with 911 deals in the period, the monthly exit recurring revenue stood at GBP 7.6 million. Adjusted EBITDA losses increased to GBP 34.0 million from a loss of GBP 4.2 million, while loss from operations (including share-based payments) for the period was GBP 35.0 million, versus a loss of GBP 5.5 million in 1H18 and operating loss before share-based payments was £34.3 million (1H18: a loss of £4.3m). On 30^th April 2019, the cash and cash equivalents were GBP 129.4 million.

Share Price Performance

Daily Chart as at October-16-19, before the market closed (Source: Thomson Reuters)

On 16th October 2019, Blue Prism Group PLC shares were trading at GBX 930.9 at the time of writing before the market close (at 11:55 AM GMT), down by 1.49% against the previous day closing price. Stock's 52 weeks High and Low are GBX 2,030/GBX 845. The company’s stock beta stood at 2.55, reflecting the higher movement of the stock as compared to the benchmark index.

Valuation Methodology


Key Risks
Failure of the market to accept the company’s operating model, issues with software dependability, potential for quick change in technology, growth management, uncertainties surrounding the UK’s decision to leave the European Union (Brexit), potential cyber-attacks and challenges of operating in a competitive marketplace.

Conclusion
The company on 16th July 2019 announced that all conditions related to the completion of the acquisition of Thoughtonomy were satisfied and 1,074,711 new ordinary shares were added to the share capital of the group. This acquisition would open the mid-tier of the market for the group as it will provide the company with a productive solution which is expected to simplify and broaden access to its connected-RPA platform.

As the company faces strong competition in a rapidly evolving market, the financial viability of the group can be impacted due to the dynamic nature of the industry which is characterised by the development of new artificial intelligence technology.

For the full-year 2019, revenues will increase by £0.5 million, the EBITDA loss will decrease by £11.2 million. The company is well-positioned to capitalise on the new growth opportunities, and the Robotic Process Automation continues to develop into a significant software category.

Based on the healthy prospects and supported by valuation done using the above method, we have given a "SPECULATIVE BUY" recommendation at the current price of GBX 930.9 (as on 16 October 2019, before the market close), with lower double-digit upside potential, based on 7.71x NTM EV/Sales (approx.) on FY19E Sales (approx.).
 

D4t4 Solutions PLC

D4t4 Solutions PLC (D4T4) is a British company, engaged in providing data collection, management, and analytics solutions, with a focus on providing end-to-end management of the entire data lifecycle. The company’s operations are differentiated in three operating segments: Licence Sales, Project work and Recurring revenues.

Recent News
On 16^th September 2019, the company announced the appointment of Charles (Charlie) Irvine as a Chief Financial Officer.

Financial Highlights (for the year ended 31^st March 2019, £million)

(Source: Annual Report, Company Website)

In the financial year 2019, the company’s reported revenue increased by 37% to £25.24 millionas compared with the previous year data, due to an increase in all the segments. The gross profit margin rose by 0.05% to 56.69% against 56.66% in FY18. The statutory profit before tax stood at £6.34 million, an increase of 90.70% against the prior period data, while adjusted profit before tax increased to £6.02 million. Basic and diluted earnings per share surged by 93.96% and 99.04% to 14.78 pence and 14.53 pence respectively against the same period in 2018. For the year 2019, the dividend per share stood at 3 pence, an increase of 20 per cent against the 2.5 pence in FY18. On 31^st March 2019, the cash and cash equivalents stood at £11.00 million, an increase from the previous year data. Total net assets at the end of the year were £24.84 million versus £20.11 million in FY18.

Share Price Performance

Daily Chart as at October-16-19, before the market closed (Source: Thomson Reuters)

On 16th October 2019, D4t4 Solutions PLC shares were trading at GBX 213.16 at the time of writing before the market close (at 12:24 PM GMT), down by 1.08% against the previous day closing price. Stock's 52 weeks High and Low are GBX 288/GBX 172.45. The company’s stock beta stood at 0.58, reflecting the lower movement of the stock as compared to the benchmark index.

Valuation Methodology


Key Risks
Execution timing, people risks, market and regulatory changes, competition, client or partner loss, data loss and reputational risk, and foreign currency risk.

Conclusion
The group’s business operations may be impacted due to political uncertainty and Brexit headwinds. The company has identified several opportunities to develop the enterprise with current and new clients, both domestically and internationally.  The company believe that this will underpin the progress in terms of market share and revenue in the main markets. A huge proportion of the business is dollar-derived, and this gives some protection from existing Sterling weakness.

The company reported decent financial numbers for FY19, with several key contracts signed, a robust increase in profitability and revenues,and overall delivering results marginally ahead of market anticipations. The company is benefitting in terms of IP and recurring revenues from the relocation of the business with focus now on the data platform services and software market space, an area where the group is positively building both the Celebrus software client data platform base and the hybrid cloud data platform services sales. The company persist in making very excellent growth as compared to the core areas of strategic focus in line with the aspiration of empowering the clients to earn substantial value from their client data and through this to provide main uplifts in their profitability and revenues. The company come into the current financial year (ending March 2020) in strong shape, and the business is ongoing to trade well and in line with the anticipations. However, with a growing and healthy pipeline of new business prospects together with an array of opportunities with current customers, the group’s board stays confident regarding progress during the rest of the financial year 2020 and beyond.

Based on the healthy prospects and supported by valuation done using the above method, we have given a "SPECULATIVE BUY" recommendation at the current price of GBX 213.16 (as on 16 October 2019, before the market close), with lower double-digit upside potential, based on 16.8x NTM Price/Earnings (approx.) on FY20E earnings per share (approx.).
 
*All forecasted figures and Peers information has been taken from Thomson Reuters.

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