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Castleton Technology (CTP): Corp
Interim trading update
Castleton has released an interim trading update to September detailing a challenging 1H20 for one-off revenue and continuing strength in recurring revenue, which grew in absolute terms. While 2H20 is expected to deliver a material improvement in group performance, we review FY20 forecasts to accommodate the pressure on product and professional services revenue, moving revenue and EBITDA (pre IFRS16) -15% in FY20, and -13% in FY21. Even as recurring revenue demonstrates its strengths and opportunities, in the near term the contemplation of moving to the cloud has changed customer buying habits and slowed decision making – meaning the long-term growth opportunities from recurring revenue growth are stronger than ever, but the instant fillip of one-off revenue, which boosted prior years, is not yet offset. As a growing and focused one stop shop for public sector Housing, and having reorganised to drive greater focus, Castleton’s main risk is now being acquired in moments of share price performance weakness. Target 130p (140p) a 5% free cash flow yield target for FY21.
On dummy trades, those 56.5 appear to be buys.
Mr.Dickinson felt the need to address the troops yesterday, who are no doubt realising their incentives have just gone up the Swanee for this year. Stick together girls - we're well set up! And all in the same boat.
Castleton Technology
@CastletonTech
·
22h
Hearing from our CEO
?@deanrdhpool1?
today, kicking off H2 for Castleton, driving our strategy and sharing our latest developments and internal enhancements with our staff ?#workingtogether? ?#ukhousing? ?#tech?
Adding to what you have said, firstly I am bound to say this is a strange situation. On the basis of what the company and FinCap published, these are more of my thoughts. I do not know, but suspect the largely generic suppliers, a few of whom partner with Castleton and use Castleton EDRM and Agile mobile on their implementations, must have been affected in a similar way. It is difficult to comprehend how this downturn can suddenly in a 3 month period affect Castleton alone. They are all private companies apart from Capita and so we hear little. We have no easy comparators. But on the positive side we know Castleton relatively recently secured contracts with housing associations for full end-to-end managed services and also full suite solutions, providing part of the referenceability you mention. In the year ending March cross-selling went well, with the number of customers taking more than one individual solution increasing from 40% to 50% and their customer satisfaction survey ran at 96%. There is nothing wrong with that, quite the opposite. Despite the poor trading update, I cannot come up with anything 'wrong' with the company, which has been performing in line right up to the last trading update, and nor apparently can the NHF. It's products have stood the test of time. We have an innovative, responsive management, who as an example are pioneering the Alexa solution with a customer, and Castleton develop and market their own new products in response to changing customer requirements. Castleton Community is just one such. I therefore accept that the situation indeed represents a 'short term challenge' (as described by Dean Dickinson, with broker explanation) which will be overcome once the sector starts moving again, in the direction for which the company has planned. I think this price would react very positively on contract news. We can but wait for more information.
t's a bit ironic really. They've been preparing ( new data centre space and merging software and managed services ) for bigger and better multi-year contracts, and got ahead of the market ( on what we're told ) with one off deals drying up. Anyway, on the bigger ones it was only in July this year that we learned they had previously bid on 2 large full suite contracts. They got one. They won the other on price, but not on referenceability. They have that now and are happy to bid on more. Knowing how long the tender process takes there is still plenty of time for success on at least some of the 7 new live bids mentioned.
This is not a fly by night company. Mr. Dickinson has said he is always open and transparent in company affairs, and says things as they are. I think he must at least have sight on improved figures for the second half. The use of 'material' may be, material. I would expect him to put some meat on the bones of a trading update which saw a 40% drop, when they report on 5th. November.
We know that Castleton is a successful and growing company. It's products are valued, obtained as a result of the acquisition of other companies and their best in breed solutions. It has grown to be the largest pure social housing IT provider from a virtual shell company, in the face of competition from large and established providers.
The recent RNS and FinCap comment when read together indicate that the company was in a sense the victim of a change in market conditions, which has resulted in associations not buying one off solutions and carrying on with what they have whilst they consider the move to the cloud, full managed services, and what I can call ' bigger' and more integrated full suite technology. The one-stop shop. Castleton has prepared for that. I had expected one or two larger deals to be coming through, based on the referenceability Castleton now has from it's first movers. They may still be. In any event, associations have a need for modern technology and someone has to provide it. But there is something in the pipeline. I doubt Dean Dickinson would otherwise have spoken of 'material' improvement in the second half. In any event, associations have a need for modern technology and someone has to provide it. I believe Castleton has positioned itself well for the future.
recommends Castleton by entering 3 year partnership for its housing association members
https://www.housing.org.uk/offers-and-benefits/services-and-benefits/castleton-technology-plc/
That puts them and Nigel WRAY as joint largest shareholders.
Cannacord a buyer - averaging down and went from 10% to about 13% yesterday
NT to buy at 55p.
Some very large trades continuing with no change in sp. This is not new here - they have been occurring over the last year or so plus with no change in sp. In the 90p + range. We have taken them to be inter party trades, probably through FinnCap, without the mm system, and notified to the market. ie a sell and a buy.
I think it appropriate to repeat one of my earlier posts, which I think goes to putting Castleton into perspective in the sector. ( though the last sentence now appears odd )
The National Housing Federation is the professional representative body for housing associations. I think they can be credited, through their members, of knowing what is going on in the sector. It was only on the 2nd. September that they announced their new partnership with Castleton, and named them as preferred supplier. Castleton are not one of a number of relevant preferred suppliers. The company is 'the' preferred supplier amongst its peers. Not Aareon, Northgate, Civica, Capita, or anybody else. Castleton alone is named in their field of expertise.
Tier 1: Preferred Supplier
This is a bespoke multi-year partnership with commercial organisations, created to deliver preferential terms and conditions for products and services for our members.
The product or service offered needs to meet housing association members’ requirements, while delivering exceptional customer service and value. Preferred Suppliers can connect with specific member groups through our digital channels.
Castleton was not granted this status without proper enquiry. It puts them top of the tree. Provided Mr. Dickinson and Mr. Haywood make the figures work, and I have no doubt their minds are on costs, margins and the future, then Castleton should be doing very well, in contradiction of the current price.
Anyway, back to the company. Business as usual for them. They put out a newsletter today. It's a sort of summary of products and things, for customers.
https://www.castletonplc.com/wp-content/uploads/Keeping-Up-with-Castleton-Oct-2019.pdf
Ahh ok...did not notice that...lookas as tho we may get past this range in next 10 mins or so...GL All...Hopefully an afternoon climb into the 60s
It looks to me that they are keeping it this low to fill big orders,otherwise they will have to pay over the ASK to fill them .. dunno if you noticed but whenever there is a mini drop, it gets followed by a 5-6 figures buy(s)
range proving hard to crack...been here for a good while...Hopefully we will be past this range soon
It should bounce back up to 60s before closing, Many 6 figures buys have been going through since the opening.
From twitter :
"@JohnAnderson_10
#finnCap : “ #Castleton’s main risk is now being acquired in moments of share price performance weakness !
We reaffirm our corporate investment rating today on #CastletonTechnology $CTP.L and its new price target is 130p”
(#AIM : #CTP - PT is 130% above today’s sp level).
https://twitter.com/JohnAnderson_10/status/1182238920500797440
"
Exactly my thinking....Post lunch can see us in 60s...GL
hell of a lot of confidence here, with these large trades, very surprised if dont finish in 60 range,
Hahaha....wish they were mine....would need to re-mortgage for those amounts
Which one of these chunky buys is your mate ? ; )
10:48:03
55.00
200,000
110.00k
10:47:57
55.00
208,848
114.87k
am in...believe drop in SP is over done....Hoping for a close in the 60s...We shall see.....GL All OF
That will follow from talking to Dean Dickinson. A temporary setback, explained, and Castleton we know has positioned itself with a new data centre for cloud migration. A temporary setback. And still a high target of £1.30 - not in the least in line with today's price movement.
Interim trading update
Castleton has released an interim trading update to September detailing a challenging 1H20 for one-off revenue and continuing strength in recurring revenue, which grew in absolute terms. While 2H20 is expected to deliver a material improvement in group performance, we review FY20 forecasts to accommodate the pressure on product and professional services revenue, moving revenue and EBITDA (pre IFRS16) -15% in FY20, and -13% in FY21. Even as recurring revenue demonstrates its strengths and opportunities, in the near term the contemplation of moving to the cloud has changed customer buying habits and slowed decision making – meaning the long-term growth opportunities from recurring revenue growth are stronger than ever, but the instant fillip of one-off revenue, which boosted prior years, is not yet offset. As a growing and focused one stop shop for public sector Housing, and having reorganised to drive greater focus, Castleton’s main risk is now being acquired in moments of share price performance weakness. Target 130p (140p) a 5% free cash flow yield target for FY21.
Its still doing well Majorboy, buys 2x the sells so far ...I think the drop was an extreme reaction to the profit warning.
# Trades 222
Vol. Sold 1,026,828
Sold Value £564.76k
Vol. Bought 1,878,708
Bought Value £1m