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The Herftord-OTAQ prospectus also shows, for the 9 months ending 31.12.19, the proportion of Sealfence revenues generated on a long-term (48 month) contract basis compared to those on a medium-short term (12-18 month) basis and those revenues which are attributable to sales:
48-month contracts: 84%
12-18 month contracts: 14%
Sales: 2%
I.e. the group has a high proportion of recurring revenues.
And the group's annual revenue has risen over tenfold in the last four years:
Year to 31 March 2017: £374,000
Year to 31 March 2018: £919,000
Year to 31 March 2019: £1,570,000
Year to 31 March 2020: £3,420,000
Year to 31 March 2021: £4,053,000
So OTAQ's revenue, as well as growing strongly, is very recurring in nature.
"Recurring Revenue
By DANIEL LIBERTO Reviewed by DAVID KINDNESS
Updated Nov 29, 2020
What is Recurring Revenue?
Recurring revenue is the portion of a company's revenue that is expected to continue in the future. Unlike one-off sales, these revenues are predictable, stable and can be counted on to occur at regular intervals going forward with a relatively high degree of certainty. ...
Many market pundits consider recurring revenue to be a highly desirable quality. They make a company more stable and predictable, both operationally and financially, lowering the risk that business will take a drastic turn from one month to the next.
That stability usually comes at a cost. Investors are regularly willing to pay more for the earnings generated by companies with recurring revenues because their forecasts are deemed more reliable. ... "
https://www.investopedia.com/terms/r/recurringrevenue.asp
Recurring revenues are also cheaper to generate after the first year, because the initial sales cost doesn't have to be repeated.
But their most important trait is that they largely keep on coming in, year after year.
So unlike one-off sales, which need to be matched annually just to stand still, recurring revenues create a base - and staircase - for revenues to grow upon year after year.
Hi Hedgehog,
As well as the profitable recurring revenues, Otaq has another hidden secret sitting behind and further supporting this YOY company growth.
The Fish nets are hired out on a fixed term rental scheme that provides this recurring revenue, generally 12 - 48 months.
At the end of the contract the nets can be taken out of the water, cleaned, repaired ( low cost to fully refurbish to as new standard ) and then re-leased into the next contract, so as each contract adds a 'staircase into profitability, each new purchased net system for their stock reduces in cost of replacement by the time of being fully refurbished so the stock increases in a similar 'staircase' method as do the profits.
Talking of nets they have said they are on the acquisition trail - there are specialist net cleaning businesses out there, some of which have interesting tech that could move over for Peter Robinson to tinker with and add to ?