No wonder share price thumped -poor TU11 Mar 2024 16:35
I too am very disappointed by the TU. It raises a huge number of questions in my mind about strategic direction and the leadership. Reading the TU , and not between the lines, clear to me that Milverton's global ambitions for the business have been pared back - they just can't generate the cash & working capital needed for the growth propsects they've banged on about. Looking at the RNS:
Revs of +6%: nothing to get excited about at all.....really pedestrian
Recurring revs +18%: these are growing at a decent clip , and recurring SAAS revs growing even more smartly, but forecasting revenue growth with any confidence is a nightmare here. The lumpiness of the contracts means there's sod all visibility...and even when there is, closing deals seems to take forever ( look at UK power deal: it took 6 months to sign from Milverton's "It's imminent" comment in October)
EBITDA +10%: again, hardly shooting out lights! But my real worry is Milverton's comment "Despite the impact of inflationary cost increases." Presumably she means staff wage costs, business rates etc, as thes are surely the main cost items.....if thats the case, then is Milverton actually saying that they've been unable to recoup part of the cost increases they're seeing through price increases to customers or put it another way, are they sellling the products too cheaply ? Not a pretty picture. And the big drop in net cash position, notwithstanding the brief, to my mind, working cap reversal wasn't flagged at all, given the analysts were miles off.
Finally, the strategy seems all over the place:
first they announce a big push to invest in sales & marketing for 1streetworks (something that hasn't been discussed prior to now). I certainly thought Milverton had already put that piece in place - clearly not! So it looks like working capital requirements are going to rise substantially over next 12 months, meaning they need to find the cash to fund it, which means imho that Milverton will have to raise new capital.
and
second, Milverton flgs another big change of direction in the USA, for the other great flagship product NG911, in which they've invested huge amounts , and spoekn about at length. Supposedly they have a great and strong relationship with the individual states so this sudden change in approach is unnerving. What I'm afriad it tells me is (1) current US approach isn't working anything like as well or as quickly as MIlverton assumed and told us) AND
(2) they can't afford to invest in salesforce in US & at the same time build 1streetworks in UK, so they are going to partially outsource the US meaning they'll have to share revenues, profits, & lose some degree of control.
Seems incredible to me that these strategic changes have been highlighted in a TU, almost as if Milverton thought that we already knew the above changes, which we didnt.
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