IDEA tipped in the IC20 Jul 2017 11:10
as follows:
"Management at Ideagen (IDEA) were keen to emphasise the value-add from acquisitions made over the full year to 30 April 2017 – not just buying companies for the sake of it, but finding ways to integrate new businesses in a way that enhances their current offering. Revenues for the IT software specialist grew by almost a quarter during the period, which included underlying organic growth of 10 per cent, suggesting that it is not simply inflating its top line via acquisition. But the costs of the strategy meant operating profit fell 30 per cent to £0.7m.
In an attempt to boost recurring revenue, Ideagen is increasingly moving from a licencing model towards a subscription-based model. Progress has already been made, with recurring revenues comprising 57 per cent of Ideagen’s total, up from 54 per cent last year. Management expects that this could reach 70 per cent in the medium term.
The four acquisitions made in the period were intended to add intellectual property and recurring revenue, as well as vertical integration; with one such example being Covalent – purchased to add a risk management element to Ideagen’s audit management offering Pentana.
Analysts at FinnCap expect £9.7m of pre-tax profit in the year to April 2018, giving EPS of 4.2p, compared with £6.9m and 3.2p in FY2017.
IDEAGEN (IDEA)
ORD PRICE: 83.5p MARKET VALUE: £ 165m
TOUCH: 83.0-84.0p 12-MONTH HIGH: 98p LOW: 52p
DIVIDEND YIELD: 0.3% PE RATIO: 209
NET ASSET VALUE: 23.4p* NET CASH £4.2m
IC View
Ideagen has proved that it grow organically and by acquisition. Shares aren't cheap at 20 times forward earnings, falling to 18 times in FY2018. But there's net cash on the balance sheet and good forecast top-line growth. Buy."
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