Artec technologies — Positive FY20 progress, focus on MULTIEYE

artec technologies (GR: A6T)

Last close As at 22/11/2024

2.60

0.06 (2.36%)

Market capitalisation

8m

More on this equity

Research: TMT

Artec technologies — Positive FY20 progress, focus on MULTIEYE

In a post year-end trading update, artec reported strong sales growth, with FY20 revenues rising 50% y-o-y to €3.2m (FY19: €2.0m), marginally below consensus (€3.25m). Management expects a significantly improved FY20 profit figure y-o-y when it reports its FY20 results. 24% of FY20 revenues are recurring, with contract terms of up to four years giving increasing forward visibility. Two-thirds of sales came from the security side of the business, which continues to show good momentum, while the media business suffered from contract delays due largely to uncertainty around the COVID-19 pandemic. Management remains confident in the outlook for both media and security segments, with security its key focus for FY21.

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TMT

artec technologies

Positive FY20 progress, focus on MULTIEYE

Technology

Scale research report - Flash

27 January 2021

Price

€4.28

Market cap

€12m

Share price graph

Share details

Code

A6T

Listing

Deutsche Börse Scale

Shares in issue

2.86m

Last reported net cash at 30 June 2020

€0.13m

Business description

artec technologies develops cloud-based software solutions for the recording and analysis of video and audio, in two sectors: video security technology and crime prevention; and broadcast media.

Bull

Momentum building in the security business, with a growing list of reference clients.

Strong growth in multi-year contracts.

IP-based, patent-protected technology solutions.

Bear

Scale and growth potential limited by operational and resourcing constraints.

Revenue visibility improving but still limited.

Volatile trading history, with financial outcome subject to contract delays.

Analyst

Richard Williamson

+44 (0)20 3077 5700

In a post year-end trading update, artec reported strong sales growth, with FY20 revenues rising 50% y-o-y to €3.2m (FY19: €2.0m), marginally below consensus (€3.25m). Management expects a significantly improved FY20 profit figure y-o-y when it reports its FY20 results. 24% of FY20 revenues are recurring, with contract terms of up to four years giving increasing forward visibility. Two-thirds of sales came from the security side of the business, which continues to show good momentum, while the media business suffered from contract delays due largely to uncertainty around the COVID-19 pandemic. Management remains confident in the outlook for both media and security segments, with security its key focus for FY21.

FY20 results overview

Despite the challenges of COVID-19, artec won new clients in Spain, Turkey and the GCC, including a Qatari sports broadcaster, news agency and sports academy. Clients included a mix of existing and new customers from both the security and broadcast segments. Recurring revenues (cloud contracts, software and services) of €0.75m represented 24% of overall revenue, up from 12.5% in FY19. The security segment represented two-thirds of artec’s sales in FY20, with €0.2m of new service contracts signed with DACH security authorities. With the cancellation of trade fairs and events, progress on the media side of the business was slower than expected, with a number of orders delayed due to COVID-19. However, eight of Germany’s 14 state media authorities are now clients. Despite delays to contract awards, artec’s management remains confident in the outlook for both sectors.

Strategic focus on MULTIEYE security surveillance

In FY21 and beyond, artec sees considerable growth potential in law enforcement, as it positions itself as a GDPR-compliant data collector and processor for security authorities based around its private cloud-based software platform, MULTIEYE. Expanding MULTIEYE’s video surveillance functionality is artec's key strategic goal for FY21, with artec planning to offer a ‘try before you buy’ proposition to drive regional and international sales in FY21.

Valuation: Continuing growth justifies valuation

artec’s share price has reflected the progress made by the business, rising c 50% in FY20 and >100% since the group’s mid-March lows. The group trades on a consensus FY21e EV/EBITDA multiple of 14.3x and a P/E of 32.9x. With a positive outlook and sustained growth, the shares have scope for continued appreciation.

Consensus estimates

Year
end

Revenue
(€m)

EBITDA
(€m)

EPS
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/18

2.94

0.42

0.02

0.0

N/M

N/A

12/19

2.01

(0.16)

(0.42)

0.0

N/M

N/A

12/20e

3.25

0.52

0.08

0.0

57.1

N/A

12/21e

4.45

0.85

0.13

0.0

32.9

N/A

Source: Refinitiv

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Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

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Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

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This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

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Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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