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Blancco Technology Group — Rebasing the business

Blancco Technology Group — Rebasing the business

After a difficult six months for Blancco, we believe that management has stabilised the business and put it on a course for sustainable growth. A focus on recurring-type contracts should provide better visibility. We have taken a conservative approach to forecasts using the lower end of revenue guidance; if management is able to drive growth at a faster rate than this then we see scope for substantial upside to forecasts.

Katherine Thompson

Written by

Katherine Thompson

Director

Blancco Technology Group

Rebasing the business

FY17 results

Software & comp services

17 November 2017

Price

71.5p

Market cap

£46m

Net cash (£m) at end FY17

1.7

Shares in issue

64.0m

Free float

95.6%

Code

BLTG

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

44.4

(33.5)

(66.2)

Rel (local)

47.2

(33.2)

(69.4)

52-week high/low

308p

48p

Business description

Blancco Technology Group develops and sells data erasure and mobile diagnostics software. Its headquarters are in the US and it has sales offices in 15 countries around the world.

Next events

H118 trading update

January 2018

Analysts

Katherine Thompson

+44 (0)20 3077 5730

Bridie Barrett

+44 (0)20 3077 5700

Blancco Technology Group is a research client of Edison Investment Research Limited

After a difficult six months for Blancco, we believe that management has stabilised the business and put it on a course for sustainable growth. A focus on recurring-type contracts should provide better visibility. We have taken a conservative approach to forecasts using the lower end of revenue guidance; if management is able to drive growth at a faster rate than this then we see scope for substantial upside to forecasts.

Year end

Revenue (£m)

Adj. operating profit* (£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

06/16**

21.2

4.6

4.16

2.0

17.2

2.8

06/17

27.7

3.4

3.02

0.7

23.7

1.0

06/18e

29.4

2.3

1.35

0.0

53.0

N/A

06/19e

32.2

3.2

2.35

0.0

30.5

N/A

Note: *Adjusted operating profit and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. **Restated.

Clearing out the books

FY17 results reflect the contract reversals and provisions previously announced. Blancco reported revenue growth of 31%, or 6% on a constant currency, organic basis. The company also restated FY16 results to reverse one of the contracts that had previously been provided for in FY17, resulting in higher than forecast adjusted operating profit in FY17. Following the recent issues with revenue recognition and overdue debts, management undertook a thorough review of contracts to ensure revenues have been correctly reported and debtor balances are recoverable. In addition, controls have been strengthened to ensure better financial oversight. The search for a permanent CEO is underway.

New forecasts based on the lower end of guidance

The sales team has been restructured with the new global head focused on reinvigorating growth. The company has provided data on the split of underlying revenues versus one-off licences and is now basing guidance on only underlying revenues (10-20% growth in underlying revenues equating to 6-16% reported revenue growth). We have based our forecasts on the bottom end of guidance, assuming no one-off licences. Our scenario analysis shows that achieving the upper end of revenue guidance could take FY18e EPS from 1.35p to 3.30p.

Valuation: One-off deals could add material upside

On our new forecasts, Blancco is trading on a P/E multiple of 53.0x FY18e and 30.5x FY19e. Upside to the share price from this point will depend on the company demonstrating progress towards achieving at least the low end of revenue growth guidance, with a recovery in the end-of-life business a key factor in this. One-off licence deals could add materially to profitability. Achieving underlying revenue growth at the top end of the guidance range would bring the multiples down to 21.7x and 15.0x, respectively.

Review of FY17 results

Exhibit 1: FY17 results highlights

£m

FY16*

FY17 estimate

FY17 actual

Difference

y-o-y

Revenues

21.2

28.8

27.7

-3.7%

30.6%

Gross profit

19.3

26.7

26.5

-0.9%

37.3%

Gross margin

91.1%

93.0%

95.7%

2.8%

4.7%

EBITDA

5.4

4.2

5.2

24.2%

-2.9%

EBITDA margin

25.4%

14.6%

18.9%

4.2%

-6.5%

Adjusted operating profit

4.6

2.6

3.4

31.1%

-25.2%

Adjusted operating profit margin

21.7%

9.1%

12.4%

3.3%

-9.3%

Reported operating profit

(1.7)

(4.1)

(2.5)

38.9%

44.7%

Reported operating margin

-8.1%

-14.2%

-9.0%

5.2%

-0.9%

Normalised PBT

4.1

2.0

3.1

60.5%

-23.8%

Reported PBT

(2.8)

(5.1)

(1.7)

65.8%

-38.4%

Normalised net income

3.0

0.8

1.7

121.4%

-42.5%

Reported net income

(25.9)

(9.2)

(4.9)

47.4%

-81.2%

Normalised basic EPS (p)

4.2

1.3

3.0

131.3%

-27.4%

Normalised diluted EPS (p)

4.2

1.2

3.0

153.2%

-27.4%

Reported basic EPS (p)

(36.2)

(15.6)

(8.6)

45.0%

-76.3%

Dividend per share (p)

2.00

2.10

0.70

-66.7%

-65.0%

Net debt/(cash)

(1.0)

(1.5)

(1.7)

14.5%

66.2%

Source: Blancco Technology Group, Edison Investment Research. Note: *Restated.

The company had previously highlighted that it had taken provisions against a £3.5m debtor for contracts signed in June 2016 and December 2016, as well as reversing two contracts worth £2.9m that had been recorded in June 2017. It has now restated FY16 results to reflect the fact that the contract signed in June 2016 did not meet the criteria for revenue recognition. This reduced FY16 revenue by £1.2m and adjusted operating profit by £1.5m (£1.2m in revenue plus £0.3m of pre-paid costs written off). The balance sheet was also adjusted to remove the entire £1.8m invoice value from trade receivables and deferred income. Once these adjustments were made, this resulted in reported revenue growth of 30.6% for FY17. Management scrutinised all revenues for FY17 to ensure that revenue had been recognised correctly – at the end of September, cash had been received for 97% of reported FY17 revenues. Material debtors outstanding at the end of September were also reviewed. The board has put in place more rigorous controls to ensure that there is better scrutiny of contracts and better overall financial control.

Adjusted operating profit was higher than our forecast as the impact of the contract reversal was moved to FY16.

The company ended FY17 with net cash of £1.7m, consisting of gross cash of £11.6m (after a £9.5m fund-raise) and using £9.9m of the £12.4m credit facility. To preserve funds, the company will not be paying a final dividend.

Divisional performance mixed

The table below shows the invoiced revenues on a reported, constant currency and constant currency organic basis.

■

End of life (EOL): management believe that as sales teams focused on the mobile business, less focus was placed on the EOL business, particularly in the US.

■

Mobile erasure: this has grown very strongly, helped by some contracts that combine diagnostics and erasure, and several contracts signed in Japan.

■

Active erasure: this benefited in the past from one-off volume contracts, eg £0.5m in H116 in Mexico. The contract that was reversed causing the FY16 restatement was an active erasure contract.

■

Diagnostics revenues: the acquisition of this business completed in H216. A large proportion of the growth came from the rollout to the US mobile network operator, which is now complete.

Exhibit 2: Invoiced* revenues by product line

Invoiced revenues (£m)

FY17

FY16 restated

Growth

Constant currency growth

Constant currency organic growth

End of life erasure

15.5

14.0

11%

-2%

-2%

Mobile erasure

6.7

3.8

79%

58%

48%

Active erasure

0.9

1.2

-26%

-34%

-34%

Professional services

1.7

2.7

-38%

-47%

-48%

Erasure total revenues

24.8

21.7

14%

1%

-1%

Diagnostics revenues

4.5

0.9

400%

345%

N/A

Total revenues

29.3

22.6

30%

15%

3%

Source: Blancco Technology Group. Note: *Includes full value of subscription licences.

Alan Bentley, who previously headed up the European sales effort, has now been appointed head of global sales. He returned the European business to growth in FY17 and the hope is that he will be able to refocus the sales teams, particularly in the US, to reinvigorate growth in all geographies. The sales incentivisation structure is as yet unchanged, but is currently under review by management. While changes to encourage a focus on contracts of a more sustainable nature would be ideal, management is keen to ensure that changes to the structure do not create a material disruption in the salesforce.

Management believes that despite internal issues with contracts, the market for data erasure remains robust, with continued growth potential from the well-established end-of-life market as well as strong demand for mobile erasure and diagnostics (particularly integrated solutions). With the advent of GDPR in May 2018, the active erasure market should offer good growth potential, although as live data erasure will need to be factored into business processes, it may take some time for enterprises to understand how in practice they can meet their regulatory requirements.

Providing more insight on recurring revenues

The company has provided more clarity on the make-up of the revenue base, separating it out into underlying revenues (subscription licences and volume licences that tend to be renewed), the US diagnostics contract (also recurring) and one-off volume licences. It is clear from this table that the one-off deals influence the overall growth rates – excluding them the business grew its recurring (in nature) revenue base at 12% in constant currency before adding in the US mobile contract. The table also highlights the strength in Europe and Asia (mainly Japan).

Exhibit 3: Geographic revenue split by type of contract

Revenues (£m)

H116

H216

FY16

H117

H217

FY17

Growth

Constant currency growth

Americas (includes Mexico)

2.2

3.9

6.1

3.3

3.2

6.5

7%

-5%

Europe

3.5

4.1

7.6

4.8

5.0

9.8

29%

17%

Asia & ROW

2.4

2.6

5.0

3.3

3.9

7.2

44%

26%

Underlying revenue

8.1

10.6

18.7

11.4

12.1

23.5

26%

12%

US mobile contract

0

0.3

0.3

1.6

1.6

3.2

967%

800%

Total underlying revenue

8.1

10.9

19.0

13

13.7

26.7

41%

25%

Non-repeating volume deals

1.8

0.4

2.2

0.6

0.4

1.0

-55%

-55%

Reported revenue

9.9

11.3

21.2

13.6

14.1

27.7

31%

17%

Source: Blancco Technology Group

Outlook and changes to forecasts

As the timing and size of the one-off licences is difficult to predict, the company has given revenue guidance on the basis of total underlying revenues. It expects to be able to achieve a minimum growth rate of 10% in FY18, with scope to grow as much as 20% at the upper end. This flows down to a reported revenue growth range of 6-16%. We have taken a conservative approach and modelled our revenue forecasts at the bottom end of the range. We have also not included any one-off licences in our forecast; the company noted that it would update the market as and when any material licences of this type are signed.

The company estimates that adjusted operating margins should be in the range 8-12% on the 6-16% revenue growth range. This implies that operating expenses before depreciation and amortisation will grow 8.4-13.4% in FY18 (mainly due to the annualisation of the cost of hires made in FY17) and 5-7% in FY19. The table below shows our forecasts for FY18 and FY19. On these forecasts, we estimate that the company will consume cash in FY18 and FY19, arriving at a net debt position of £1.6m by the end of FY19. We note that this factors in £4.5m in acquisition-related payments that will be complete by the end of FY19.

Exhibit 4: Divisional forecasts

£m

FY16

FY17

FY18e

FY19e

Year-on-year growth

FY17

FY18e

FY19e

Erasure revenues

20.47

23.52

24.17

25.99

14.9%

2.8%

7.5%

Diagnostics revenues

0.73

4.16

5.20

6.24

471.8%

25.0%

20.0%

Total revenues

21.20

27.68

29.37

32.24

30.6%

6.1%

9.8%

Erasure adjusted operating profit

6.10

4.56

3.44

4.23

Diagnostics adjusted operating profit

0.01

0.55

0.70

0.87

Central costs

(1.52)

(1.67)

(1.80)

(1.94)

Total adjusted operating profit

4.60

3.44

2.35

3.16

Erasure adjusted operating margin

29.8%

19.4%

14.3%

16.3%

Diagnostics adjusted operating margin

1.8%

13.2%

13.5%

14.0%

Total adjusted operating margin

21.7%

12.4%

8.0%

9.8%

Source: Blancco Technology Group, Edison Investment Research

Exhibit 5: New forecasts

£m

FY18e

y-o-y

FY19e

y-o-y

Revenues

29.4

6.1%

32.2

9.8%

Gross profit

27.3

3.1%

30.0

9.8%

Gross margin

93.0%

-2.7%

93.0%

0.0%

EBITDA

4.2

-18.6%

5.8

35.6%

EBITDA margin

14.5%

-4.4%

17.9%

3.4%

Normalised operating profit

2.3

-31.7%

3.2

34.5%

Normalised operating profit margin

8.0%

-4.4%

9.8%

1.8%

Reported operating profit

(1.1)

-54.0%

(0.3)

-70.8%

Reported operating margin

-3.9%

5.1%

-1.0%

2.9%

Normalised PBT

2.0

-37.5%

2.8

41.9%

Reported PBT

(1.8)

3.3%

(0.9)

-51.6%

Normalised net income

0.8

-51.3%

1.4

74.1%

Reported net income

(3.3)

-33.0%

(2.3)

-27.9%

Normalised basic EPS (p)

1.35

-55.3%

2.35

74.1%

Normalised diluted EPS (p)

1.35

-55.3%

2.35

74.1%

Reported basic EPS (p)

(5.28)

-38.5%

(3.81)

-27.9%

Dividend per share (p)

0.0

-100.0%

0.0

N/A

Net debt/(cash)

0.9

-152.0%

1.6

78.0%

Source: Edison Investment Research

Revising contingent consideration

As a result of the reversal of several contracts, the company has revised the contingent consideration payable in two cases:

■

Blancco Sweden: £1.1m was payable in March 2017. This was revised to a £0.2m payment made in August, and a potential payment of £0.9m due following the collection of cash from the Mexican contracts that comprised part of the earn-out value. At the end of FY17, the second amount was not included on the balance sheet.

■

Increase in Mexican JV stake: the company was due to pay contingent consideration of £1m for the 19% increase in its stake in the Mexican JV. This has been revised to a payment of £0.3m made in August and a potential payment of £0.6m to be made pro rata with any collections made by the overdue debtor. At the end of FY17, the second amount was not included on the balance sheet.

Contingent consideration for Xcaliber was reduced whereas consideration payable for Tabernus is unchanged. Overall, an exceptional credit of £1.6m was recorded in FY17 in financial income from the downward revaluation of contingent consideration. We have factored in payments totalling £1.9m in FY18 and £2.6m in FY19 to cover all contingent consideration for acquisitions and increasing stakes in joint ventures.

Scenario analysis: Upside potential

We have re-run our forecasts using the top end of the revenue guidance range. If this growth rate were achieved, normalised EPS for FY18e could increase to 3.30p from our base case 1.35p forecast.

Exhibit 6: Scenario analysis – achieve 20% underlying revenue growth in FY18

£m

FY17

FY18e

FY19e

Year-on-year growth

FY18e

FY19e

Erasure revenues

23.52

26.94

29.74

14.5%

10.4%

Diagnostics revenues

4.16

5.20

6.24

25.0%

20.0%

Total revenues

27.68

32.14

35.98

16.1%

12.0%

Erasure adjusted operating profit

4.56

4.88

6.05

Diagnostics adjusted operating profit

0.55

0.78

0.94

Central costs

(1.67)

(1.80)

(1.94)

Total adjusted operating profit

3.44

3.86

5.05

Erasure adjusted operating margin

19.4%

18.1%

16.3%

Diagnostics adjusted operating margin

13.2%

15.0%

14.0%

Total adjusted operating margin

12.4%

12.0%

14.0%

Normalised net income

1.71

2.04

2.95

Reported net income

(4.87)

(1.60)

(0.87)

Normalised basic EPS (p)

3.02

3.30

4.77

Net (cash)/debt

(1.73)

(0.43)

(1.47)

Source: Blancco Technology Group, Edison Investment Research

Any one-off licence sales would have a significant positive impact on adjusted operating profit, as we estimate gross margins are at around 93%. For example, we estimate that signing £0.5m of one-off licences in FY18 would add 17.7% to our base case adjusted operating profit and 39.9% to normalised EPS (this assumes a gross margin of 93%, sales commission of 10% and a 20% tax rate). On the higher growth scenario, it would add 10.8% to adjusted operating profit and 16.3% to normalised EPS, taking it from 3.30p to 3.84p.

Valuation

On our new forecasts, Blancco is trading on an EV/EBITDA multiple of 10.6x FY18e and 7.8x FY19e, well below its peer group. Blancco’s EBITDA margins are forecast to be significantly lower than the peer group, although signing any material one-off deals could boost margins significantly. On a P/E basis, Blancco is trading on 53.0x FY18e and 30.5x FY19e. On an FY19e basis, this is in line with UK peers. If the company is able to achieve revenues at the top end of guidance, this would reduce the multiple to 21.7x FY18e and 15.0x FY19e, and if one-off contracts are signed, this would further reduce the multiple.

Exhibit 7: Peer group financial and valuation metrics

Market
cap (m)

Sales FY1 (m)

Sales Growth 1FY (%)

Sales Growth 2FY (%)

EBITDA margin 1FY (%)

EBITDA margin 2FY (%)

EV/ sales 1FY (x)

EV/ sales 2FY (x)

EV/ EBITDA 1FY (x)

EV/ EBITDA 2FY (x)

P/E 1FY (x)

P/E 2FY (x)

EPS

Grth 1FY (%)

Grth 2FY (%)

Blancco

£46

29.4

6.1

9.8

14.5

17.9

1.5

1.4

10.6

7.8

53.0

30.5

-55.3

74.1

UK cybersecurity

GB Group

£588

116.2

32.8

12.8

22.0

22.4

5.0

4.4

22.8

19.8

31.8

27.9

34.5

14.0

Sophos Group

£2,733

635.8

20.0

17.6

10.7

12.1

6.1

5.1

56.5

42.5

194.3

100.9

93.2

92.5

UK high growth software

Craneware

£399

66.5

15.1

14.9

31.4

31.7

7.1

6.2

22.7

19.6

36.2

31.7

10.0

14.3

Dotdigital Group

£252

39.7

24.0

18.5

30.4

31.2

5.8

4.9

19.2

15.8

30.4

25.1

15.4

21.4

Ideagen

£177

34.9

28.7

10.0

31.5

32.6

5.0

4.5

15.7

13.8

21.1

19.2

525.2

9.5

Idox

£218

97.6

27.2

12.0

27.8

28.6

2.5

2.2

9.0

7.9

14.2

10.1

16.9

40.5

Average

24.6

14.3

25.6

26.4

5.2

4.6

24.3

19.9

54.7

35.8

115.9

32.1

Median

25.6

13.8

29.1

29.9

5.4

4.7

21.0

17.7

31.1

26.5

25.7

17.8

Global cybersecurity

Cyberark

$1,525

256.8

18.6

19.2

21.2

22.4

4.8

4.0

22.5

17.9

40.0

33.4

40.6

20.0

FireEye

$2,505

742.7

4.0

7.8

7.1

7.6

3.2

3.0

45.6

39.5

N/A

N/A

N/A

N/A

Fortinet

$6,939

1487.4

16.6

14.1

18.9

21.9

3.8

3.3

20.2

15.2

39.9

33.4

308.2

19.7

F-Secure

€ 651

171.7

8.5

9.9

9.8

14.7

3.3

3.0

33.9

20.6

53.2

37.3

-34.9

42.9

Imperva

$1,376

321.8

21.7

17.6

13.3

13.7

3.2

2.7

24.1

20.0

43.5

39.3

-147

10.6

Qualys

$2,184

229.9

16.1

16.3

36.8

36.8

8.2

7.0

22.2

19.1

54.7

49.5

102.7

10.5

Secureworks

$777

464.6

8.2

9.0

N/A

0.3

1.5

1.3

N/A

403.4

N/A

N/A

N/A

N/A

Vasco Data Security

$516

188.8

-1.8

6.6

10.0

11.1

1.9

1.8

18.9

16.0

33.4

32.5

42.6

2.6

Average

11.5

12.6

16.7

16.1

3.7

3.3

26.8

69.0

44.1

37.6

Median

12.3

12.0

13.3

14.2

3.3

3.0

22.5

19.5

41.8

35.3

Data management software

Barracuda Networks

$1,157

377.1

6.9

7.6

18.0

20.4

2.5

2.3

14.0

11.5

29.0

24.9

275.5

16.6

Commvault Systems

$2,533

707.2

8.7

9.8

13.1

15.6

2.9

2.6

22.1

16.8

50.0

41.4

N/A

20.8

Mimecast

$1,705

253.6

35.9

21.4

9.1

11.7

6.3

5.2

68.5

44.0

N/A

214.0

-126

434.6

Proofpoint

$4,019

509.3

35.6

28.1

13.0

13.8

7.7

6.0

59.5

43.6

120.1

87.9

-132

36.7

Average

21.8

16.7

13.3

15.4

4.9

4.0

41.0

29.0

335.8

92.0

Median

22.2

15.6

13.0

14.7

4.6

3.9

40.8

30.2

85.1

64.7

Source: Edison Investment Research, Bloomberg (as at 16 November)

Exhibit 8: Financial summary

£m

2015

2016

2017

2018e

2019e

Year end 30 June

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

15.0

21.2

27.7

29.4

32.2

Cost of Sales

(0.5)

(1.9)

(1.2)

(2.1)

(2.3)

Gross Profit

14.6

19.3

26.5

27.3

30.0

EBITDA

 

 

4.2

5.4

5.2

4.2

5.8

Normalised operating profit

 

 

4.0

4.6

3.4

2.3

3.2

Amortisation of acquired intangibles

(2.0)

(2.5)

(2.5)

(2.5)

(2.5)

Exceptionals

(2.5)

(2.7)

(2.8)

0.0

0.0

Share-based payments

(0.4)

(1.2)

(0.7)

(1.0)

(1.0)

Reported operating profit

(0.9)

(1.7)

(2.5)

(1.1)

(0.3)

Net Interest

(0.5)

(0.3)

(0.3)

(0.4)

(0.4)

Joint ventures & associates (post tax)

(0.7)

(0.2)

0.0

0.0

0.0

Exceptionals

(0.3)

(0.6)

1.1

(0.3)

(0.2)

Profit Before Tax (norm)

 

 

2.8

4.1

3.1

2.0

2.8

Profit Before Tax (reported)

 

 

(2.4)

(2.8)

(1.7)

(1.8)

(0.9)

Reported tax

(0.9)

(0.6)

(0.7)

(0.6)

(0.6)

Profit After Tax (norm)

1.9

3.2

2.3

1.7

2.4

Profit After Tax (reported)

(3.3)

(3.5)

(2.4)

(2.4)

(1.4)

Minority interests

0.3

(0.2)

(0.6)

(0.8)

(0.9)

Discontinued operations

8.4

(22.2)

(1.9)

0.0

0.0

Net income (normalised)

2.2

3.0

1.7

0.8

1.4

Net income (reported)

5.4

(25.9)

(4.9)

(3.3)

(2.3)

Basic average number of shares outstanding (m)

78

72

57

62

62

EPS - basic normalised (p)

 

 

2.84

4.16

3.02

1.35

2.35

EPS - diluted normalised (p)

 

 

2.84

4.16

3.02

1.35

2.35

EPS - basic reported (p)

 

 

6.97

(36.20)

(8.59)

(5.28)

(3.81)

Dividend (p)

5.00

2.00

0.70

0.00

0.00

Revenue growth (%)

41.2

30.6

6.1

9.8

Gross Margin (%)

96.9

91.1

95.7

93.0

93.0

EBITDA Margin (%)

28.3

25.4

18.9

14.5

17.9

Normalised Operating Margin

26.8

21.7

12.4

8.0

9.8

BALANCE SHEET

Fixed Assets

 

 

119.1

67.3

66.6

65.7

64.1

Intangible Assets

110.2

66.9

66.2

65.2

63.6

Tangible Assets

6.4

0.4

0.4

0.5

0.6

Investments & other

2.5

0.0

0.0

0.0

0.0

Current Assets

 

 

56.2

16.2

20.2

18.8

19.1

Stocks

9.5

0.1

0.1

0.2

0.2

Debtors

34.6

6.6

8.4

9.7

10.6

Cash & cash equivalents

12.1

4.8

11.6

9.0

8.3

Other

0.0

4.8

0.0

0.0

0.0

Current Liabilities

 

 

(43.2)

(22.5)

(17.5)

(19.0)

(18.2)

Creditors

(40.5)

(13.4)

(14.0)

(14.7)

(16.3)

Tax and social security

(0.6)

(2.3)

(1.5)

(1.5)

(1.5)

Short term borrowings

0.0

0.0

0.0

0.0

0.0

Other

(2.1)

(6.8)

(2.1)

(2.9)

(0.4)

Long Term Liabilities

 

 

(9.4)

(13.5)

(18.7)

(16.2)

(16.2)

Long term borrowings

(4.4)

(3.7)

(9.9)

(9.9)

(9.9)

Other long term liabilities

(5.0)

(9.8)

(8.7)

(6.3)

(6.3)

Net Assets

 

 

122.7

47.6

50.6

49.3

48.8

Minority interests

(0.2)

(0.5)

(1.0)

(1.9)

(2.8)

Shareholders' equity

 

 

122.4

47.1

49.6

47.4

46.0

CASH FLOW

Op Cash Flow before WC and tax

4.2

5.4

5.2

4.2

5.8

Working capital

0.8

0.9

(2.1)

0.3

0.7

Exceptional & other

2.8

(12.2)

(4.9)

0.0

0.0

Tax

(0.6)

(0.6)

(0.7)

(1.4)

(0.6)

Net operating cash flow

 

 

7.3

(6.6)

(2.5)

3.1

5.9

Capex

(1.8)

(2.5)

(3.4)

(3.5)

(3.6)

Acquisitions/disposals

(2.5)

(7.5)

(0.7)

(1.5)

(2.6)

Net interest

(0.4)

(0.2)

(0.3)

(0.4)

(0.4)

Equity financing

(3.6)

(50.7)

9.5

0.0

0.0

Dividends

(3.4)

(3.1)

(1.4)

0.0

0.0

Other

(6.5)

65.1

(0.4)

(0.5)

0.0

Net Cash Flow

(10.8)

(5.6)

0.84

(2.6)

(0.7)

Opening net debt/(cash)

 

 

(20.6)

(7.8)

(1.0)

(1.7)

0.9

FX

(1.9)

(1.2)

(0.1)

0.0

0.0

Other non-cash movements

(0.1)

0.0

0.0

0.0

0.0

Closing net debt/(cash)

 

 

(7.8)

(1.0)

(1.7)

0.9

1.6

Source: Blancco Technology Group, Edison Investment Research

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

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The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided 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. 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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. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). 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Frankfurt +49 (0)69 78 8076 960

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Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

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Level 12, Office 1205

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NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Blancco Technology Group and prepared and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investments Pty Ltd (Corporate Authorised Representative (ACH 161 453 872) of Myonlineadvisers Pty Ltd (AFSL: 427484) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided 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. Edison has a restrictive policy relating to personal dealing. 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. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. 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. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Research: TMT

TXT e-solutions — Well funded for growth

TXT has reported its first set of results showing TXT Next as a standalone business. We have revised our forecasts to reflect the new structure of the group. The group is now focused on growing the TXT Next business organically and through targeted acquisitions of niche software solution and specialised engineering service providers in the aerospace and aviation market. Of the €85m proceeds from selling TXT Retail, we expect the company to retain funds for acquisition as well as paying a special dividend next year.

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