There has been a very positive pre-close Trading Update this morning from ActiveOps (AOM) which has seen the share price recover some of the lost ground endured after a previous positive run.
I won’t go into detail as to what the business is about in this piece as I have already covered the company here following my interview with management in December of last year.
Suffice to say in short, AOM works for and with some of the biggest banking names around, alongside other blue-chip customers in differing sectors and on a global basis.
Here, it provides for the provision of back- office operations through delivering software (SaaS) products and solutions.
On a personal note, I did top slice here when the shares hit the mid 90’s a few months back as I had realised a circa 25% profit in a relatively short period of time in choppy markets.
The shares subsequently slid back to the recent 75p range, although not surprisingly this morning, they are up around 10% at 81p.
In the update announced today, the company revealed positive progress across the board with revenue and profitability coming in ahead of expectations, alongside a strong performance on net cash.
Ahead of delivering its full year results in a few months time, the company anticipates group revenues to have increased by 11% to at least £25m which in turn should see a positive EBITDA performance against last year's £0.3m loss.
Touching on the cash element, the company said the cash generation had been strong which has seen a year-end position of £15.4m that had swelled to £17.5m shortly after the year end.
There certainly appears to be continued momentum at AOM and as in my previous look here, the expectations from management and vision for the business in tough times appears to be playing out to the script.
Existing customers have delivered a good percentage of the year’s growth where the top ten customers have grown substantially.
The company’s newly launched CaseWorkiQ solution has been greeted positively and multiple new wins and contract extensions have been secured for the existing offerings of ContoliQ and WorkiQ.
Broker Investec, highlights a strong SaaS performance with healthy ARR growth which it concludes leaves its full year 2024 forecasts looking conservative and which it will update on at the full year 2023 results point.
In terms of numbers for the year now commenced, the broker currently has revenue expectations of £25.7m with positive EBITDA of £0.8m and a small pre-tax profit of circa £0.1m.
Clearly, given the update today and the Investec comments those numbers should be updated accordingly in due course, with potential for a notable move northwards on figures.
AOM has, as I mentioned here previously been committed to ploughing money back into the business to further drive growth and it will continue to invest in R&D moving forward.
That said, the company is very much demonstrating positively on delivery, with strong cash conversion and importantly not only retaining existing major customers, but winning new business from both those and additional one's too.
Looking ahead to the next financial year, the positive trend looks set to continue, so it will be interesting to see if those 2025 numbers are revised at the time of the 2023 results delivery.
At present, expectations see revenue of £26.9m for 2025 with EBITDA at £2m and a sharp increase in normalized pre-tax profit at £1m being pencilled in.
More will no doubt become clearer when the preliminary results are announced in the summer when I should be catching up with management again, but even after moving northwards this morning, the shares are well off previous highs and significantly lower than the broker target price of £1.50p.
It is never easy valuing businesses like AOM, particularly in the near term, where they are continuing to plough money in to drive growth.
However, with a market cap of £59m which is made up of a sizeable chunk of net cash, the shares look decent value to me as an exciting growth play that is delivering on track and indeed ahead of forecasts.
The drivers for the business appear firmly intact, with hybrid working and continued digitalisation playing to its strengths, along with business belt tightening historically benefitting the likes of AOM.Â