Up 652% since IPO, Blue Prism sets out plans for "global domination"

When Investec released a note to clients this morning reiterating its target price of 580p, it gave Blue Prism potential upside of 20%. But after investors bid the shares up to 555p during Thursday morning trading, that target gives just 4.5% upside now. Back to the drawing board.

Whitman Howard, meanwhile, upgraded its target price this morning, which was 590p in its initiation note. That number is now 650p, giving Blue Prism further upside of 17%.

Blue Prism supplies "software robots" to companies such as O2, Aegon and Siemens. Its robotic process automation allows its customers to automate routine back-office clerical tasks and allows their employees to concentrate more on the value-adding part of their job.

The firm is just 13 months old as a listed entity, coming to market at 78p in March 2016, but it already seems to be coming of age. By the way, that's a gain of over 600% for investors who bought in at IPO. It's backed by some big hitters, including fund houses Schroders, River and Mercantile and Old Mutual, while management retains a substantial shareholding.

We mentioned at full-year results back in January that it had been a rocky road, with a slump of 30% in the early stages of 2017. But momentum seems to be gathering pace at a frightening rate. In 2016, Blue Prism signed 189 license deals, up from just 40 in 2015. In the first five months of its 2017 financial year to 31 March it had signed 151 new software deals.

Harvey Robinson, technology analyst at Whitman, makes the point that deals per month have increased quickly in the first five months. In Blue Prism's first quarter it signed 83 deals, an average of 28 per month. In the next two months it signed 68 deals, an average of 34 deals per month. "This clearly represents a significant acceleration in deal momentum," Robinson added.

"Business has been more than brisk," CEO Alistair Bathgate told Interactive Investor today. The challenge now is to keep momentum going in an increasingly competitive global market.

So far the company is well represented on both sides of the Atlantic, but Bathgate says it plans to push out into new geographies as it expands distribution. It's a "big growing market that's global", he explained, and "there's parts of the world where we're not yet fully represented".

It is still growing, then, so isn't yet profitable, which is unsurprising for such an early growth stage tech company.

But today's trading update said revenues for the full year will be "significantly ahead of existing market expectations", leading Investec's Roger Phillips to upgrade his expectations by 20% to £20 million – more than double that of last year. "This figure has now been upgraded more than 40% since forecasts published at the time of full-year 2016 results," he pointed out.

Phillips continued: "To be relatively comfortable less than six months into a financial year that a rateable recognition business model is going to more than double revenues is exceptional.

"In our view this reflects an attractive combination of a potentially massive total addressable market, combined with a supply bottleneck with only three vendors capable of meeting the need and Blue Prism the enterprise-grade vendor."

Bathgate said the firm has a mid-term (two to three year) objective of cash generation, which is "still achievable".

"We like to focus on what we're good at," Bathgate said. "We're a single-product company [and] our product is the same for every customer, we don't do any bespoking or customisation work… so pretty unique in that regard.

"Our revenues are pretty pure and we're able to scale the business quicker than most on the back of having that advantage."

Bathgate speaks of "global domination" and Blue Prism could certainly be the next in a long line of British technology success stories.

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