Share price: 143p (-8%)
No. of shares: 38 million
Market cap: £55 million
Year end trading update
D4T4 Solutions is a contract-driven data management company (the name has apparently been chosen because "4" looks a bit like the letter "a"!)
I'm bringing fresh eyes to this, as it's not one that I've covered before.
Looking through the archives, I see that it had a very poor H1 2018, and that this has been followed by a strong H2, so that the overall annual result for the year ending March 2018 should be ok. According to broker estimates, the revenue split for FY 2018 is 25/75 between H1 and H2.
The same broker has reduced revenue forecasts for FY 2019 by 10% to £23 million, but leaves adjusted PBT forecasts unchanged at £5.3 million.
The statement itself is confident that business is going well:
We remain confident in the Group's strategy; our underlying business is delivering against our key KPIs and is performing well and D4t4 is well-positioned in its key markets. The current revenue visibility, order book and pipeline of opportunities bodes well for the future.
This is another "SaaS" company, and I agree with those who suggest that it is cheap relative to its peers. However, I think SaaS as a whole is in a bit of a bubble! So the D4T4 valuation might be about right.
The algorithms agree that it is fairly valued:
I was a little disappointed with the net cash and the rather vague "management expectations" that is commonly used. Seems they have had a decent year and are hopeful for next year. I expect the price to drop back a little of the next few weeks. Holding for now.
I too cashed some shares in on Friday afternoon . The rise was just too tempting. Still hold quite a few as I believe with all the new privacy laws coming in, companies will be rushing around updating and securing their sites. My other IT holding is CCC and they are doing very well. Time to walk the dog now.
I agree with you on revenue and closure of contracts. rightly or wrongly ahead of 23rd I used the recent strength to reduce some of these from one of my highest price paid which brings my average down to 1.15. That sale generated just a small profit.
I am a little suspicious of the recent positive press releases coming in advance of the results. I fear the numbers for the past year are not that good, and the press releases are an attempt to prevent the shares from dropping too far.
The price has risen as I hoped. The results will hopefully talk about forward orders, margins and profit all improving. That scenario will see the price spike up. This appears to be an opportunity to hold for greater rewards. My biggest issue is the unpredictability of the revenues. Heh Ho that`s investing.
D4t4 Solutions Plc (AIM: D4T4), the AIM-listed data solutions provider...
The company is today updating us on performance for the year ended 31 Mar 2018.
To refresh our memories, here is my review on 22 Feb 2018. The key issue then was that the company's performance in H1 was poor, hence the full year forecasts looked a very tall order. So there seemed to be a high risk of a full year profit warning. The share price fell back a considerable amount, to factor in these worries.
As you can see from the sharp rebound in share price today, the market is relieved at what sounds like a reassuring update. However, I'm not entirely happy with the wording of this key sentence, as it side-steps reporting on trading versus market expectations, which is they key information. Instead, the company says it will beat prior year comparatives, which of course is not the same as beating market expectations.
The Company is in the process of its year end close and intends to provide a more detailed update on financial performance on 23 April 2018, in advance of this, the Directors are confident that the revenue and adjusted* profit before tax will be ahead of the comparatives for the year ended 31 March 2017.
This is annoying, because it now wastes everyone's time, by forcing us to look up prior year results, and compare them with current year forecasts.
Last year's adjusted PBT was £4.22m, with adjusted EPS of 9.97p.
Stockopedia is showing broker forecast of 10.1p EPS (which is usually calculated on an adjusted basis). So, it seems to be the case that the company has likely achieved market expectations. So why didn't they just say so?
As there is limited broker information now, post MiFID II, I usually check broker forecasts to other sources. Reuters own website shows consensus of 9.6p, which is strange as Thomson Reuters provide the data to Stockopedia, hence why their figures are usually the same as the ones here.
A house broker note issued today seems to imply that the 10.1p EPS forecast has been achieved, and has a positive tone. So the very strong H2 which management promised, does seem to have been delivered. Kudos to management, as that doesn't often happen - a very toppy H2 forecast is usually followed by a profit warning, but not in this case.
Recent contract wins saved the day, in terms of the year just ended, but also sounds like they provide a good start to the new financial year;
... delighted to announce that having secured a number of high quality contracts in the last quarter of its financial year ended 31 March 2018 (further details of which are set out below) it expects to report a very strong trading performance for the second half of the year alongside a record level of bookings, which underpins the Board's confidence for financial performance in the current financial year ending 31 March 2019.
That's all great, but to my mind it also highlights the problems when investing in small software companies - they're so dependent on high margin contract wins, that financial performance is almost impossible to predict with any degree of confidence. Therefore, profit warnings, and volatile share prices, seem a higher risk. You can't really sleep easily when holding this type of share.
My opinion - given that the year just ended turned out OK, this share might be worth a closer look perhaps? The PER seems reasonable (about 12-13), the balance sheet is satisfactory, and there's a dividend too.
The inherent unpredictability about performance worries me too much to want to buy any shares in it. Also, without having done any detailed research on its product, or competitors, I don't know how to assess it. Note also that the share price hasn't really gone anywhere overall in the last 2 years;
I noticed this, "A new contract for our Celebrus data collection software with a major Japanese car manufacturer who will be utilising our GDPR compliance functionality.". I think it's good to see GDPR helping to generate some business, when concerns over Facebook and privacy might have been affecting the stock price.
Any thoughts on "the Directors are confident that the revenue and adjusted* profit before tax will be ahead of the comparatives for the year ended 31 March 2017."? I think it might be conservative, because of the contract wins, and being cautious after the "relatively quiet first half". Or maybe they don't want to commit to a more positive outlook before figures for 2017 are out.
Update quite impressive. I would expect the share price to rise a bit further leading up to the finals. Hoping for improved cash flow, divi and forward outlook. I doubled up at 101p the other day, not often I get it right.
Surely Beaufort only held as nominees for their clients? Although possible new advisory brokers might be dumping the old Beaufort holdings I suppose or people previously with B making a new start for their investments. I have some of these left in an ISA - sold most in SIPP at 1.25ish when market wobbled but have held a few as they were obviously very confident in late Nov 17 that H2 would make up for H1, directors bought after awful HI results etc. They have not issued anything to the contrary since Nov and whilst I know this is AIM and anything could happen, and usually does...., surely they would be absolutely hammered if H2 has not at least gone a long way to recovering for H1 as they said it would. As has been said before if their software is as good as has been reported then v vulnerable to takeover now. Not brave enough to buy more though!
If there is a trading update next week I would expect the shares to act positively. In my experience when the market is unsure the price always heads south. It is always very hard to gauge fear from knowledge in these circumstances. Beaufort may be selling into the market as part of the liquidation. I would like to find out if this is the case, anyone out there know? Very tempted to add at the current price.
In agreement. I too got in at £1.13 in my last deal. Since then the price has moved a bit but the Facebook investigations could seriously hamper the sector. This company needs to re-assure that its business will not be affected. My guess is that they will stay quiet because they are in a new area, regarding the boundaries for data security. Expect some upsets in the coming weeks as the contracts come under scrutiny. Nervously holding for now.
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