Elixirr International – certainly not on a ‘challenging’ rating

This group, which was established in 2009 by former Accenture Managing Partner accountant Stephen Newton, went public on AIM in early July this year. It raised £20m in the process and its current market capitalisation is just over £102m.

We have all heard of the ‘challenger banks’ – well this group is a ‘challenger consultancy’.

Basically, it is a business management consulting firm, that is offering to help its international clients to change the game in their industries.

Its basic services cover digital design and build, technology architecture, vendor management, data and analytics, together with business regulation.

The company, Elixirr International (LON:ELIX), which has over 116 employees, operates in 25 countries across the world, spanning 16 different industries.

Since it was formed it has handled well over 900 projects for in excess of 150 client companies. Its global presence in a robust and growing consultant marketplace spans across North America, Australasia, Africa and, of course, Europe.

Its client list to date has been somewhat focussed upon the financial services market – having worked for and with Barclays, Standard Bank, ABSA, Danske Bank, Allianz, First Rand, Bank of the West, Lincoln Financial, BNP Paribas, Schroders, NFU Mutual, Virgin Money, CitiBank, HSBC, RBS, and Investec amongst many others.

Other industry clients include major brands such as British American Tobacco, Harrods, Selfridges, Argos, International Workspace Group, John Lewis Partnership, ABB, Delta Dental, Grosvenor Group, LVMH, ASOS, tieto, the BBC, Farfetch, Cardtronics, ATOS, deZeen, Avis, Post Office, Marks & Spencer, and IWG.

The majority of the group’s revenue is from repeat business, but it gains ever more clients each year.

Since 2012 the group has achieved a revenue compound annual growth rate of some 32% – which really is quite impressive.

The well-diversified geographic revenue split works out as follows: UK 46%, Africa 17%, Europe 15%, US 15% and the rest of the world 7%.

In its interim results statement made last week the group said that it sees further opportunities arising from the current change reverberating through its core clients’ industries.

It went onto comment that “alongside a strong financial performance in the first half of the year, good visibility over current work-in-progress and pipeline opportunities, and a belief in the fundamental growth strategy and business model, give the directors confidence in the group’s prospects for the current financial year and beyond.”

Because the group was previously an LLP partnership there are no comparisons for its results.

However, its brokers are looking for a current year revenue to end December of £27.8m, pre-tax profits of £7.5m, earnings of 15.2p and a 2.2p dividend per share.
Exampling its growth potential, the brokers are going for £33.1m sales next year and £37.3m in 2022. While its pre-tax profits should jump to £9.3m in 2021 and the next year to £10.7m, earnings increasing to 16.5p and then 18.9p per share respectively.

The group now has 45.2m shares in issue. Founding partners and now directors have large holdings, including boss Stephen Newton (33.1%), Ian Ferguson (6.3%), Andrew Curtis (3.9%), Graham Busby (3.8%), and Mark Goodyear (3.7%). Together they make up a ‘concert party.’

Professional investors include Slater Investments (8.8%), Chelverton Asset Management (4.4%), and Gresham House Asset Management (3.7%).

As a major part of the group’s current growth strategy it is determined to ‘buy and build’. It has identified and analysed a pipeline of potential acquisitions to boost its coverage in industries, its geographic spread, and to enhance its overall capabilities.

It is now in discussions with eight such company targets. So, we can expect corporate expansion in the short term, which, hopefully will not only boost the market capitalisation but also the group’s profitability.

Its aim is to become the best consulting group in the world – it could very well happen and sooner than many would think.

Considering, with its shares currently trading at 227p compared to the July Placing price of 217p, that the companies being acquired will be at, I would guess sub-eight times earnings ratios, then shareholders of Elixirr will be the beneficiaries, because its shares are on a current year 14.9 times price earnings.

My Target Price is 285p.