Elixirr International – Is This Consultancy Ready To Grow?

This group’s Management, which should shortly be announcing the 2022 Finals Trading Update, has the declared aim of building up a $1bn business.

That is almost four times its current value.

It is big on challenges, and it declares its objectives loud and clear.

“We are not afraid to challenge convention.

We work with clients across industries all over the world, and we love what we do.

We are driven by a purpose: to be the best consulting firm in the world.

We are Elixirr, The Challenger Consultancy.”

The Business

This group, Elixirr International (LON:ELIX), was established in 2009 by former Accenture Managing Partner accountant Stephen Newton.

It went public on AIM in early July 2020, when it raised £20m in the process, with a £98.1m market capitalisation.

Today it is valued at £239m.

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.

Elixirr guides its clients to overcome challenges such as: future-proofing against technological disruption; development and roll-out of new propositions, products and services; incubating new businesses; navigating a more complex and multinational regulatory environment; and project management and implementation of major change programmes.

The company,which has over 525 employees, operates in more than 25 countries across the world, spanning over 16 different industries.

The company offers its services for various sectors, such as automotive and transportation, manufacturing, business and financial services, charities, energy, utilities and resources, healthcare and pharmaceuticals, insurance, luxury and fashion, travel and leisure, telecommunications, technology, retail and consumer goods, private equity, media, and entertainment and sports industries. 

Just Some Of Its Top-Name Clients

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.

The group’s client list has previously been somewhat focussed upon the financial services market – having worked for and with Barclays, M&G, Standard Bank, ABSA, Danske Bank, Allianz, First Rand, Bank of the West, Bank of America, Lincoln Financial, BNP Paribas, Schroders, People’s United Bank, NFU Mutual, Virgin Money, CitiBank, HSBC, RBS, Bloomberg, Benchmark Capital and Investec amongst many others.

Today other industry clients include major brands such as AT&T, British American Tobacco, Harrods, Diageo, Selfridges, Argos, Nissan, Co-op, Honeywell, 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 44%, US 25% and the rest of the world 31%.

The Equity

The group now has 46.2m shares in issue.

Founding partners and now directors have large holdings, including boss Stephen Newton (28.7%), Ian Ferguson (5.6%), Andrew Curtis (3.0%), Graham Busby (3.0%), and Mark Goodyear (2.8%). Together they make up a ‘concert party.’

Professional investors include Rathbone Investment Management (9.4%), Slater Investments (7.7%), Gresham House Asset Management (3.5%) and Chelverton Asset Management (2.2%).

Interim Results

The group declared its interim results in late September last year.

They showed half-time revenues 39% ahead at £33.4m (£24.0m), adjusted pre-tax profits 31% better at £8.4m (£6.4m), with interim earnings of 15.1p (12.5p) per share.

The group remained confident in its outlook for full year FY 22, with revenue expected to be in the range of £70-75m, and adjusted EBITDA expected to be at least £20.0m – above the market expectation of £19.9m.

At the time CEO Stephen Newton stated that:

“So far on a macro-level, 2022 has not been without its challenges, but Elixirr’s ability to adapt to changing market demands has continued to be evident in the first half of the year.

We can see the results of our profile growing in the market and have reaped the benefits of our expanding capabilities as we continue to provide an extensive range of services to our clients, while retaining our bespoke and personalised approach – a key differentiator for us in our industry.

We have continued to pursue each element of our four-pillar growth strategy with rigour and have sustained the robust levels of growth the business has seen since listing in 2020 during the H1 22 period.

Our ambition for Elixirr is only growing, and I’m looking forward to seeing what we can achieve in the remainder of the year and beyond.”

Broker’s View – A Price Objective Of 959p

Analyst Guy Hewett at finnCap has given a price objective for the group’s shares at 959p.

His estimates for the 2022 trading year are for revenues of £72.5m (£50.6m), with adjusted pre-tax profits of £19.5m (£14.8m), generating earnings of 29.8p and easily covering a 4.7p (4.1p) dividend per share.

For the current year he see £83.7m revenues, £22.6m profits, 32.6p earnings and a 5.2p dividend.

My View – Setting A New One-Year Target Price Of 650p

Considering its growth to date, its strong finances, its global spread and its impressive client lists, I believe that this group’s shares are significantly undervalued.

Perhaps the announcement shortly of its 2022 end year Trading Update and then its finals being published in April, will see both events helping to increase investor knowledge of its corporate ability and value.

With its shares currently at just 517.5p, after hitting 780p in April last year, I am now setting a new Target Price of 650p for the next year.

(Profile 21.09.20 @ 227p set a Target Price of 285p*)

(Asterisks * denote that Target Prices have been achieved since Profile publication)

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