Journeo – Time To Get Really Connected
If you go anywhere in this country, there is a fair chance that you have used public transport at some time or another.
In that case it is also a fair bet that those transport operators have been using or are considering using products and systems from Journeo (LON:JNEO).
Interim Results Due Within Days
Recently this group’s shares have fleetingly been up to 205.88p, on Friday night they closed at just 185p offering investors a great ‘small cap’ buying opportunity to participate in the potential growth to come in a technologically advanced business that is still, very much, in the early stages of its development and profitable growth.
Set up some 30 years ago, the £31.5m capitalised company, which is based in Ashby-de-la-Zouch, is an information systems and technical services business focussed on delivering innovative public transport and related infrastructure solutions to its customers, contributing to smart city initiatives as transport becomes more connected and intelligent.
It is a leading Intelligent Transport Systems provider, delivering solutions in towns, cities, airports and the public transport networks that connect them.
It works extensively with local and combined authorities, Network Rail and many of the largest multinational transport operators, supporting them as systems converge towards a more efficient and sustainable future.
The group works with a global supply chain of market-leading equipment manufacturers, niche specialists and supports them with its own in-house research and development capabilities to deliver safe, secure and scalable solutions.
The company provides solutions to the transport community that captures, processes, and displays essential information to enhance journeys in the UK and mainland Europe.
The Operations
The company operates in two segments, Fleet Systems and Passenger Systems.
It offers passenger transport infrastructure systems, such as bay, stretched in-shelter, summary, full-colour LED, low-power E-ink, and solar-powered TFT displays, as well as interactive wayfinding totems, air quality sensors, in-shelter closed circuit television (CCTV), and bus station Wi-Fi.
The company also provides fleet operator systems, including automatic passenger counting, CCTV, driver displays, next stop announcement displays, on-board Wi-Fi, camera monitor systems, and telematics and driver behaviour for buses, coaches, and specialist vehicles; and forward facing and saloon CCTV, automatic passenger counting, station information security systems, and train Wi-Fi for rails.
In addition, it offers various passenger systems, including real time information, advertising, and bus station management, as well as real time information displays, stations and interchanges, digital wayfinding, low-power solutions, shelter integration, and accessibility solutions.
Infotec, the latest acquisition, is involved in the design, advanced manufacture, installation and software management of information displays hardware for rail applications in stations, on-platform and on-vehicle.
First Half Trading Update (1st August)
Journeo had a strong H1 2023 with revenue of £21.8m (H1 2022: £8.9m), an increase of 145% over H1 2022.
Fleet Systems revenue increased by 61% to £7.9m (H1 2022: £4.9m) and Passenger Systems revenue increased by 16% to £4.6m (H1 2022: £4.0m).
The Infotec business, which was acquired in January this year, delivered revenue of £9.3m in the period from acquisition to 30 June 2023.
Sales of lower margin products were higher than expected in H1 2023 and this is expected to continue throughout most of H2 2023, with margins increasing in FY2024 as the effect of component shortages in supply chains improve and the sales business mix changes.
The company expects a broadly similar performance in H2 2023 with revenue for the full year expected to be significantly ahead of current market expectations and profit before tax for the full year expected to be marginally ahead of current market expectations, demonstrating its resilience and ability to maintain its performance despite the challenging macro-economic environment.
Cash balance at 30 June 2023 was £11.3m, including payments in advance of £3.5m (H1 2022: £1.2m).
The company’s invoice discounting facility remained at £2.75m.
The group continues to invest in the research and development of future technologies and software with a focus on low-power, low latency designs, where high-performance, reliability and sustainability form the basis of the products and services road map.
Management Comment And Outlook
Sales order intake in the first half increased to £18m including £4.2m from Infotec providing increased visibility into H2 2023 and beyond.
The Order Book carried forward into H2 2023 was some £27m while the sales opportunity pipeline was over £55m.
Journeo expects to achieve £42m revenue in FY2024 and is targeting £50m in FY2025 with improved net profit margins, as it looks to consolidate on some of the exceptional contracts in FY2023 and continues to drive bottom line profit growth.
CEO Russ Singleton has stated that:
“The first half of this year has seen the Group enter a transformational stage in its development following the acquisition of Infotec in January and generate strong organic and acquisitive growth.
Revenues increased 145% to £21.8m, delivering a pre-tax profit of £1.7m.
We entered H2 2023 with a £27m order book, a £55m sales opportunity pipeline and expect revenue for the full year to be £41m, with profit marginally ahead of current market expectations.
The integration is going well with finance, HR, new product design and marketing working together and a number of cross selling initiatives underway to broaden the customer base, increase sales, annual recurring revenues and margins.”
The Equity
There are some 16.2m shares in issue.
The larger holders include Canaccord Genuity Wealth (10.07%), Slater Investments (9.75%), Robert Millington (7.84%), Downing LLP (6.63%), Premier Fund Managers (5.06%), Octopus Investments (4.12%), Colin Stone (4.05%), Herbert Bottomley (3.45%), Russ Singleton, CEO, (2.47%) and William Campbell (2.17%).
Broker’s View – Trebled Profits On Doubled Sales
Analyst Andrew Renton at Cenkos Securities recently upgraded his 2023 and 2024 estimates, rating its shares as a Buy.
For the current year to end December he is looking for the group to almost double its revenues to £41.0m (£21.1m), while more than trebling its pre-tax profits to £3.4m (£0.9m), lifting its earnings up to 18.7p (10.3p) per share.
For the coming year he estimates £42.0m sales, £3.9m profits and 21.0p per share in earnings.
My View – Interim Results Due Within Days
Recently this group’s shares have fleetingly been up to 205.88p, on Friday night they closed at just 185p.
At that level I do believe that they offer investors a great ‘small cap’ purchase opportunity to participate in the potential growth to come in a technologically advanced business that is still, very much, in the early stages of its development and profitable growth.
(Profile 07.04.21 @ 95.5p set a Target Price of 120p*)
(Asterisk* denotes that the Target Price has been achieved since Profile publication)
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