Silver Bullet Data Services And REACT Group – Both Set To Rise

Silver Bullet Data Services Group (LON:SBDS) – Now Ready To Fire Away

If you like to invest in companies when they are just on the turn, then this one really is for you.

Silver Bullet was only set up in 2016 and it floated three years ago.

So far, as it has been gradually developing its now global business, it has been making operating losses.

However, it now looks as though it could well be getting into a positive cashflow situation before the end of the year.

It has spent a chunk of both time and money as it builds up its services offer and its impressive list of top name clients.

Now it is ready to really push strongly as it enters its ‘monetisation’ phase, especially while it expects to maintain its operating costs.

The group is an established and growing services business, with significant accumulated industry experience, together with a proven track record of delivering strategic digital transformation and activation services to its clients. 

The company’s 4D AI advertising solution is designed to help advertisers target consumers in a ‘post cookie world’.

The product is a natural extension to its existing services business.

It has contracted with some 500 major brands globally and is already serving a very wide-ranging ‘blue-chip’ client base, such as Mars, BMW, Heineken, Pedigree, Johnson & Johnson, Lego, Sony, Entain, Omnicom Group, Dell, Honda, Aramco, Greene King and ITV amongst many others.

Yesterday the group announced its Finals for the year to end December 2023.

It declared a 44% increase in revenues to £8.36m (£5.82m), while the headline pre-tax loss was 46% lower at £3.31m (-£6.10m).

The results showed a significantly reduced loss boosted by the revenue acceleration against reduced operating costs.

What yesterday’s statement also highlighted was that bookings already this year have risen to £6.2m, making up 69% of what the company was targeting for the current year, especially with the group’s 4D bookings more than doubling the 2023 corresponding figure.

There is a ‘robust’ pipeline of over £4m for the rest of the year.

CEO Ian James stated that:

“Our revenue increase of 44% to £8.36m underscores the growing demand for our AI-driven digital transformation services and products.

Notably, our 4D revenue increased by 85%, a testament to the continued interest in our products, particularly in the US market.

Moreover, with over 50% of our revenue now stemming from US and global clients, we are solidifying our position as a key player in the international arena.”

What gives me a strong pointer that after the years of investing in the group’s development, it is definitely now ready to switch into an impressive ‘monetisation’ phase, as the CEO continued:

“Looking ahead, our post-period end highlights paint a promising picture, with total bookings at approximately £6.2m and a robust pipeline exceeding £4m.

With our sights set on achieving an EBITDA positive run rate entering the second half of the year and positive operating cashflow in the current financial year, I am very excited about the future prospects of Silver Bullet.”

Although still very early in the £15m capitalised group’s growth, in my view, its shares represent an interesting gamble upon its Management’s ability to perform to its strategic aims.

At 86.50p they must only be purchased by ‘risk tolerant’ investors – however, it could be those that do so will prove to be the real winners in 2024.

Without doubt I will be returning to comment upon this expanding group.

(Profile 30.05.24 @ 86.50p set an early Target Price of 105p)

REACT Group (LON:REAT) – Operating On Nearly 90% ARR

Since I last commented upon this company’s fortunes its share price has risen from 1.38p to last night’s 75p – unfortunately that does not reflect my share-picking ability, but instead the result of a 1 for 50 share consolidation.

The group is the UK’s leading specialist and contract cleaning, hygiene and decontamination company, operates with three divisions: LaddersFree, one of the largest commercial window cleaning businesses in the UK; Fidelis Contract Services, a contract cleaning and facilities maintenance business; and REACT business, which primarily provides a solution to emergency and specialist cleaning situations, both through long-term framework agreements and on an ad-hoc basis.

The £16.2m capitalised company yesterday issued its Interim Results for the six months to end March 2024.

It reported a 13% increase in revenues to £10.57m (£9.32m), while its adjusted EBITDA was an impressive 35% better at £1.28m (£0.95m), lifting its EBITDA earnings up to 6.02p against a previous 4.51p per share.

The group reported a good uplift in contract intakes, while it has been consolidating its banking relationship with HSBC, which I can see as a possible pointer to some M&A possibilities before the end of 2024.

CEO Shaun Doak stated that:

“We are delighted with the Group’s performance, particularly in a year characterised by significant investments. Despite the challenges, we have maintained strong sales momentum and secured higher margin business, which is a testament to our strategic efforts and operational efficiencies.

In addition to securing new material contracts, the Group has also achieved numerous small and medium-sized wins, whilst simultaneously renewing and enlarging existing contracts. This consistent success across various deal sizes underscores the quality of the Groups value proposition and is testament to our effective selling and cross-selling to drive growth.”

Commenting upon the group’s Outlook, he stated that:

“Looking ahead, the pipeline for the remainder of the year remains strong. This solid foundation provides the Board with considerable confidence in our ability to meet full year market expectations. We believe that our strategic investments and diversified contract wins position us well for sustained success.”

Analysts Mark Howson and Paul Richards at Dowgate Capital have current year estimates out for revenues of £21.3m (£19.6m), with adjusted EBITDA for the year to end September of £2.5m (£2.2m), with earnings of 6.9p (7.8p) per share.

In my opinion this group’s shares have good upside attractions and I cannot disagree with Dowgate Capital’s 100p share price aim, against last night’s close of 75p.

The shares are a very good Hold for existing shareholders and an appealing bargain for new investors.

(Profile 29.01.21 @ 75p set a Target Price of 125p)

(Profile 31.10.22 @ 40p set a Target Price of 80p*)

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