Small Cap Round-up: Digital Delivery, Legal Consultancy and the Revolution
Made Tech Group (LON:MTEC) – accelerating its growth
On Wednesday of this week this leading provider of digital, data and technology services to the UK public sector will be holding its AGM and I look forward to a bullish Trading Statement from the company.
In the year to end May it accelerated to an impressive 100% organic revenue growth and it showed a compound annual growth rate of 97% in the four years to the end of May.
Founded in 2008, Made Tech now has a headcount of over 478 across its four UK locations, in London, Manchester, Bristol and Swansea.
The £36m group has a focussed mission to digitise Public Services. It provides services that enable central government, healthcare and local government organisations to digitally transform, allowing them to modernise their legacy technology, to accelerate their digital service delivery and to drive better decisions by using data.
It serves central and local government, the housing, healthcare, transport, education, police, justice, emergency, the space, defence, and security sectors.
The digital transformation market is substantial and growing and Made Tech is well positioned to capitalise on the opportunity. Over the last three years, since focussing solely on the public sector, it has demonstrated its ability to attract, secure and win new clients, new contracts and new talent.
It has a fast-expanding client base, including the Home Office, DVLA, HMRC, the Ministry of Justice and the Departments of Education and of International Trade.
The estimates for the current year to end May 2023 from Singer Capital Markets, the group’s Nomad and broker, are for revenues to increase from £29.3m to £43.0m, while adjusted pre-tax profits will rise to £3.4m (£2.3m), with earnings of 2.3p (1,6p) per share.
For the coming year they see £50.0m revenues, £4.1m profits, with 2.6p earnings.
The broker’s analysts have a price objective of 76p on the group’s shares.
This week’s AGM Statement will hopefully show a very positive outlook, making its shares at the current 24p look really appealing.
My price aim is quite modest but still offers some very good upside for new investors.
(Profile 24.08.22 @ 34p set a Target Price of 45p)
Gateley (Holdings) (LON:GTLY) – still growing apace
On Thursday of this week this legal and professional services group will be holding its AGM.
The year to end April saw the £231m capitalised group deliver a very strong financial performance, with it achieving a significant organic growth during the year.
I am hoping for a positive Trading Statement for the progress in the current year.
The group’s origins can be traced back to the 19th century when the commercial law firm of Stephen Gateley & Sons was established in Birmingham.
Since then, the company has grown significantly and going public boosted its ability to attract new partners and businesses into its fold.
Today it is a legal and professional service group, with 700 fee-generating staff out of its total of 1,038+ people.
It has offices in Belfast, Birmingham, Bolton, Chester, Exeter, Guildford, Leeds, Leicester, Llandudno, London, Manchester, Milton Keynes, Newcastle, Nottingham, Reading, Rutland and Dubai.
The full-service legal offering is given by its four business groups: business services, corporate activities, people issues, and finally, property matters.
It supports in over 5,700 active clients in the UK and beyond, ranging from private individuals up to FTSE100 companies.
Its clients include: the BBC, Sainsburys, HS2, Samsung, McCarthy & Stone, Jaguar Land Rover, Saint Gobain, Balfour Beatty, Toyota, Danone, BAE Systems, Taylor Wimpey, de Montfort University, NCP, and Transport for London.
Analyst James Allen at Liberum Capital rates the group’s shares as a Buy, looking for 320p in due course.
He expects the year to end April 2023 to show revenues of £162m (£137m), while pre-tax profits could rise to £26.1m (£21.6m), lifting earnings up to 16.5p (14.3p) and covering a 9.6p (8.5p) dividend per share.
The group’s shares, which peaked at 244p a year ago, closed at 185p on Friday night and look very attractive at that level.
An easy climb to trade the 200p-220p range is more than possible.
(Profile 18.05.20 @ 155p set a Target Price of 195p*)
Revolution Bars Group (LON:RBG) – a ray of sunshine
On Tuesday morning this leading operator of some 69 premium bars, trading mainly under the Revolution and Revolución de Cuba brands, will be disclosing its final results for the year to 2 July this year.
At the beginning of August, when giving a Pre-Close Statement, CEO Rob Pitcher commented that:
“Revolution Bars Group is in great shape. The business is well positioned with a net cash position to fund our new site and refurbishment programme.It has been exciting to see the positive results of our refurbishment and expansion strategy this year and to see our young guests, who place real importance on socialising, continue to enjoy themselves in our bars.
Our vision and strategy to delight our guests is delivering. The business is well positioned to continue to progress, is well funded for our new site and refurbishment programme, and we are seeing Christmas bookings building much earlier than last year.”
In reaction brokers finnCap noted that:
“RBG’s full-year pre-close trading statement reads like a ray of sunshine in a market obsessed with rising consumer pressures. The update reveals that results will be in line with expectations, having upgraded following the mid-June trading update. It continues to trade well and the outlook remains positive. Its customers have a degree of insulation from cost-of-living pressures and there are early signs of a return of the pre-Christmas corporate market. The refurbishment projects are on track, initial trading at the two recent openings is encouraging and there is a healthy pipeline of new sites building.”
Their analysts are predicting revenues for the last year of £141.1m (£39.4m) helping to turn it around from a £20.9m loss in 2021 to a £2.7m adjusted pre-tax profit, worth 1.2p per share in earnings.
Staggeringly the brokers have a 36p price objective on the group’s shares, which to be fair I would imagine they will cautiously lower on tomorrow’s results statement.
However, that does not take away from the buying appeal of the group’s shares, now at just 10.62p.
I see them moving up to trade around 14p/15p in the run-up to Christmas, politics permitting.
Accordingly, I now set a new Target Price of 15p.
(Profile 13.10.21 @ 24.25p set a Target Price of 31p)
(Asterisks denote that Target Prices have been achieved since Profile publication)
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