Small Cap Round-Up: Digital Developments

Restore (LON:RST) – Strong Revenue And Profit Growth

The UK’s leading provider of digital and information management and secure lifecycle services issued a Trading Update for the year to end December 2022.

Demonstrating its underlying resilience during a challenging economic it declared that the group had achieved strong revenue and profit growth in the year.

Furthermore there is already a positive momentum for even more growth in the current year.

CEO Charles Bligh stated that:

“Restore delivered another year of revenue and profit growth and I am pleased how the whole team navigated the uncertainties of 2022 to finish in a strong position with major contract wins and excellent operational execution for customers, together with a robust financial position.

Whilst the macro-economic outlook is uncertain, our markets remain attractive as our essential services are needed more than ever to help customers reduce their costs while delivering improvements in security and data management and we have plans in place across both pricing and the cost base to address these macro challenges. Accordingly, we are confident that FY23 will be another year of good progress.” 

The Business

The £466m capitalised group provides offices and workplaces services to the public and private sectors primarily in the United Kingdom.

The company operates through two segments, Digital & Information Management, and Secure Lifecycle Services.

The Digital & Information Management segment offers storage and retrieval solutions for hard copy documents, magnetic data storage tapes, and heritage assets; digital workflow services, including document scanning, workflow automation, cloud-based document management systems, robotic process automation, and artificial intelligence.

The Secure Lifecycle Services segment provides lifecycle management of technology assets; relocation services; and hardware and software upgrades; and paper shredding and recycling services.

Broker’s View – Resilient And Misprised

Analyst James Wood at Canaccord Genuity Capital Markets now has a Buy rating out on the group’s shares, looking for 590p as his price objective.

His estimates for 2022 are for sales of £280.0m (£234.3m), with adjusted pre-tax profits of £41.0m (£38.1m), worth 23.4p (22.5p in earnings and covering a 7.4p (7.2p) dividend per share.

For the current year now underway he goes for £310.0m sales, £45.0m profits, 24.3p earnings and 7.6p per share in dividends.

My View – Heading Back Up Through The 400p Level

As it goes into its 2023 trading year this group is getting some solid control on its costs and building up its order pipeline.

The shares at the current 337.5p are down from the high of 492p, achieved this time last year.

They will be back up there again soon, the shares represent a strong hold.

(Profile 16.09.20 @ 335p set a Target Price of 420p*)

*****

Filtronic (LON:FTC) – Interims Next Tuesday

Despite last Monday’s announcement of this group expanding its presence into the satellite communications market, investors have not yet got excited about its current year prospects.

Contract and product supply delays have not helped.

Estimates for next Tuesday’s Interim results are suggesting that downgraded sales and profits for the year to end May 2023 are to be expected.

However, the designer and manufacturer of products and sub-systems for the aerospace, defence, telecoms infrastructure, space and critical communications markets, will give the market some guidance for the balance of this year and then into its 2024 trading year.

A new contract with a leading global provider of low earth orbit satellite communications equipment has been presented as a very positive development by the £24m capitalised company.

We remain optimistic for the group and its potential, even though being disappointed at the recent dismal share price performance, now at only 11p.

Hold very tightly.

(Profile 04.02.22 @ 11.6p set a Target Price of 14.5p)

*****

CentralNic Group (LON:CNIC) – Trading Update As Expected

Showing strong resilient growth was the message from internet services outfit CentralNic Group when, last Monday, it announced its final Trading Update for 2022.

I will refrain for a while on mentioning anything more about more favourite technology sector ‘money machine’ – I don’t want to bore my readers by repeating my massively optimistic opinions about the group.

After the Update those views have gone even stronger.

The shares closed last night at 144p, a price level that investors should consider offers massive upside.

(Profile 12.07.2 @ 89p set a Target Price of 110p*)

*****

NCC Group – cyber resilience and headwinds are a challenge for today

In last November’s AGM Trading Statement CEO Mike Maddison informed shareholders in the NCC Group (LON:NCC), the leading independent cyber security and resilience provider, that he would present his plans to evolve and accelerate the group’s strategy.

The latest corporate announcement indicates that his plans will need to be very forceful in their implementation.

The group’s Interim results for the six months to end November 2022 showed a 17.7% increase in revenues to £176.6m (£150.1m) but with an adjusted EBITDA increase of just 2.3% to £26.7m (£26.1m) and earnings 2.3% lower at 4.3p (4.4p) per share.

“Due to the macro-economic backdrop, and the savings arising from the actions to reshape the business, we expect FY23 Adjusted operating profit to be around £52m, before the investment we are making this year to implement the next chapter of our strategy.”

NCC Group Exists To Make The World Safer And More Secure

The group’s vision is to be the leading cyber resilience provider globally, trusted to protect and secure its customers’ critical assets.

As global experts in cyber security and risk mitigation, the NCC Group is trusted by over 14,000 customers worldwide to protect their most critical assets from the ever-changing threat landscape.

With over 2,400 colleagues in 12 countries, the NCC Group has a significant market presence in North America, Europe and the UK, and a growing footprint in Asia Pacific with offices in Australia, Japan, and Singapore.

Working across both the private and public sectors, including supporting governments, the company advises global technology, manufacturers, financial institutions, critical national infrastructure providers, retailers and governments to keep businesses, software and personal data safe.

Brokers View – Due To Reassess

The Consensus opinion, from analysts at eight different broking firms, prior to the Interim announcement, was that the group will see revenues of £342.7m for the year to end May 2023, generating adjusted pre-tax profits of £53.5m and earnings of 12.7p per share.

For the coming year the consensus had suggested £370.7m sales, £59.5m profits and 14.2p in earnings per share.

My View – Shares Ready To Regain Composure

Headwinds dragging profits will see those consensus ratings being amended, while the shares fell back from 184p ahead of the news, to around 152p in reaction.

They closed last night at 173p, valuing the group at £542m.leo

They will regain their composure in due course.

(Profile 02.01.20 @ 229p set a Target Price of 300p*)

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