Report

Solid start to FY19

In a trading update ahead of today’s AGM the Board said that revenues had climbed for the 1st 5 months of FY19 (ED est 5%-10% LFL), thanks to a 11.8% rise at PowerConnections, along with a 95% jump in the number of smart home connected devices (Re lighting & heating) vs 12 months ago. 3rd party distribution has been expanded too, with Primaflow F&P, Expert Electrical (Ireland), JTF, Plumb Nation, Renuvo, Box.co.uk and Utilita Energy all selecting the MiHome platform.
That said, MiHome’s FY18 comparatives included a large ‘stock build’ at a major customer, which is unlikely to be repeated. Instead orderflow this year is set to be far better balanced from a working capital perspective, thus avoiding another inventory overhang within the channel. Meaning that as of today, the anticipated shift to a 50/50 split between PowerConnections and MiHome has not yet occurred. Albeit we view this simply as a timing issue which should unwind in due course.
Far more importantly though from an investor perspective, is that underlying LFL demand remains strong supported by a buoyant home automation market. As evidenced again last week, when the UK’s #1 smart energy provider Hive (Centrica), reported a 50% uplift in turnover for the 10 months to the 31st October.
Interestingly the CEO addresses financing the growth opportunity in his report that ‘’The Directors continue to be excited about the opportunities for MiHome, but recognise that these will only be fully achieved with additional capital for both further product development and increased marketing spend. The Board is therefore pursuing the possibility of raising further equity or debt for this purpose.”
In terms of the outlook, given the tough FY18 comparatives (re stock overhang) and uncertainty surrounding Brexit, we have nudged down our overall FY19 turnover and PBT forecasts to £4.15m (vs £4.43m before) and -£22k (+£6k) respectively. Albeit due to the adverse mix effect between MiHome and PowerConnections, this has had a slightly bigger impact on the sum of the parts valuation, which has fallen from 65p to 57p per share.
Underlyings
Alarm.com Holdings Inc.

Alarm.com is a platform for the intelligently connected property. The company provides a suite of cloud-based solutions for smart residential and commercial properties. The company's service provider partners can deploy its interactive security, video monitoring, intelligent automation and energy management solutions as stand-alone offerings or as combined solutions to address the needs of a range of customers. The company's subscribers can connect to their property through the company's family of mobile apps, websites, and engagement platforms like voice control through Amazon Echo and Google Home, wearable devices like the Apple Watch and TV platforms such as Apple TV and Amazon Fire TV.

Arlo Technologies

Arlo Technologies combines an intelligent cloud infrastructure and mobile app with a variety of smart connected devices. The company's cloud-based platform provides users with visibility, insight and a solution to help protect and connect in real-time with the people and things from any location with a Wi-Fi or a cellular connection. The company's smart connected devices include Arlo Security Camera, Arlo Q and Arlo Q Plus, Arlo Pro, Arlo Go, Arlo Baby, Arlo Pro 2, Arlo Audio Doorbell, Arlo Chime, Arlo Ultra, Arlo Pro 3 and Arlo Video Doorbell. The company's Arlo accessories include Arlo Charging Accessories, Arlo Mounts and Arlo Skins.

Checkit

Elektron Technology is a global business that designs, manufactures and markets products that connect, monitor and control. Co. has three business segments: Bulgin, which products are sealed connectors for the demanding environments, and custom product and system development; Instrumentation, Monitoring and Control, which key products are ophthalmic instruments, nanopositioning and sensing equipment, and materials testing equipment; and Checkit, which key products are cloud-based work management software based on interactive checklists, and smart wireless sensors for continuous automated monitoring.

Concurrent Technologies PLC

Concurrent Technologies designs, manufactures and supplies embedded computer products for customers within the telecommunication, defense, aerospace, transportation, scientific and industrial markerts. Co.'s products are based on long life cycle components supplied by companies such as Intel, and include a range of central processing unit boards and complementary accessory boards. Co.'s products support various operating systems including Windows®, Linux®, Solaris™, QNX® and VxWorks® used in the embedded markets.

Cyanconnode Holdings

CyanConnode Holdings is a holding company. Co. designs and develops narrowband Radio Frequency (RF) mesh networks that enable Internet of Things communications. Co. provides customers with networking solutions and applications that help them in service delivery, business and energy. Co.'s optimized solutions provide narrowband RF network technology, delivering exceptional performance and total cost of ownership. These solutions include hardware, software and network management. Co.'s IPv6 solution is a wireless Neighborhood Area Network, an IP-based machine-to-machine platform that uses narrowband radio mesh networks to create deployments for the implementation of third party applications.

discoverIE Group plc

Electrocomponents plc

Fireangel Safety Technology Group Plc

FireAngel Safety Technology Group sells and distributes home safety products and accessories in the U.K., Continental Europe and certain other countries and undertakes manufacturing activities in Canada. Co. is engaged in the sale of smoke and carbon monoxide detectors and accessories to end customers. Co.'s wholly owned subsidiary, Pace Sensors, is engaged in the manufacture and sale of carbon monoxide sensors to a third party carbon monoxide detector assembler based in China. Co.'s principal products are smoke alarms, carbon monoxide alarms and accessories. Co. has an extensive portfolio of patented intellectual property in Europe, the U.S. and other selected territories.

HIVE Blockchain Technologies Ltd.

IndigoVision Group

IndigoVision Group is engaged in the development, manufacture and sale of networked video security systems. Co.'s software, cameras, encoders and network video recorders are designed both internally and with technology partners and manufactured in Asia and Europe. Co.'s end-to-end internet protocol video security systems allow full motion video to be transmitted worldwide, in real time, with digital quality and security, over local or wide area networks, wireless links or the internet, using compression technology to minimize usage of network bandwith. Co.'s geographical sales regions are primarily Europe, the Middle East and Africa; the Americas and Asia Pacific.

LPA Group PLC

LPA Group is a designer, manufacturer and supplier of LED based lighting and electro-mechanical systems and a distributor of engineered components focussed on the transportation (including rail, infrastructure and aviation) and aerospace and defence markets. Co. and its subsidiaries comprise three product groups within a single operating segment - electro-mechanical, lighting and distribution, which collectively design, manufacture and market industrial electrical and electronic accessories.

Resideo Technologies, Inc.

Smart Metering Systems

Smart Metering Systems installs, owns and manages utility assets and provides energy solutions. Co. operates in three division: Asset Installation; Asset Management; and Energy Management. Co.'s asset management division is a direct field force management and asset installation, which comprises regulated management of gas meters, electric meters and ADM™ units within the U.K. Co.'s asset installation division is engaged in investing in assets and providing remote reading solutions, which comprises installation of domestic and industrial and commercial gas meters and electricity meters throughout the U.K. Co.'s energy management division is engaged in providing energy-saving strategies.

Solid State

Solid State manufactures electronic equipment and distributes electronic components and materials. Co. has two divisions: Distribution, which is a distributor serving the needs of the electronics original equipment manufacturer community in the U.K. and products provided include those for the internet of things, embedded processing, control, wireless and wired communications, power management, and light-emitting diode lighting from manufacturers; and Manufacturing, which is engaged in the design, development and supply of rugged and industrial computers, portable power and energy storage solutions, communication systems, antennas and high bandwidth video transmission products.

Sonos

Sonos designs, develops, manufactures and sells multi-room audio products. The Sonos home sound system provides customers with a listening activity created by the design of its speakers and components, a proprietary software platform and the ability to stream content from a variety of sources over the customer's wireless network or over Bluetooth. The company's products are sold via third-party retail stores, including custom installers of home audio systems. The company also sells via select e-commerce retailers and its website sonos.com. The company's products are distributed through its wholly owned subsidiaries: Sonos Europe B.V., Beijing Sonos Technology Co., Ltd., Sonos Japan GK and Sonos Australia Pty Ltd.

Synectics

Synectics is a holding company. Through its subsidiaries, Co. is engaged in the design, integration, control and management of surveillance technology and networked security systems. Co. serves its customers through two business models: Systems, which markets under the Synectics brand, securing contracts for the design, development, and deployment of security and surveillance solutions founded on its Synergy 3 platform; Integration & Managed Services, which trades under the Quadrant Security Group and SSS Management Services brands, serving customers by designing security, surveillance, and facilities management solutions, and then implementing, maintaining, and supporting them over time.

Telit Communications S.p.A.

Telit Communications is a global enabler of the Internet of Things (IoT). IoT is the technologies that allow both wireless and wired systems to communicate, exchange data with a range of devices, typically in a vast number of locations. Co. provides a portfolio of integrated products and services for end-to-end IoT deployments. This includes cellular communication modules, global navigation satellite system, short-to-long range wireless modules, low power Wi-Fi and Bluetooth, IoT connectivity and IoT platform services. Co. sells its products and services directly, and through a network of distributors, to direct and indirect customers, in countries around the world.

Vianet Group

Vianet Group is a provider of actionable management information and business insight created through combining data from its smart Internet of Things solutions and external information sources. Co. operates two business divisions: Smart Zones, which principally consists of beer monitoring business (including the U.S.) and gaming machine management services; and Smart Machines, which comprises vending machine telemetry and contactless payment solutions, as well as monitoring business primarily in the vending sector. Co. provides design, product development, sale and rental of fluid monitoring equipment and machine monitoring equipment, data insights and related services in these divisions.

Provider
Equity Development
Equity Development

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Analysts
Paul Hill

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