'Blowing the doors off'
​Blancco is the world's leading developer of 'data erasure' software, used to protect governments and corporates from ID/data theft and cyber-crime, along with being a pioneer in smartphone diagnostics (Xcaliber). It is roughly 7x larger than its closest competitor. The Erasure division includes the Blancco business which enables customers to test, diagnose, repair and repurpose IT devices with certified software.
The company posted impressive figures this morning for the 12 months ending June 2016. Turnover climbed 35% organically to £22.4m (or +49% including acquisitions) - delivering a 1.09x Book:Bill ratio, adjusted EBIT of £6.1m (+51%, with 27% margins) and EPS of 5.6p (+97%). Better still, recurring revenues, underpinned by 1-4 year contracts, now generate approx 25% of sales, thus providing good visibility, as evidenced by the doubling of the year-end deferred income balance to £4.8m.
Going forward, since Blancco today possesses a full suite of 'best-in-breed' software applications, we suspect most of its future growth will be organic - augmented by the odd one or two cherry-picked acquisition. For all intents and purposes, Blancco is already the 'gold standard' for secure, certified and automated data erasure within their <£100m pa niche.
We think Blancco can grow turnover, adjusted PBT and EPS to £59.5m, £17.3m and 19.8p respectively by FY20. In turn putting the shares (at 230p) in 4 years' time, on attractive PE and PEG ratios of 11.6x and 0.4x, which would look extremely cheap for such a high quality, science rich stock.
On valuation, we have pushed up our price target to 245p/share (from 225p), mirroring Blancco's excellent results and slightly higher proceeds (€4.5m) from the Digital Care disposal.
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