Expanding rapidly, improving margins & enriching IP
earlier this week the UK’s Information Commissioner Office slapped eye watering fines on both Hilton Hotels (£99m) and British Airways (£184m) for the theft of customer data.Not only will this news shake up many corporate boardrooms, but it could also be a ‘game changer’ for the cyber-security industry. In particular data erasure experts like Blancco, who may soon receive a tsunami of incremental orders from organisations wishing to delete all their old, redundant files. Better still, all this would be upside for investors.
You see the company has already embarked on a highly value accretive growth strategy, centred on creating a new paradigm in technical innovation. Today announcing the €5.25m earnings enhancing acquisition (split €3.25m cash & €2m equity) of YouGetItBack Ltd (trading as Inhance), which we believe will materially enrich the group’s mobile IP. Alongside recently partnering with ZroBlack to develop a break-through firmware solution that will halve the time it takes to erase handsets. Both of these exciting initiatives have been financed by a £10m placing at 125p.
In terms of trading, FY19 EBIT (pre SBPs, est £3.4m vs £2.9m LY) and cashflows (conversion 117%) both exceeded consensus, on turnover that was in line with previously raised expectations (ED £30.5m, +13.3% organic, vs £26.9m LY). Net funds closed June at £0.1m (vs our -£1.8m figure & -£2.7m LY) – which proforma is now c. £6m.
As such, we have lifted both our FY20 sales and adjusted EBIT (pre SBPs) forecasts to £35.0m and £4.3 respectively – and valuation from 160p to 174p/share.
Blancco Technology Group provides data erasure software. Co.'s segments are: Erasure, which enables customers to erase and repurpose IT devices with certified software; and Diagnostics, which provides diagnostics of smartphones and tablets, as well as new diagnostics tools. The erasure division focuses on development and delivery of solutions, includes: Blancco, a provider of data erasure software; SafeIT, which involved in cloud and networked data erasure; and Tabernus, which provides software erasure products. The diagnostics division consists of the Mobile Diagnostics business, comprising Xcaliber Technologies, a smartphone diagnostics software business and its SmartChk solution.
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