Blancco Technology Group: £4m+ top-up funding being sought
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).This morning it said that net debt is set to close June 2017 at around -£5.5m, or £2m higher than consensus. This temporary cash squeeze has arisen primarily as a result of the payment of previous acquisition earn-outs and advisors' fees, the expected deferred settlement of a £3.5m receivable (re Central American government contract) and the slippage of other license deals into June.
Granted, this news comes somewhat out-the-blue, yet even so the shortfall should be manageable (say via a standard RCF) in the context of a highly profitable and cash generative £99m market cap business, growing organically at over 30% pa.
In fact, the business is still going like a train with FY17 sales and adjusted EBIT projected to be in line with consensus, boosted by Q3 revenues up 48% yoy (constant currency), split 36% Erasure and 189% (pro forma) Diagnostics.
Going forward, we make no change to our profit estimates, albeit the valuation has been reduced from 290p to 230p/share, reflecting the new debt position and greater short term uncertainty. In terms of the dividend, we have assumed last year’s 2p payout is held, although as part of the forthcoming lender discussions, this might have to be trimmed/suspended – more as a gesture of goodwill, than financial necessity.
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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