Doing all the right things consistently well
Elektron (EKT) is a specialist niche product OEM and B2B operational service provider, enjoying a wide economic moat. It runs 3 separate divisions, each targeting distinct markets, yet bound together by a single centre of engineering excellence located in Cambridge.For EKT - particularly in light of the difficult hand it was originally dealt – this morning’s ‘strong’ results are the culmination of years of hard work, and a reflection of the business’ resilience and quality.
In terms of the 1st half numbers, revenues and EBIT climbed to £15.9m (+17% LFL) and £1.4m (180%) respectively, thanks to a standout performance from Bulgin. Here “unprecedented demand†(bookings +10%) propelled turnover up +14.4% to £14.3m (£12.5m LY), EBIT 20% higher (£3.6m vs £3.0m) and operating margins to 25% (24% LY). Similarly, Checkit delivered impressive top line growth of 146% to £0.4m, aided by July’18 annualised revenues running at a £1.1m clip (vs £1.0m April and £0.5m LY) – with losses broadly flat at £2.2m (-£2.3m LY) mirroring its ambitious expansion plans. Optometry equipment maker EET made good progress too, breaking-even (-£0.2m LY) on revenues up 33% to £1.2m.
Elsewhere, net cash closed July at £6.8m (vs £2.1m LY & £5.2m Jan’18) and is set to rise to £8.3m by Jan’19. Implying to us that there is headroom available for possible synergistic M&A, albeit nothing is thought to be imminent & organic growth remains by far the #1 focus.
Alongside the improving outlook, the medium-long term prospects at each division are in our mind outstanding. For us, all of these three scenarios are perfectly feasible and not factored into the current share price. Consequently, although our forecasts remain unchanged, we think the broader risk/reward profile has improved, and accordingly have nudged up the SOTP valuation from 66p to 69p/share - split 49p Bulgin, 14p Checkit, 2p EET and 3p net funds.
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.
Crimson Tide is a holding company. Through its subsidiaries, Co. is engaged in the provision of mobility solutions and related software development. Co. also provides management and support to other group companies.
Ideagen is a supplier of information management software to regulated industries. Co. supplies Governance, Risk and Compliance solutions principally to the Healthcare, Transport, Aerospace & Defense, Life Sciences, Manufacturing and Financial Services sectors.
Salesforce.Com is engaged in customer relationship management technology. The company's Customer 360 is an integrated platform that unites sales, service, marketing, commerce, integration, analytics and more to give companies a single, shared view of their customers. Through its platform and other developer tools, the company also enables third parties to develop additional functionality and applications, or apps, that run on its platform, which are sold separately from or in conjunction with the company's service offerings. The company's cloud service offerings include sales cloud, service cloud, marketing and commerce cloud, and salesforce platform and other.
ServiceNow provides enterprise cloud computing services that define, structure, manage and automate digital workflows for global enterprises. The company markets its services to enterprises in a variety of industries, including consumer products, education, financial services, government, health care, information technology (IT) services and technology. The company sells its subscription services through direct sales and, to a lesser extent, through indirect channel sales. The company also provides a portfolio of personnel and other services, both directly and through its network of partners. The company's products include IT service management, IT operations management, IT business management, and security operations.
Strix Group is a holding company. Through its subsidiaries, Co. is engaged in the designing, manufacturing and supply of kettle safety controls and other components and devices involving water heating and temperature control, steam management and water filtration. Co.'s core products are kettle safety controls, which are responsible for disconnecting the power to the heating element when either water has boiled, operated with no water present, or in some products when the kettle is lifted off its base.
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