Taking Checkit to the ‘Next’ level
Visionary and founder of Apple, Steve Jobs, was a consummate genius at taking everyday concepts (ie PCs, mobile phones) and ultra-simplifying them for users. Likewise Checkit’s innovative SaaS solutions have transformed the process of completing routine tasks (eg cleaning restaurants, maintaining schools) - generating unrivalled benefits in terms of efficiency, customer service, repeatability, transparency, safety and regulatory compliance.The goal now is to exploit this 1st mover advantage, rapidly scale the division, and ultimately become a global ‘category champion’. This morning, the business took a major step forward towards achieving this objective, by announcing the £9m (cash/debt free) acquisition of Next Control Systems Ltd (NCS) – a leading UK (98% sales) remote monitoring, control, IoT and real time data analysis specialist, based in Fleet (Hampshire) and employing 104 staff.
The transaction is modestly priced (6.8x EV/EBITDA, 7.5x EV/EBIT), earnings enhancing, value accretive, and should generate substantial synergies in due course. Not least, by improving product quality, up/x-selling services, expanding overseas and opening doors for Checkit into other non-food related verticals.
From a risk perspective too, all of NCS’ key employees have decided to stay on, which should ensure a smooth handover and integration. Plus, the deal appears to be relatively low risk, in light of the Board’s prior knowledge of the target, alongside the symbiotic chemistry, skillset and genetic fit.
Elsewhere, Q1’20 trading (ie Feb-April) has been strong, with turnover up 17% to £8.9m (LY £7.6m), driven primarily by Bulgin (+20%). Consequently, we have upgraded our FY20 and FY21 EBIT forecasts to £6.6m (vs £5.8m before) & £8.4m (£7.4m) respectively – but prudently held the 83p/share valuation.
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.
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