Report

Growth set to accelerate in 2016


Turnarounds are notoriously tricky even at the best of times: inevitably once one problem is fixed, another crops up. Indeed in last Thursday's trading update came news too that SVR's H2 turnover had been impacted - and is now anticipated to come in at £6.2m (-7.8%), or £13m (+2.1%) for 2015.
This is £0.6m shy of our previous £13.6m estimate, with product revenue growth (strategically higher value) being partly offset by a contraction in professional services. In addition £300k of extra IT spend (relating to one-off cloud transition) was incurred in the period - so we now predict 2015 adjusted PBT of -£1.2m (vs -£0.4m before). The company is still negotiating a number of license deals which may be signed prior to the year end, although prudently we have forecast them to close early 2016.
Going forward, we think that things will improve, and understand from Management that the pipeline is already filling up, especially relating to firm's newly launched mobile proposition (Nexus FS). In fact if they can successfully execute the turnaround, then there is substantial upside for patient investors despite our price target being cut from 11p to 8p/share in line with our lowered estimates.
Compared to software peers, the stock at 3.25p trades on a frugal EV/sales multiple of 0.5x versus the sector average of 2.9x. Plus there is always a chance that an interested trade buyer may come knocking eventually to snap-up this strategic asset.


Underlying
Service Power Technologies plc

Provider
Equity Development
Equity Development

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