Osirium Technologies — A game of two halves

Osirium Technologies (LN: OSI)

Last close As at 10/10/2024

8.00

0.00 (0.00%)

Market capitalisation

4m

More on this equity

Research: TMT

Osirium Technologies — A game of two halves

Osirium saw strong order intake in H119, +70% y-o-y and +81% h-o-h. As H1 benefited from the renewal of a large three-year contract, management has guided bookings more cautiously for H219, expecting growth of at least 36% for FY19. We have revised our forecasts down accordingly, but highlight that the recently launched Opus solution could provide upside to our bookings, revenue and EBITDA estimates.

Katherine Thompson

Written by

Katherine Thompson

Director

TMT

Osirium Technologies

A game of two halves

Trading update

Software & comp services

8 July 2019

Price

71.5p

Market cap

£10m

Net cash (£m) at end FY18

2.4

Shares in issue

13.6m

Free float

92%

Code

OSI

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(7.7)

(37.3)

(50.7)

Rel (local)

(11.5)

(38.1)

(50.0)

52-week high/low

151p

72p

Business description

UK-based Osirium Technologies designs and supplies subscription-based cybersecurity software. Its PxM platform includes privileged access management, privileged task management, privileged session management and privileged behaviour management and it has recently launched Opus for secure process automation.

Next events

H119 results

September 2019

Analyst

Katherine Thompson

+44 (0)20 3077 5730

Osirium Technologies is a research client of Edison Investment Research Limited

Osirium saw strong order intake in H119, +70% y-o-y and +81% h-o-h. As H1 benefited from the renewal of a large three-year contract, management has guided bookings more cautiously for H219, expecting growth of at least 36% for FY19. We have revised our forecasts down accordingly, but highlight that the recently launched Opus solution could provide upside to our bookings, revenue and EBITDA estimates.

Year end

Revenue (£m)

EBITDA*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

EV/Sales
(x)

12/17

0.65

(1.61)

(18.1)

0.0

N/A

11.3

12/18

0.96

(1.77)

(18.1)

0.0

N/A

7.6

12/19e

1.25

(1.83)

(17.4)

0.0

N/A

5.8

12/20e

1.83

(1.52)

(17.2)

0.0

N/A

4.0

Note: *EBITDA and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Bookings strong in H1; expected to moderate in H2

Osirium’s H119 trading update confirmed that it received bookings worth £1.03m in H1, 70% higher than a year ago. As this number included one large three-year renewal with a global asset manager (announced in May), the company has guided to a more conservative bookings intake in H2, expecting total bookings of £1.6m for the year (versus our £1.88m). H119 revenues of £0.52m were 13% higher y-o-y and deferred income at the end of H119 stood at £1.24m, of which £0.46m is expected to be recognised in H2. Net cash at the end of H119 stood at £0.89m; this excludes a £0.47m R&D tax credit due to be received this month. Management has previously suggested it is considering a fund-raise later this year to strengthen the balance sheet and accelerate sales growth.

Estimates revised down but Opus could be wild card

We have revised our bookings forecasts down for FY19 and FY20 and now expect bookings growth of 36% in FY19 and 35% in FY20. We have revised down our revenue and EBITDA forecasts, partially offset by the higher than expected R&D tax credit. We note however, that Osirium’s new secure IT process automation solution, Opus, was only launched in May and is yet to have a material impact on bookings. This could provide upside to the conservative H2 bookings guidance and boost H2 revenue and cash. As a lead indicator for new customers, management reiterated that it is seeing an increasing conversion rate of proofs of concept (PoC) to sales, with more PoCs having taken place in H119 than in the whole of 2018.

Valuation: Bookings key to upside

Osirium is trading broadly in line with peers on an EV/Sales basis. We have performed a reverse DCF to analyse the assumptions factored into the current share price, using a WACC of 11% and a terminal growth rate of 3%. We estimate that the share price is discounting average annual bookings growth of 23% for FY21–28, break-even EBITDA in FY23, average EBITDA margins of 9.7% for FY21–28 and a terminal EBITDA margin of 35%. In our view, bookings growth will be the key driver of share price performance.

Changes to forecasts

Exhibit 1: Estimate changes

£'000s

FY19e

FY20e

Old

New

Change

y-o-y

Old

New

Change

y-o-y

Bookings

1,883.7

1,601.1

(15.0%)

36.0%

2,543.0

2,161.5

(15.0%)

35.0%

Revenues

1,404.2

1,250.7

(10.9%)

30.6%

2,072.8

1,830.3

(11.7%)

46.3%

EBITDA

(1,679.7)

(1,833.3)

9.1%

3.7%

(1,273.8)

(1,516.2)

19.0%

(17.3%)

EBITDA margin

-119.6%

-146.6%

22.5%

-61.5%

-82.8%

34.8%

Normalised operating profit

(2,677.3)

(2,830.8)

5.7%

5.8%

(2,500.2)

(2,742.7)

9.7%

(3.1%)

Normalised operating profit margin

-190.7%

-226.3%

(35.7%)

-120.6%

-149.8%

(29.2%)

Reported operating profit

(2,677.3)

(2,830.8)

5.7%

5.8%

(2,500.2)

(2,742.7)

9.7%

(3.1%)

Reported operating margin

-190.7%

-226.3%

(35.7%)

-120.6%

-149.8%

(29.2%)

Normalised PBT

(2,677.3)

(2,830.8)

5.7%

5.8%

(2,500.2)

(2,742.7)

9.7%

(3.1%)

Reported PBT

(2,677.3)

(2,830.8)

5.7%

5.8%

(2,500.2)

(2,742.7)

9.7%

(3.1%)

Normalised net income

(2,275.7)

(2,360.9)

3.7%

4.1%

(2,125.2)

(2,331.3)

9.7%

(1.3%)

Reported net income

(2,275.7)

(2,360.9)

3.7%

4.1%

(2,125.2)

(2,331.3)

9.7%

(1.3%)

Normalised basic EPS

(16.79)

(17.42)

3.7%

(4.0%)

(15.68)

(17.20)

9.7%

(1.3%)

Normalised diluted EPS

(16.79)

(17.42)

3.7%

(4.0%)

(15.68)

(17.20)

9.7%

(1.3%)

Reported basic EPS

(16.79)

(17.42)

3.7%

(4.0%)

(15.68)

(17.20)

9.7%

(1.3%)

Net debt/(cash)

33.2

197.0

493.0%

(108.3%)

2,275.1

2,754.7

21.1%

1298.3%

Source: Edison Investment Research

Exhibit 2: Financial summary

£'000s

2013

2014

2015

2016

2017

2018

2019e

2020e

31-December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

120.0

207.0

290.2

477.6

647.6

957.5

1,250.7

1,830.3

EBITDA

 

 

(366.7)

(327.1)

(377.9)

(1,136.7)

(1,609.4)

(1,767.3)

(1,833.3)

(1,516.2)

Normalised operating profit

 

 

(679.4)

(714.3)

(790.7)

(1,725.6)

(2,296.8)

(2,674.8)

(2,830.8)

(2,742.7)

Amortisation of acquired intangibles

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Exceptionals

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Share-based payments

0.0

(184.3)

(56.4)

(96.9)

0.0

0.0

0.0

0.0

Reported operating profit

(679.4)

(898.5)

(847.1)

(1,822.5)

(2,296.8)

(2,674.8)

(2,830.8)

(2,742.7)

Net Interest

(35.2)

5.7

(9.9)

9.7

4.2

(0.6)

0.0

0.0

Joint ventures & associates (post tax)

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Exceptionals

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Profit Before Tax (norm)

 

 

(714.6)

(708.5)

(800.7)

(1,715.9)

(2,292.6)

(2,675.4)

(2,830.8)

(2,742.7)

Profit Before Tax (reported)

 

 

(714.6)

(892.8)

(857.1)

(1,812.8)

(2,292.6)

(2,675.4)

(2,830.8)

(2,742.7)

Reported tax

137.7

134.1

121.0

453.3

409.4

407.6

469.9

411.4

Profit After Tax (norm)

(576.9)

(602.1)

(687.6)

(1,286.9)

(1,883.2)

(2,267.8)

(2,360.9)

(2,331.3)

Profit After Tax (reported)

(576.9)

(758.7)

(736.0)

(1,359.6)

(1,883.2)

(2,267.8)

(2,360.9)

(2,331.3)

Minority interests

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Discontinued operations

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Net income (normalised)

(576.9)

(602.1)

(687.6)

(1,286.9)

(1,883.2)

(2,267.8)

(2,360.9)

(2,331.3)

Net income (reported)

(576.9)

(758.7)

(736.0)

(1,359.6)

(1,883.2)

(2,267.8)

(2,360.9)

(2,331.3)

Basic average number of shares outstanding (m)

0

1

10

10

10

13

14

14

EPS - normalised (p)

 

 

N/A

N/A

(6.61)

(12.38)

(18.12)

(18.14)

(17.42)

(17.20)

EPS - normalised fully diluted (p)

 

 

N/A

N/A

(6.61)

(12.38)

(18.12)

(18.14)

(17.42)

(17.20)

EPS - basic reported (p)

 

 

(296.36)

(144.92)

(7.08)

(13.08)

(18.12)

(18.14)

(17.42)

(17.20)

Dividend (p)

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

Revenue growth (%)

26.3

72.6

40.2

64.6

35.6

47.9

30.6

46.3

EBITDA Margin (%)

-305.7

-158.0

-130.2

-238.0

-248.5

-184.6

-146.6

-82.8

Normalised Operating Margin

-566.3

-345.0

-272.5

-361.3

-354.7

-279.4

-226.3

-149.8

BALANCE SHEET

Fixed Assets

 

 

815.7

805.2

799.7

1,178.8

1,812.1

2,360.2

2,923.7

3,333.9

Intangible Assets

808.6

795.7

793.3

1,134.5

1,731.9

2,307.2

2,864.6

3,268.6

Tangible Assets

7.2

9.5

6.4

44.3

80.2

52.9

59.1

65.4

Investments & other

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Current Assets

 

 

109.3

269.2

428.1

3,953.7

1,646.4

3,134.6

622.2

(1,744.9)

Stocks

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Debtors

77.2

218.6

154.6

380.9

622.6

748.0

819.2

1,009.7

Cash & cash equivalents

32.2

50.6

273.5

3,572.8

1,023.8

2,386.6

(197.0)

(2,754.6)

Other

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Current Liabilities

 

 

(235.2)

(294.2)

(365.0)

(648.5)

(857.7)

(1,170.3)

(1,582.4)

(1,956.8)

Creditors

(235.2)

(294.2)

(365.0)

(648.5)

(857.7)

(1,170.3)

(1,582.4)

(1,956.8)

Tax and social security

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Short term borrowings

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Other

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Long Term Liabilities

 

 

(952.5)

(487.6)

(163.3)

0.0

0.0

0.0

0.0

0.0

Long term borrowings

(789.0)

(323.7)

0.0

0.0

0.0

0.0

0.0

0.0

Other long term liabilities

(163.4)

(163.9)

(163.3)

0.0

0.0

0.0

0.0

0.0

Net Assets

 

 

(262.6)

292.6

699.5

4,483.9

2,600.8

4,324.5

1,963.5

(367.7)

Minority interests

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Shareholders' equity

 

 

(262.6)

292.6

699.5

4,483.9

2,600.8

4,324.5

1,963.5

(367.7)

CASH FLOW

Op Cash Flow before WC and tax

(366.7)

(327.1)

(377.9)

(1,136.7)

(1,609.4)

(1,767.3)

(1,833.3)

(1,516.2)

Working capital

66.3

3.8

120.7

226.8

85.5

187.2

340.9

183.8

Exceptional & other

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Tax

109.8

48.4

134.6

120.4

291.4

407.6

469.9

411.4

Net operating cash flow

 

 

(190.6)

(274.9)

(122.6)

(789.4)

(1,232.5)

(1,172.5)

(1,022.4)

(921.1)

Capex

(412.8)

(376.7)

(407.3)

(968.0)

(1,320.6)

(1,455.7)

(1,561.1)

(1,636.6)

Acquisitions/disposals

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Net interest

(35.2)

5.7

(9.9)

9.7

4.2

(0.6)

0.0

0.0

Equity financing

0.0

639.3

762.8

5,047.1

0.0

3,991.5

0.0

0.0

Dividends

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Other

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Net Cash Flow

(638.6)

(6.5)

222.9

3,299.3

(2,549.0)

1,362.8

(2,583.5)

(2,557.7)

Opening net (cash)/debt

 

 

118.3

756.9

273.1

(273.5)

(3,572.8)

(1,023.8)

(2,386.6)

197.0

FX

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Other non-cash movements

0.0

490.3

323.8

0.0

0.0

(0.1)

(0.0)

0.0

Closing net (cash)/debt

 

 

756.9

273.1

(273.5)

(3,572.8)

(1,023.8)

(2,386.6)

197.0

2,754.7

Source: Osirium, Edison Investment Research

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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