Last close As at 05/08/2026
GBP0.20
▲ 0.50 (2.63%)
Market capitalisation
GBP21m
Research: TMT
Checkit reported annual recurring revenue (ARR) growth of 24% y-o-y in H124, with more than half of the growth from upsells and cross-sells to its existing customer base. Revenue was 19% higher y-o-y and EBITDA losses nearly halved y-o-y. We have upgraded our FY24 EBITDA forecast on better gross margins and operating efficiencies. Recent contract wins provide upsell potential and the recent John Lewis contract renewal highlights the stickiness of the technology.
Checkit |
Making good progress towards profitability |
H124 results |
Software and comp services |
14 September 2023 |
Share price performance
Business description
Next events
Analyst
Checkit is a research client of Edison Investment Research Limited |
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Checkit reported annual recurring revenue (ARR) growth of 24% y-o-y in H124, with more than half of the growth from upsells and cross-sells to its existing customer base. Revenue was 19% higher y-o-y and EBITDA losses nearly halved y-o-y. We have upgraded our FY24 EBITDA forecast on better gross margins and operating efficiencies. Recent contract wins provide upsell potential and the recent John Lewis contract renewal highlights the stickiness of the technology.
Year |
Revenue |
ARR |
PBT* |
EPS* |
DPS |
EV/sales |
01/22** |
8.4 |
9.0 |
(6.1) |
(9.0) |
0.0 |
1.9 |
01/23** |
10.3 |
11.5 |
(7.3) |
(6.9) |
0.0 |
1.6 |
01/24e |
12.0 |
13.3 |
(4.7) |
(4.3) |
0.0 |
1.4 |
01/25e |
14.2 |
15.9 |
(3.6) |
(3.4) |
0.0 |
1.1 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. **Continuing operations only.
ARR growth and cost control reduces losses
For H124, Checkit reported revenue of £5.7m (+19% y-o-y), recurring revenue of £5.4m (+22% y-o-y) and LBITDA of £1.9m (-47% y-o-y). ARR was 10% higher half-on-half (h-o-h), with gross retention of 98% and net revenue retention of 113%, reflecting strong upsells and cross-sells. ARR in the US increased 41% y-o-y to £3.2m. The company is continuing to focus on growth via its land and expand strategy while reducing costs and improving operating efficiency and expects to deliver operating performance ahead of market expectations for FY24. We have improved our LBITDA forecast for FY24 by 4% to £3.6m.
Scaling the business; evolving the product offering
Checkit’s land and expand strategy is focused on winning enterprise customers, who currently make up 85% of current pipeline opportunities, and the company is looking for partnerships to accelerate its growth. The recent agreement signed with Compass is already starting to bear fruit and other small wins have upsell potential. Checkit continues to invest in its technology platform to help the business scale and to support development of the product offering. This includes considering a wider range of verticals and applying artificial intelligence (AI) tools to the vast quantities of data the platform produces to bring predictive insights to customers.
Valuation: Sustained ARR growth to reduce discount
On an EV/sales multiple of 1.4x for FY24e and 1.1x for FY25e, Checkit trades at a material discount to the UK software sector (2.6x current year sales, 2.3x next year sales) and US SaaS peers (6.6x current year, 5.6x next year). If Checkit were to trade on the UK average for FY24e, it would be worth 40p per share and moving to trade in line with US SaaS peers would imply a valuation of 85p. Sustained ARR growth will be the key trigger for Checkit to attract a multiple more in line with SaaS peers, evidenced by customers signing up to use its software and existing customers expanding their usage. Faster movement towards break-even should also support the share price.
Review of H124 results
Exhibit 1 summarises Checkit’s H124 performance.
Exhibit 1: Half-year results from continuing operations
£m |
H124 |
H123 |
y-o-y |
Revenue |
5.7 |
4.8 |
19% |
Recurring revenue |
5.4 |
4.4 |
22% |
Non-recurring revenue |
0.3 |
0.4 |
-21% |
Gross profit |
3.9 |
3.0 |
31% |
Gross margin |
69% |
63% |
6% |
Adjusted EBITDA |
(1.9) |
(3.5) |
-47% |
Normalised operating profit |
(2.5) |
(3.9) |
-37% |
Reported operating profit |
(2.7) |
(4.5) |
-41% |
Normalised PBT |
(2.3) |
(3.9) |
-42% |
Reported PBT |
(2.5) |
(4.5) |
-45% |
Normalised net income |
(2.3) |
(3.9) |
-42% |
Reported net income |
(2.4) |
(4.4) |
-46% |
Normalised basic EPS (p) |
(2.1) |
(3.6) |
-42% |
Reported basic EPS (p) |
(2.3) |
(4.3) |
-47% |
Net cash |
12.8 |
19.5 |
-34% |
Period-end ARR |
12.6 |
10.2 |
24% |
Recurring revenue/total revenue |
95% |
92% |
Source: Checkit, Edison Investment Research
Revenue increased 19% y-o-y, with recurring revenue 22% higher and non-recurring revenue down 21%. Recurring revenue made up 95% of group revenue, up from 92% a year ago. Period-end ARR was 24% higher y-o-y. Gross margin improved over the year, increasing 6pp to 69% due to increased efficiency in hardware costs and lower platform procurement costs. Adjusted LBITDA reduced from £3.5m to £1.9m from a combination of higher gross profit and reduced operating costs. Depreciation and amortisation totalled £0.6m, share-based payments were £0.2m, the company earned net interest income of £0.2m and reported a £0.1m tax credit, resulting in a net loss of £2.4m.
Cash reduced from £15.6m at the end of FY23 to £12.8m at the end of H124. The company consumed £1.9m in cash from operations, received interest income of £0.2m, capitalised development costs totalling £0.9m, spent £0.1m on capex and made lease payments of £0.1m.
ARR growth reflects land and expand strategy
End-H124 ARR increased 10% h-o-h, with US ARR of £3.2m up 41% y-o-y and 16% h-o-h. The company had a gross retention rate of 98% and net revenue retention rate of 113%, reflecting a mix of upsells/cross-sells and price increases during the period. More than 50% of H124 ARR growth was from upsell and cross-sell within the existing customer base, with the balance from new customer wins and pricing.
The company benefited from several small wins that have potential for future upsell. Checkit also signed a master service agreement with Compass Contract Services (UK) Limited (Compass) for the provision of connected automated monitoring and connected workflow management to their end-users, primarily in the food services sector. Since signing, Checkit has entered into three new contracts with Compass and is discussing further opportunities. The company signed its largest ever contract renewal with John Lewis, worth £6m over three years.
Pipeline development focused on high-quality enterprise
Checkit noted that while sales cycles have lengthened due to customer caution in the current economic environment, the pipeline remains strong. The company is developing new customer relationships globally, focused on large multinational enterprise accounts. As well as its direct sales approach, it is looking for complementary partnerships to accelerate expansion. At the end of H124, the company noted that the pipeline split by customer size was 64% tier one (large enterprise), 22% tier two (enterprise) and 15% tier three (mid-size). In the US, the pipeline includes a number of multi-site organisations in the healthcare, food retail and hospitality sectors.
Product development: Looking at broader applications, simplifying installation, supporting growth
While to date, Checkit’s applications have focused on food service operations and compliance in the storage of medical products and samples, its products can be applicable to multiple other industries. As an example, recently Checkit’s collaborative workflow functionality has been adopted by facilities managers in care homes to ensure safety levels are maintained and maintenance is performed efficiently. The company is investigating applications and developing propositions in further sectors.
Investment in the data platform over the last year supports the company’s development of machine learning models to help managers take proactive steps to improve their operational efficiency; these models are currently being tested. The R&D team is working on applying rapidly developing AI technologies, including large language models, to Checkit’s customers’ problems.
The company has also invested in simplifying sensor installation procedures, including using Checkit’s workflow tools to guide and manage installations, to make it easier for third parties to implement Checkit’s sensor solutions without its direct involvement.
Checkit has continued to invest in improving app functionality for iOS and Android and improving resilience and performance to support growth.
Outlook and changes to forecasts
The board is confident it can deliver an FY24 operating performance ahead of current expectations (analyst forecasts for adjusted LBITDA in the range £3.7–3.8m) and management reconfirmed its target to achieve break-even at the EBITDA level during FY26. The company noted that it is planning to offshore part of its customer support team in H224, which should result in some cost savings. We have slightly reduced our revenue forecasts to reflect the timing of roll-out of recent contract wins and increased our gross margin assumptions. Our FY24 LBITDA forecast reduces from £3.8m to £3.6m and we maintain our FY25 forecast. As the company generated interest income of £0.2m in H124, we have factored in higher interest income for FY24 and FY25. Our net cash forecasts are maintained and we continue to estimate that the company has sufficient cash to reach cash flow break-even.
Exhibit 2: Changes to forecasts
£m |
FY24e |
FY25e |
|||||||
Old |
New |
Change |
y-o-y |
Old |
New |
Change |
y-o-y |
||
Revenues |
12.5 |
12.0 |
-4.0% |
16.2% |
14.6 |
14.2 |
-2.3% |
19.0% |
|
Gross profit |
8.2 |
8.4 |
2.2% |
28.5% |
10.0 |
10.0 |
-0.2% |
19.4% |
|
Gross margin |
65.5% |
69.8% |
4.3% |
6.7% |
68.5% |
70.0% |
1.5% |
0.2% |
|
EBITDA |
(3.7) |
(3.6) |
-4.2% |
-43.9% |
(2.3) |
(2.3) |
2.1% |
-35.1% |
|
EBITDA margin |
-30.0% |
-30.0% |
0.0% |
32.1% |
-15.7% |
-16.4% |
-0.7% |
13.6% |
|
Normalised operating profit |
(5.2) |
(5.1) |
-3.0% |
-31.2% |
(3.8) |
(3.8) |
1.2% |
-24.8% |
|
Normalised operating margin |
-42.1% |
-42.5% |
-0.5% |
29.3% |
-25.9% |
-26.9% |
-0.9% |
15.6% |
|
Reported operating profit |
(5.4) |
(5.6) |
2.6% |
-54.9% |
(3.9) |
(4.2) |
8.9% |
-24.3% |
|
Reported operating margin |
-43.7% |
-46.7% |
-3.0% |
73.7% |
-26.6% |
-29.7% |
-3.1% |
17.0% |
|
Normalised PBT |
(5.2) |
(4.7) |
-10.6% |
-35.8% |
(3.8) |
(3.6) |
-4.0% |
-22.6% |
|
Reported PBT |
(5.4) |
(5.2) |
-4.7% |
-57.8% |
(3.9) |
(4.0) |
3.8% |
-22.4% |
|
Normalised net income |
(5.2) |
(4.7) |
-10.6% |
-37.5% |
(3.8) |
(3.6) |
-4.0% |
-22.6% |
|
Reported net income |
(5.4) |
(5.1) |
-6.5% |
-58.6% |
(3.9) |
(4.0) |
3.8% |
-20.8% |
|
Normalised basic & diluted EPS (p) |
(4.9) |
(4.3) |
-10.6% |
-37.5% |
(3.5) |
(3.4) |
-4.0% |
-22.6% |
|
Reported basic EPS (p) |
(5.0) |
(4.7) |
-6.5% |
-58.6% |
(3.6) |
(3.7) |
3.8% |
-20.8% |
|
Net debt/(cash) |
(9.5) |
(9.5) |
0.4% |
-39.1% |
(6.2) |
(6.2) |
-0.3% |
-35.0% |
|
ARR |
13.3 |
13.3 |
-0.3% |
15.6% |
15.9 |
15.9 |
-0.3% |
19.4% |
|
Source: Edison Investment Research
Exhibit 3: Financial summary
£m |
2019 |
2020 |
2021 |
2022 |
2023 |
2024e |
2025e |
||
31-January |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
INCOME STATEMENT |
|||||||||
Revenue |
|
|
1.0 |
9.8 |
13.2 |
8.4 |
10.3 |
12.0 |
14.2 |
Cost of Sales |
(1.0) |
(7.2) |
(6.7) |
(3.8) |
(3.8) |
(3.6) |
(4.3) |
||
Gross Profit |
0.0 |
2.6 |
6.5 |
4.6 |
6.5 |
8.4 |
10.0 |
||
EBITDA |
|
|
(2.3) |
(4.9) |
(2.5) |
(5.6) |
(6.4) |
(3.6) |
(2.3) |
Normalised operating profit |
|
|
(4.4) |
(6.5) |
(3.1) |
(6.1) |
(7.4) |
(5.1) |
(3.8) |
Amortisation of acquired intangibles |
(0.1) |
(1.0) |
(1.3) |
(1.4) |
(0.5) |
(0.1) |
0.0 |
||
Exceptionals |
0.0 |
(1.7) |
(0.9) |
(1.0) |
(4.3) |
0.0 |
0.0 |
||
Share-based payments |
0.0 |
0.0 |
0.0 |
0.0 |
(0.2) |
(0.4) |
(0.4) |
||
Reported operating profit |
(4.5) |
(9.2) |
(5.3) |
(8.5) |
(12.4) |
(5.6) |
(4.2) |
||
Net Interest |
0.0 |
0.1 |
0.0 |
0.0 |
0.1 |
0.4 |
0.2 |
||
Joint ventures & associates (post tax) |
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 |
||
Profit Before Tax (norm) |
|
|
(4.4) |
(6.4) |
(3.1) |
(6.1) |
(7.3) |
(4.7) |
(3.6) |
Profit Before Tax (reported) |
|
|
(4.5) |
(9.1) |
(5.3) |
(8.5) |
(12.3) |
(5.2) |
(4.0) |
Reported tax |
0.0 |
0.1 |
0.3 |
0.3 |
0.3 |
0.1 |
0.0 |
||
Profit After Tax (norm) |
(4.4) |
(6.4) |
(3.1) |
(6.1) |
(7.5) |
(4.7) |
(3.6) |
||
Profit After Tax (reported) |
(4.5) |
(9.0) |
(5.0) |
(8.2) |
(12.0) |
(5.1) |
(4.0) |
||
Minority interests |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Discontinued operations |
8.6 |
89.8 |
0.6 |
1.4 |
(0.3) |
0.0 |
0.0 |
||
Net income (normalised) |
(4.4) |
(6.4) |
(3.1) |
(6.1) |
(7.5) |
(4.7) |
(3.6) |
||
Net income (reported) |
4.1 |
80.8 |
(4.4) |
(6.8) |
(12.3) |
(5.1) |
(4.0) |
||
Basic average number of shares outstanding (m) |
178 |
161 |
62 |
68 |
108 |
108 |
108 |
||
EPS - basic normalised (p) |
|
|
(2.5) |
(4.0) |
(5.2) |
(9.0) |
(6.9) |
(4.3) |
(3.4) |
EPS - diluted normalised (p) |
|
|
(2.5) |
(4.0) |
(5.2) |
(9.0) |
(6.9) |
(4.3) |
(3.4) |
EPS - basic reported (p) |
|
|
2.3 |
50.2 |
(7.2) |
(10.0) |
(11.4) |
(4.7) |
(3.7) |
Dividend (p) |
0.00 |
0.00 |
0.00 |
0.00 |
0.00 |
0.00 |
0.00 |
||
Revenue growth (%) |
N/A |
880.0 |
34.7 |
(-36.4) |
22.6 |
16.2 |
19.0 |
||
Gross Margin (%) |
0.0 |
26.5 |
49.2 |
54.8 |
63.1 |
69.8 |
70.0 |
||
EBITDA Margin (%) |
(230.0) |
(50.0) |
(18.9) |
(66.7) |
(62.1) |
(30.0) |
(16.4) |
||
Normalised Operating Margin |
(440.0) |
(66.3) |
(23.5) |
(72.6) |
(71.8) |
(42.5) |
(26.9) |
||
BALANCE SHEET |
|||||||||
Fixed Assets |
|
|
5.0 |
8.5 |
6.8 |
8.3 |
4.9 |
5.9 |
7.0 |
Intangible Assets |
2.9 |
7.3 |
6.0 |
7.3 |
4.0 |
4.9 |
5.9 |
||
Tangible Assets |
1.7 |
1.2 |
0.8 |
1.0 |
0.9 |
1.0 |
1.1 |
||
Investments & other |
0.4 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Current Assets |
|
|
19.5 |
19.8 |
17.5 |
29.0 |
22.5 |
16.6 |
12.4 |
Stocks |
4.3 |
1.7 |
1.1 |
1.8 |
2.4 |
3.1 |
2.2 |
||
Debtors |
5.1 |
3.4 |
4.4 |
2.9 |
4.5 |
4.0 |
4.1 |
||
Cash & cash equivalents |
10.1 |
14.3 |
11.5 |
24.2 |
15.6 |
9.5 |
6.2 |
||
Other |
0.0 |
0.4 |
0.5 |
0.1 |
0.0 |
0.0 |
0.0 |
||
Current Liabilities |
|
|
(7.9) |
(5.6) |
(5.9) |
(5.7) |
(7.8) |
(7.6) |
(8.2) |
Creditors |
(7.6) |
(5.1) |
(5.6) |
(5.2) |
(7.5) |
(7.3) |
(7.9) |
||
Tax and social security |
(0.3) |
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 |
||
Other |
0.0 |
(0.5) |
(0.3) |
(0.5) |
(0.3) |
(0.3) |
(0.3) |
||
Long Term Liabilities |
|
|
(0.3) |
(1.3) |
(0.8) |
(0.6) |
(0.7) |
(0.7) |
(0.7) |
Long term borrowings |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other long term liabilities |
(0.3) |
(1.3) |
(0.8) |
(0.6) |
(0.7) |
(0.7) |
(0.7) |
||
Net Assets |
|
|
16.3 |
21.4 |
17.6 |
31.0 |
18.9 |
14.2 |
10.6 |
Minority interests |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Shareholders' equity |
|
|
16.3 |
21.4 |
17.6 |
31.0 |
18.9 |
14.2 |
10.6 |
CASH FLOW |
|||||||||
Op Cash Flow before WC and tax |
(2.3) |
(4.9) |
(2.5) |
(5.6) |
(6.4) |
(3.6) |
(2.3) |
||
Working capital |
(0.5) |
(1.0) |
0.3 |
0.2 |
0.1 |
(0.4) |
1.4 |
||
Exceptional & other |
9.1 |
5.3 |
(0.7) |
0.4 |
(0.2) |
0.0 |
0.0 |
||
Tax |
(0.5) |
(0.5) |
0.0 |
0.1 |
0.1 |
0.1 |
0.0 |
||
Net operating cash flow |
|
|
5.8 |
(1.1) |
(2.9) |
(4.9) |
(6.4) |
(3.9) |
(0.9) |
Capex |
(2.2) |
(0.3) |
(0.3) |
(2.3) |
(2.2) |
(2.3) |
(2.3) |
||
Acquisitions/disposals |
1.3 |
84.2 |
0.3 |
0.0 |
0.2 |
0.0 |
0.0 |
||
Net interest |
0.0 |
0.1 |
0.0 |
0.0 |
0.1 |
0.4 |
0.2 |
||
Equity financing |
0.0 |
(77.9) |
0.5 |
20.2 |
0.0 |
0.0 |
0.0 |
||
Dividends |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other |
0.0 |
(0.8) |
(0.4) |
(0.3) |
(0.3) |
(0.3) |
(0.3) |
||
Net Cash Flow |
4.9 |
4.2 |
(2.8) |
12.7 |
(8.6) |
(6.1) |
(3.3) |
||
Opening net debt/(cash) |
|
|
(5.2) |
(10.1) |
(14.3) |
(11.5) |
(24.2) |
(15.6) |
(9.5) |
FX |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other non-cash movements |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Closing net debt/(cash) |
|
|
(10.1) |
(14.3) |
(11.5) |
(24.2) |
(15.6) |
(9.5) |
(6.2) |
Source: Checkit, Edison Investment Research
|
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Research: Healthcare
Following Creo Medical’s H123 trading update (see our August note), management has reported detailed results, including a 42% increase (sequentially over H222) in the volume of Speedboat Inject procedures, coupled with expansion into the US consumables business market. Creo continues to build momentum with its Pioneer training programme. Management remains active on licensing and regulatory fronts, through its robotic deals with Intuitive and CMR, further exploration of potential licensing for its core technology, Kamaptive, and continued collaboration with the National Institute for Health and Care Excellence (NICE). Adjusting for reported cash, our valuation changes to £512m or 142p per share (versus £528m or 150p per share previously).