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Research: TMT
Cordel’s Q324 update shows progress towards the group’s FY24 revenue expectation and other objectives, supporting our forecasts. Doubling the customer base by year-end is a key milestone, which encouragingly looks set to come in part from tier-one US railroads, offering the greatest scope for large seven-figure contracts from its target markets. Developments with Amtrak, as Cordel moves to the five-year service phase, and Angel Trains in the UK provide positive indicators for stable recurring revenue and upsell opportunities. Top-line progress is supported by investments already made in sales and delivery, underpinning forecast margin expansion.
Written by
Cordel Group |
Positive steps towards ambitious FY24 goals |
Q324 update |
Software and comp services |
3 April 2024 |
Share price performance
Business description
Analyst
Cordel Group is a research client of Edison Investment Research Limited |
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Cordel’s Q324 update shows progress towards the group’s FY24 revenue expectation and other objectives, supporting our forecasts. Doubling the customer base by year-end is a key milestone, which encouragingly looks set to come in part from tier-one US railroads, offering the greatest scope for large seven-figure contracts from its target markets. Developments with Amtrak, as Cordel moves to the five-year service phase, and Angel Trains in the UK provide positive indicators for stable recurring revenue and upsell opportunities. Top-line progress is supported by investments already made in sales and delivery, underpinning forecast margin expansion.
Year end |
Revenue (£m) |
EBITDA* (£m) |
PBT* |
EPS* |
Net debt/(cash)** |
EV/sales |
06/22 |
2.3 |
(1.0) |
(1.1) |
(0.7) |
(0.2) |
2.5 |
06/23 |
3.0 |
(0.3) |
(0.4) |
(0.2) |
(1.3) |
1.9 |
06/24e |
4.7 |
(0.5) |
(0.7) |
(0.3) |
(0.6) |
1.2 |
06/25e |
7.0 |
0.2 |
0.0 |
0.0 |
(0.7) |
0.8 |
Note: *EBITDA, PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. **Includes financial leases.
Cordel’s Q324 update states that management is encouraged by progress made in the quarter and confident in achieving its FY24 revenue expectation, supporting our forecasts.
Doubling the customer base by year-end is a key milestone, and the announcement indicates pipeline conversion for new customers will come in part from tier-one US railroads. As shown by its existing US$6.7m contract with Amtrak, the US provides the greatest scope for large seven-figure contracts from its target markets.
With Amtrak, Cordel is on track and reaching the late stages of its 18-month set-up phase and will soon be moving to the five-year software-as-a-service (SaaS) phase, which is set to be worth at least US$700k annually, with scope to more than double this annual value through use case upsells.
In the UK, Cordel continues to develop its relationship with rolling stock provider Angel Trains to integrate more value-added services into its inventory, with the end aim of driving upsell opportunities with existing customer Network Rail.
Successfully converting target customers in its pipeline and delivering upsell wins in use cases outside of clearances should further support forecasts, which indicate continued double-digit revenue growth and a swing to profitability in FY25. Management also discussed that it has further refined the group’s delivery capability in Newcastle, Australia, ensuring it has capacity to take on new business while supporting margin expansion. Execution risk is also mitigated by Cordel’s robust balance sheet and net cash position.
Elsewhere, management highlighted that to build its commercial pipeline, it is planning development visits and roadshows in the Middle East, Ireland, Australia, Asia-Pacific and Germany during 2024. In our initiation, we stated that Germany could be a promising new market following the acquisition of key technology partner D/Gauge by leading German transport inspector TÜV Rheinland.
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Research: Consumer
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