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Research: TMT
Checkit reported 23% y-o-y revenue growth for Q122. Normalising for the acquisition of Checkit US at the start of the quarter, group revenue increased 15% y-o-y. Recurring revenue made up 35% of total revenue, up from 32% in Q121 (normalised), as Checkit continues to transition customers to subscription contracts. The company is accelerating investment in sales, marketing and product to drive customer acquisition. Q122 annual recurring revenue (ARR) grew 7% q-o-q and, while early in the year, is on track to meet our 34% growth target for FY22. We maintain our estimates.
Checkit |
Promising start to the year |
Q122 trading update |
Software & comp services |
13 May 2021 |
Share price performance
Business description
Next events
Analyst
Checkit is a research client of Edison Investment Research Limited |
Checkit reported 23% y-o-y revenue growth for Q122. Normalising for the acquisition of Checkit US at the start of the quarter, group revenue increased 15% y-o-y. Recurring revenue made up 35% of total revenue, up from 32% in Q121 (normalised), as Checkit continues to transition customers to subscription contracts. The company is accelerating investment in sales, marketing and product to drive customer acquisition. Q122 annual recurring revenue (ARR) grew 7% q-o-q and, while early in the year, is on track to meet our 34% growth target for FY22. We maintain our estimates.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
EV/Sales |
01/20 |
9.8 |
(6.4) |
(4.0) |
0.0 |
N/A |
3.0 |
01/21 |
13.2 |
(3.1) |
(5.2) |
0.0 |
N/A |
2.2 |
01/22e |
15.2 |
(4.5) |
(7.2) |
0.0 |
N/A |
1.9 |
01/23e |
17.8 |
(2.7) |
(4.3) |
0.0 |
N/A |
1.6 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Good progress made in Q122
Checkit reported revenue of £4.3m for Q122, up 23% y-o-y. This was the first quarter that included the recently acquired Tutela business (now called Checkit US). Including Checkit US’s results for Q121, revenue increased 15% y-o-y on a normalised basis. Within Checkit Connect, the original business grew 1% y-o-y (recurring revenue +30%, non-recurring -47%) and Checkit US grew 29% y-o-y (recurring revenue +18%, non-recurring +32%). Checkit BEMS grew 27% y-o-y helped by the delivery of a significant project and the impact of COVID-19 in Q121. Cash at the end of Q122 was £10.9m after paying £0.6m to acquire Checkit US. Against this, Checkit benefited from a higher weighting of annual licence payments received in the quarter.
Maintaining estimates
ARR at the end of Q122 was £6.1m, up 7% from the £5.7m at the end of FY21 as new subscription contracts went live. In Checkit Connect, some hospitality customers took payment and service deferrals in Q1 but should return in Q2. In Checkit US, an initiative to convert customers to subscription contracts is already underway. The board remains confident in the outlook for the business. We maintain our forecasts.
Valuation: Sum of parts suggests upside
On an EV/sales multiple of 1.9x for FY22e and 1.6x for FY23e, Checkit trades at a significant discount to the UK software sector (5.5x current year sales). On a sum-of-the-parts basis attributing EV/sales multiples that better reflect the performance and prospects for each division, we estimate the stock is significantly undervalued. For example, using a 4x FY22e multiple for Checkit Connect and 1x for Checkit BEMS would result in a valuation of 83p per share.
Q122 revenue update
Exhibit 1: Quarterly revenues
£m |
Q122 |
Q121 |
y-o-y |
Checkit Connect |
|||
Original business |
|||
Recurring |
1.4 |
1.1 |
30% |
Non-recurring |
0.3 |
0.6 |
(47%) |
1.7 |
1.7 |
1% |
|
Checkit US (Tutela) |
|||
Recurring |
0.1 |
0.1 |
18% |
Non-recurring |
0.3 |
0.2 |
32% |
0.4 |
0.3 |
29% |
|
Checkit Connect total |
|||
Recurring |
1.5 |
1.2 |
25% |
Non-recurring |
0.6 |
0.8 |
-25% |
2.1 |
2.0 |
5% |
|
Checkit BEMS |
|||
Non-recurring |
2.2 |
1.7 |
27% |
Group revenue |
4.3 |
3.7* |
15% |
Total recurring revenue |
1.5 |
1.2* |
29% |
Total non-recurring revenue |
2.8 |
2.5* |
9% |
Recurring/total |
35% |
32%* |
Source: Checkit. *Note: Normalised to include Checkit US performance for Q121.
Exhibit 2: Financial summary
£'m |
2019 |
2020 |
2021 |
2022e |
2023e |
||
31-January |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
INCOME STATEMENT |
|||||||
Revenue |
|
|
1.0 |
9.8 |
13.2 |
15.2 |
17.8 |
Cost of Sales |
(1.0) |
(7.2) |
(8.5) |
(9.5) |
(9.7) |
||
Gross Profit |
0.0 |
2.6 |
4.7 |
5.7 |
8.1 |
||
EBITDA |
|
|
(2.3) |
(4.9) |
(2.5) |
(3.9) |
(2.0) |
Normalised operating profit |
|
|
(4.4) |
(6.5) |
(3.1) |
(4.5) |
(2.7) |
Amortisation of acquired intangibles |
(0.1) |
(1.0) |
(1.3) |
(1.3) |
(0.4) |
||
Exceptionals |
0.0 |
(1.7) |
(0.9) |
(0.4) |
0.0 |
||
Share-based payments |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Reported operating profit |
(4.5) |
(9.2) |
(5.3) |
(6.2) |
(3.1) |
||
Net Interest |
0.0 |
0.1 |
0.0 |
0.0 |
0.0 |
||
Joint ventures & associates (post tax) |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Exceptionals |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Profit Before Tax (norm) |
|
|
(4.4) |
(6.4) |
(3.1) |
(4.5) |
(2.7) |
Profit Before Tax (reported) |
|
|
(4.5) |
(9.1) |
(5.3) |
(6.2) |
(3.1) |
Reported tax |
0.0 |
0.1 |
0.3 |
0.0 |
0.0 |
||
Profit After Tax (norm) |
(4.4) |
(6.4) |
(3.1) |
(4.5) |
(2.7) |
||
Profit After Tax (reported) |
(4.5) |
(9.0) |
(5.0) |
(6.2) |
(3.1) |
||
Minority interests |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Discontinued operations |
8.6 |
89.8 |
0.6 |
0.0 |
0.0 |
||
Net income (normalised) |
(4.4) |
(6.4) |
(3.1) |
(4.5) |
(2.7) |
||
Net income (reported) |
4.1 |
80.8 |
(4.4) |
(6.2) |
(3.1) |
||
Basic average number of shares outstanding (m) |
178 |
161 |
62 |
62 |
62 |
||
EPS - basic normalised (p) |
|
|
(2.5) |
(4.0) |
(5.2) |
(7.2) |
(4.3) |
EPS - diluted normalised (p) |
|
|
(2.5) |
(4.0) |
(5.2) |
(7.2) |
(4.3) |
EPS - basic reported (p) |
|
|
2.3 |
50.2 |
(7.2) |
(9.9) |
(5.0) |
Dividend (p) |
0.00 |
0.00 |
0.00 |
0.00 |
0.00 |
||
Revenue growth (%) |
N/A |
880.0 |
34.7 |
14.9 |
17.1 |
||
Gross Margin (%) |
0.0 |
26.5 |
35.6 |
37.3 |
45.5 |
||
EBITDA Margin (%) |
-230.0 |
-50.0 |
-18.9 |
-25.6 |
-11.3 |
||
Normalised Operating Margin |
-440.0 |
-66.3 |
-23.5 |
-29.6 |
-15.2 |
||
BALANCE SHEET |
|||||||
Fixed Assets |
|
|
5.0 |
8.5 |
6.8 |
7.7 |
7.3 |
Intangible Assets |
2.9 |
7.3 |
6.0 |
6.8 |
6.2 |
||
Tangible Assets |
1.7 |
1.2 |
0.8 |
0.9 |
1.1 |
||
Investments & other |
0.4 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Current Assets |
|
|
19.5 |
19.8 |
17.5 |
11.2 |
9.8 |
Stocks |
4.3 |
1.7 |
1.1 |
1.2 |
1.3 |
||
Debtors |
5.1 |
3.4 |
4.4 |
4.8 |
5.1 |
||
Cash & cash equivalents |
10.1 |
14.3 |
11.5 |
5.1 |
3.5 |
||
Other |
0.0 |
0.4 |
0.5 |
0.1 |
0.0 |
||
Current Liabilities |
|
|
(7.9) |
(5.6) |
(5.9) |
(6.7) |
(8.0) |
Creditors |
(7.6) |
(5.1) |
(5.6) |
(6.4) |
(7.7) |
||
Tax and social security |
(0.3) |
0.0 |
0.0 |
0.0 |
0.0 |
||
Short term borrowings |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other |
0.0 |
(0.5) |
(0.3) |
(0.3) |
(0.3) |
||
Long Term Liabilities |
|
|
(0.3) |
(1.3) |
(0.8) |
(0.8) |
(0.8) |
Long term borrowings |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other long term liabilities |
(0.3) |
(1.3) |
(0.8) |
(0.8) |
(0.8) |
||
Net Assets |
|
|
16.3 |
21.4 |
17.6 |
11.4 |
8.3 |
Minority interests |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Shareholders' equity |
|
|
16.3 |
21.4 |
17.6 |
11.4 |
8.3 |
CASH FLOW |
|||||||
Op Cash Flow before WC and tax |
(2.3) |
(4.9) |
(2.5) |
(3.9) |
(2.0) |
||
Working capital |
(0.5) |
(1.0) |
0.3 |
0.3 |
1.0 |
||
Exceptional & other |
9.1 |
5.3 |
(0.7) |
(0.4) |
0.0 |
||
Tax |
(0.5) |
(0.5) |
0.0 |
0.0 |
0.0 |
||
Net operating cash flow |
|
|
5.8 |
(1.1) |
(2.9) |
(4.0) |
(1.0) |
Capex |
(2.2) |
(0.3) |
(0.3) |
(1.8) |
(0.3) |
||
Acquisitions/disposals |
1.3 |
84.2 |
0.3 |
(0.2) |
0.1 |
||
Net interest |
0.0 |
0.1 |
0.0 |
0.0 |
0.0 |
||
Equity financing |
0.0 |
(77.9) |
0.5 |
0.0 |
0.0 |
||
Dividends |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other |
0.0 |
(0.8) |
(0.4) |
(0.4) |
(0.4) |
||
Net Cash Flow |
4.9 |
4.2 |
(2.8) |
(6.4) |
(1.6) |
||
Opening net debt/(cash) |
|
|
(5.2) |
(10.1) |
(14.3) |
(11.5) |
(5.1) |
FX |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other non-cash movements |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Closing net debt/(cash) |
|
|
(10.1) |
(14.3) |
(11.5) |
(5.1) |
(3.5) |
Source: Checkit, Edison Investment Research
|
|
Research: Real Estate
Primary Health Properties (PHP) has issued a trading update covering the three months to 31 March 2021 (Q121). The existing portfolio continues to perform well, as expected, and while acquisition activity has been light amid a highly competitive investment market, progress continues with rent reviews and asset management projects, forward-funded developments and the recently acquired direct development pipeline.
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