Blancco Technology Group

www.blancco.com/en
Ticker: BLT Exchange: AIM

Blancco Technology Group is a leading, global provider of mobile device diagnostics and secure data erasure solutions.

Latest Reports

EPS enhancing acquisitions of minority stakes

Published: 12th December 2019
Earlier today, Blancco announced that it had lifted its stake in its Japanese JV (FY19 PAT +£1.2m) from 51% to 80% by issuing 813,253 new shares at 132.8p (or £1.08m) to its local ‘mobile reseller / ITAD’ partner Aucnet (Ticker: 3964, Tokyo Stock Exchange, £271m market cap). 

Here Aucnet is 44.3% owned by Flex Corporation (Singapore based contract electronics manufacturer), and will continue to act as an important route to market in Japan, Asia and other parts of the world, retaining its 20% stake in the JV.

Strategically the acquisition is important because it enables Blancco take full operational control, include the subsidiary within its transfer pricing policy, and leverage the JV’s cash (previously locked) across the wider organisation. Not only facilitating the x-fertilisation of innovative new ideas (eg mobile & enterprise) and best practice, but also simplifying the whole corporate structure and allowing new products to be scaled far more rapidly. A ‘Win-Win’ for both parties.

Elsewhere, Blancco has also mopped up the 30% stake that it did not already own in its other APAC JV (FY19 PAT -£0.5m), from both Aucnet (for $1 cash) and Alan Puah (41,686 BLTG shares at 155p, or £64.6k).

Together, we calculate the transactions will be immediately EPS enhancing – now 4.1p for FY20 vs 3.8p B4 - and deliver further strategic benefits overtime. Plus, at a combined price of £1.265m, the investments represent an undemanding 5.78x FY19 PEROur valuation ticks up from 175p to 180p/share.
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“Great confidence” in the future

Published: 24th September 2019
In today’s digital world, confidential information is under attack from cyber-criminals. Worse still the battlefield is vast, and sometimes in uncharted waters. Especially given data is often stored on multiple devices (eg mobile, laptop, hard-drive, tablet, cloud server, IoT gadget, car, smart watch, home speaker & wearable) and by numerous organisations (eg social media, healthcare, tax, utility, insurer, credit card, holiday, AdTech, education, car hire, bank & broadband providers).

So what’s the answer? Well one solution being increasingly adopted by governments worldwide, is to beef up existing data privacy laws, introduce new ones and slap eye-watering fines on any offenders (eg £183.4m on British Airways & £99.2m for Marriott Hotels).  Indeed there are now 108 countries who have passed some form of such legislation. With the latest being Ecuador, who rushed through a bill last weekend in response to a massive data breach involving 20m people - more than its entire population. 

Hence going forward, we see continued robust secular demand for Blancco’s data erasure software. In fact, consultants Transparency Market Research, predict the market will climb by 19.6% CAGR between 2018 to 2026.

In terms of the FY19 numbers, turnover rose 13.4% LFL (12.2% constant currency) to £30.5m (vs £26.9m LY), with adjusted (post SBPs) EBITDA, EBITA and EPS coming in at £5.2m, £2.5m and 2.47p respectively. Net cash closed Jun’19 at £0.1m (conversion 114%), even after investing in both headcount (June 272 vs 243 LY) and new product development (split £0.9m opex & £4.4m capex vs £2.5m amortisation of internal R&D).

All 3 regions delivered 13%-14% LFL growth, with standout performances from Data Centres / Enterprise (+20% to £10.4m) and ITAD (+18%, £10.2m). Driven by increased channel sales, macro data/cyber concerns, tightening regulation, the re-provisioning of 100ms of smartphones/servers every year and the desire to reduce client IT costs without compromising security.

Our FY20 estimates and 175p/share valuation remain unchanged, with net cash anticipated to close Jun’20 at £7.1m, following the recent £10m placing (£6.3m net proceeds, post acqn & fees). CEO Matt Jones adding “we have great confidence in another period of strong progress, operationally and financially, in line with expectations.”


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Expanding rapidly, improving margins & enriching IP

Published: 10th July 2019
Regulators around the world are upping the ante in terms of online data privacy. Indeed earlier this week the UK’s Information Commissioner Office slapped eye watering fines on both Marriott Hotels (£99m) and British Airways (£183m) for the theft of customer data.
Not only will this news shake up many corporate boardrooms, but it could also be a ‘game changer’ for the cyber-security industry. In particular data erasure experts like Blancco, who may soon receive a tsunami of incremental orders from organisations wishing to delete all their old, redundant files. Better still, all this would be upside for investors. 
You see the company has already embarked on a highly value accretive growth strategy, centred on creating a new paradigm in technical innovation. Today announcing the €5.25m earnings enhancing acquisition (split €3.25m cash & €2m equity) of YouGetItBack Ltd (trading as Inhance), which we believe will materially enrich the group’s mobile IP. Alongside recently partnering with ZroBlack to develop a break-through firmware solution that will halve the time it takes to erase handsets. Both of these exciting initiatives have been financed by a £10m placing at 125p.
In terms of trading, FY19 EBIT (pre SBPs, est £3.4m vs £2.9m LY) and cashflows (conversion 117%) both exceeded consensus, on turnover that was in line with previously raised expectations (ED £30.5m, +13.3% organic, vs £26.9m LY). Net funds closed June at £0.1m (vs our -£1.8m figure & -£2.7m LY) – which proforma should now be c. £6m. 
As such, we have lifted both our FY20 sales & adjusted EBIT (pre SBPs) forecasts to £35.0m & £4.3m respectively – and valuation from 160p to 174p/share.

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Winning a bigger piece of the data erasure pie

Published: 30th April 2019
This morning Blancco announced that trading was "ahead of expectations", and that it had secured a new $1.2m contract extension (for 3 years) with a Fortune 500 group to use its data erasure software within their global data centres.

As such, we have revised upwards our FY19 turnover, EBIT (pre SBPs) and net debt estimates to £30.5m (from £30.0m), £3.2m (£2.7m) and £1.8m (£2.0m) respectively. Along with increasing the valuation from 150p to 160p/share. It should be noted too that, although we have prudently held our FY20 and FY21 forecasts, we believe there is significant scope for further upgrades as the next 12–24 months unfold.

Blancco is the world’s leading developer of ‘data erasure’ software, used to protect governments and corporates from ID/data theft, ransomware and cyber-crime, along with being a pioneer in mobile device diagnostics. 
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View the H1 results interview with the CFO

Published: 11th March 2019
Adam Moloney discusses the recent results, as well as the strategic plans that he and CEO, Matt Jones are implementing and the growing market that the company is addressing.

The full presentation that Adam refers to is available here: https://www.blancco.com/investors/reports-presentations-circulars/

The updated Equity Development research and forecasts are here: http://tinyurl.com/y6ywz56d


The future's bright, the future's Blancco

Published: 19th February 2019
Blancco is the world’s leading developer of ‘data erasure’ software, used to protect governments and corporates from ID/data theft, ransomware and cyber-crime, along with being a pioneer in mobile device diagnostics. The company is expanding rapidly, operates in a fabulous untapped niche, and generates almost all its revenues from repeat business, ongoing contracts and/or SaaS. In turn providing excellent forward visibility, positive cashflows and improving profit margins. The perfect triumvirate for long term investors.

Today the firm posted what can only be described as a bumper set of H1’19 numbers. Turnover jumped 19% LFL to £14.6m (vs £12.3m LY), adjusted EBITDA soared 71% to £3.0m (£1.8m), EBITA margins climbed to 11.3% (4.5%) and underlying EPS came in at 1.6p (0.28p LY). 

All 3 geographies and divisions delivered double digit LFL growth (constant currency), with standout performances from Data Centres / Enterprise (up +30% to £4.7m), ITAD (+20%, £4.9m), Europe (22%, £5.6m) & North America (+21%, £5.3m). Driven by macro data/cyber concerns, tightening regulation (eg EU GDPR & PCI DSS, 2018 California Consumer Privacy Act, etc), the re-provisioning of 100ms of smartphones/servers every year and the desire to reduce corporate IT costs without compromising security. 

In parallel, 3rd party channel revenues leapt 48% to £2.4m (vs £1.6m LY), equivalent to 16.4% of the group and 50% of the Data Centre arm – thanks partly to distribution agreements signed with Arrow Electronics (EMEA) and Ingram Micro (US, Canada & Australia) in H2’18. Sure, future expansion in the ITAD division is set to moderate (ED estimate 6%-7% pa), however this should be more than offset by continued double digit growth in both Mobile (H1’19 +10%, £5.0m) and Data Centres / Enterprise (Est 20%+).

Regarding the balance sheet, net debt fell by £431k to £2.3m despite capitalising £1.3m of R&D (vs £1.3m amortisation) and forking out another £446k in deferred consideration (re Xcaliber). Operating cashflows came in at £2.5m (£0.9m LY) – representing 83% EBITDA - which enabled £1m of bank borrowings to be repaid (£9.5m drawn down from a £12m facility).

We prudently hold the ‘de-risked’ FY19 turnover and adjusted EBIT targets of £30m and £2.7m (margin 9.0%) respectively – rising to £34m & £4.0m (margin 11.8%) in FY20. Nonetheless, we have nudged up the valuation from 140p to 150p/share, mirroring the improved risk profile. Moreover the stock at 90p trades at an unwarranted discount the broader cyber-security sector in respect of EV/sales and most other benchmarks.

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Blancco at the Equity Development investor forum September 2018

Published: 2nd October 2018
Blancco Technology Group's new executive team, Matt Jones CEO and Adam Moloney CFO talk about the new focus within the business and its targeting of mobile, enterprise and ITAD for its data erasure software.

exciting times ahead

Published: 25th September 2018
Blancco is the world’s leading developer of ‘data erasure’ software, used to protect governments and corporates from ID/data theft, ransomware and cyber-crime, along with being a pioneer in mobile device diagnostics. 

Despite the stock being rated at a modest 2.2x CY EV/turnover (adjusted for JVs) vs 6.0x for the cyber-security sector, we are encouraged by this morning’s upbeat prelims, improving momentum (H2’18 sales +5.3% vs -1.4% H1), “strong” start to FY19 and the Board’s well balanced ’Growth Strategy.’ 

There was a slightly better than expected FY18 out-turn, where adjusted EBIT came in 4% higher (17% CC) at £3.3m (margin 12.1% vs 11.9% LY) on revenues up +2.1% (5% CC) to £27.5m. Driving adjusted EPS to 4.7p (vs 2.8p), with net debt closing June at a comfortable £2.7m (vs £3.4m Dec’17) and falling further since the period end - reflecting tight cost control and good working capital management (cash conversion 123% vs 100% LY). 

Going forward, the trick to unlocking this hidden value will be re-energising the top line. Grabbing share in its “priority”’ verticals where there is greatest near-term opportunity - alongside bolstering those areas where Blancco already enjoys a formidable economic ‘moat’ (eg ITAD). Altogether, feeding through into enhanced economies of scale, more investment available for R&D/S&M, faster growth, superior returns and (in theory) a much higher stock price. 

Equally, we’re confident that after a rocky couple of years, the ‘tin helmets’ can now safely be taken off, since the business is gaining real traction with an experienced management team at the helm. As evidenced recently by a slew of new contract wins/renewals with a host of household names. Providing excellent customer endorsements and revenue visibility.

Our valuation has been upgraded from 106p to 140p/share. And, assuming things go to plan, we see no reason why eventually Blancco can’t generate 20%+ EBIT margins in line with peers. Meaning that by FY 2022, the stock even at 140p would still look significantly undervalued – trading once again at a frugal 2.2x EV/sales.

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FY19 set up for much better year

Published: 11th July 2018
Blancco is the world’s leading developer of ‘data erasure’ software, used to protect governments and corporates from ID/data theft, ransomware and cyber-crime, along with being a pioneer in mobile device diagnostics.

Long term Blancco shareholders are undoubtedly a hardy bunch. An essential trait given the difficulties (some self-inflicted) the company has endured over the past 2 years. The good news is that the bleeding now seems to have stopped, with real progress being made under the new leadership team.

Firstly, stabilising the ship in H1’18, and then delivering 7% LFL top line growth in H2’18 (constant currency), alongside better than expected FY18 adjusted operating margins of 11% (estimated split 7% H1 vs 15% H2: 12% LY) thanks to tight cost control. Importantly too, underlying cashflow improved, with net debt closing June 2018 at £2.8m, or >£0.5m lower than Dec’17 after good debt collection.

Additionally, we believe the headline results would have actually been much higher had it not been for an estimated -4% forex headwind in H2, and more significantly “a number of [prior period] non-repeat volume deals, where revenue was recognised up front on the sale of software covering multiple future years.”

Therefore, looking forward we still expect double-digit revenue growth of 12.6% in FY19, albeit have rebased our numbers using the slightly lower than anticipated out-turn for FY18 sales of £27.15m (+1% on £26.9m LY). Likewise FY19 adjusted EBIT is set to come in at £3.4m (11.2% margin) on turnover of £30.6m, with net debt closing June 2019 at £2.6m (assuming no further deferred payments relating to past acquisitions).

While our valuation declines from 114p to 106p/share, we are cautiously optimistic and see scope for future upgrades as CEO Matt Jones completes his root & branch review, with findings scheduled for 25th September at the prelims. Matt Jones commenting “I have been really encouraged by what I have found across the business since I joined in March 2018.''

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An interview with the management of Blancco Technology Group at Equity Development

Published: 26th March 2018
Simon Herrick, interim CEO and Chris Hunter, Head of Finance discuss the Group's recent results announcement and lay out their proposed plans for the business in the future.

Turnaround quietly gaining traction

Published: 20th March 2018
Blancco is the world’s leading developer of ‘data erasure’ software, used to protect governments and corporates from ID/data theft, ransomware and cyber-crime, along with being a pioneer in mobile device diagnostics. The business is roughly 7x larger than its closest competitor, and led by interim CEO/CFO Simon Herrick and Chairman Rob Woodward.

After  many challenges, this morning’s ‘in-line’ H1’18 results suggest that the worst is now over and we sense that management are becoming quietly more confident. A message further supported by interim CEO Simon Herrick saying the group is “better organised and controlled…in the best possible state to welcome a new CEO. ”

In terms of the numbers, H1’18 LFL turnover (incl. -£0.2m forex headwind, and stripping out the discontinued Mexican JV, £0.5m LY), adjusted EBIT, OCF and net debt came in at £12.6m (c. 95% recurring vs ED £12.5m, £12.8m LY), £0.8m (£0.5m ED, £2.5m), £0.9m (£0.5m ED, £0.8m LY) and £3.4m (-£4.0m ED, £1.7m LY) respectively. In turn generating 110% cash conversion, better than expected cost/cash control (eg lower headcount) and a 28% jump in mobile erasure (to £3.6m thanks to new client wins) - offset by several large multi-period deals recognised LY.

Looking ahead, H2 (turnover £15.9m) should benefit from the usual seasonal uplift in renewals on top of the 35 new channel partners signed (further boosted by Ingram Micro post period end), with cashflow being roughly neutral despite absorbing c. £750k of deferred consideration (£2.2m FY19). Consequently we reiterate our FY’18 estimates of adjusted EBITA of £2.9m on sales of £28.5m (+5.9%, margin 10.2%), rising to £4.3m and £32.7m (+14.6%, margin 13.2%) 12 months later, and net debt closing Jun’18 flat at £3.5m.

Likewise there is no change to our 114p/share valuation, but we note the significant upside possible if the new CEO can engineer a complete turn-around. Characterised by sustainable double digit top-line growth and 20%+ operating margins – metrics more typical of a leading, niche software developer, operating in the rapidly expanding cyber-security space. With regards to valuation at 65p, the stock trades at a material discount to the sector, especially with regards to CY EV/sales. 

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Getting back on its feet

Published: 19th January 2018
Blancco is the world’s leading developer of ‘data erasure’ software, used to protect governments and corporates from ID/data theft, ransomware and cyber-crime, along with being a pioneer in mobile device diagnostics. The business is roughly 7x larger than its closest competitor, and led by interim CEO/CFO Simon Herrick and Chairman Rob Woodward.

Intel CEO Brian Krzanich said last month that "it's almost impossible to predict the future, but I am 100% sure that data is a company’s most valuable asset." The only problem being how to secure it. Particularly given the latest cyber threats doing the rounds, namely the ‘Spectre and Meltdown’ flaws built into most of the world’s microchips (Re Intel, AMD and ARM).Highlighting once again the strategic importance of Blancco’s erasure and diagnostic software - helping protect governments/businesses from data/ID theft, ransomware, hackers and other forms of online-crime. 

This morning the firm issued a trading update saying that H1’18 revenues (ED Est £12.5m) from continuing activities were “marginally” below LY - vs restated £12.8m and reported £14.2m - due to the non-recurrence of one-off erasure contracts (Est £2m), adverse forex (strengthening £) and considerable management resource being tied-up in stabilising operations following departure of the previous CEO in September, 2017. 

Within this, Mobile Erasure delivered “substantial growth” thanks to numerous new client wins, whereas Diagnostics was flat (as expected) and End of Life Erasure declined. However, stripping out the above one-offs and Mexico (now discontinued), we suspect the top line actually expanded LFL by mid-single digits.

We now anticipate Blancco will achieve H2 revenues of around £16.0m (underpinned by the usual strong Q4 renewals). Or up 6% (continuing) to £28.5m FY18 (vs LY £26.9m ex Mexico - £27.7m reported), and ~10% if further adjusted for non-recurring deals (£1m LY, which will impact reported, but not underlying, retention rates). 
 
Factoring all this in, our valuation drops from 127p to 114p/share, but the stock remains trading at a material discount to the sector, especially with regards to CY EV/sales. 
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Results webinar, 14th November 2017

Published: 15th November 2017
Simon Herrick, interim CEO and Chris Hunter, Head of Finance present the Group's recent results announcement.

Rebuilding trust and stability

Published: 14th November 2017
Blancco is the world’s leading developer of ‘data erasure’ software, used to protect governments and corporates from ID/data theft and cyber-crime, along with being a pioneer in mobile device diagnostics (formerly known as Xcaliber). The business is roughly 7x larger than its closest competitor, and led by interim CEO/CFO Simon Herrick and Chairman Rob Woodward.

Patient shareholders are probably more than a little cheesed off, having endured a 70% slide in the stock price since March. Nevertheless, after the recent results we see reasons for optimism: after conducting an exhaustive review of customer contracts (hence results were delayed by 1 month), the slate should now be clean as evidenced by Tuesday’s ‘in-line prelims’. Now the Board are fully committed to rectify the situation, with a permanent CEO hopefully being announced in the near future. 

Adjusted EBIT came in at £3.4m (vs £4.6m LY) on turnover up 31% to £27.7m (or 17% constant currency and 6% LFL) – the split being £23.5m Erasure (+3% LFL) and £4.2m diagnostics. Invoiced orders similarly jumped 30% to £29.3m (or 15% constant currency and 3% LFL), delivering a book:bill ratio of >1, with favourable forex boosting the top and bottom lines by £3m and £0.2m respectively.

Adjusted cash conversion was a creditable 80% (vs 130% LY after restatements), with 97% of revenues being collected by 30 September 2017. Going forward, we anticipate this should nudge up towards 90% by FY20 as a function of the greater SaaS mix, partly offset by higher enterprise volumes (re longer payment terms).

So, underlying demand remains strong, with FY18 LFL sales growth expected to be between 10-20% (or 6-16% reported) delivering adjusted EBIT margins (pre SBPs) of 8%-12%. Here, profitability is being temporarily impacted by investments in software and sales capability (headcount +24 to 125) to take advantage of the buoyant conditions. Ultimately, though, margins should revert back to historical norms of say 20%+ as the business scales.

In light of Blancco’s breadth of certifications, IPR, customer references and global reach , we reckon that the company possesses a wide competitive ‘moat’ and will be a chief beneficiary of multiple secular tailwinds. Our revised forecasts and 130p/share valuation are conservatively pitched, with management aiming to ‘meet if not beat’ their guidance. Plus, as global data volumes balloon and malware becomes much harder to detect/remove - then the cost of storage, guarding against theft and/or illegal hacking likewise will continue to mushroom, underpinning Blancco’s fortunes for possibly decades ahead.


NB Blancco’s acting CEO will present to investors via webinar TODAY, 14 Nov at 4.30pm. Register here to participate: 


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Strong H2'17 offset by one-off £2.2m charge

Published: 6th July 2017
Blancco is the world’s leading developer of ‘data erasure’ software, used to protect governments and corporates from ID/data theft and cyber-crime, along with being a pioneer in smartphone diagnostics (Xcaliber).

This morning’s pre-close trading statement was a bit of a curate’s egg. On the one hand, FY17 revenues soared 40% YoY (~30% constant currency) - in line with expectations – to an estimated £31.4m from £22.4m LY. The vast majority of this growth being organic, and reflecting buoyant demand for its proprietary data erasure software, augmented by the roll-out of its award-winning smartphone diagnostics product (Xcaliber) across up to 6,000 retail stores in North America.  

However, on the other hand came less pleasing news that an outstanding £3.5m debt from >12 months ago, relating to a single large customer, was being fully provided for - of which £2.2m would be charged to the P&L, and another £1.3m debited to ‘deferred income’ on the balance sheet. Management flagged this possible issue (re 2 LATAM contracts – 1 direct and the other via IBM/6Sigma JV) at the interims in March, so this bad news shouldn’t come as a total surprise.

The Company says adjusted FY17 EBIT should now come in at “not less than £5.5m”, with EBITDA likewise “not less than £7.0m”. We think that this guidance is prudent, and suspect actual results might be slightly higher when the prelims are released on 3rd October. So our FY18 forecasts have been broadly held intact, given the debt write-off is a one-off issue.

From our calculations, after rebasing to the lower closing cash position of £1.5m (ED estimate), we believe that the shares are now worth 184p each (from 220p before),

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'Very well supported' £9.8m placing

Published: 4th May 2017
Blancco is the world’s leading developer of ‘data erasure’ software, used to protect governments and corporates from ID/data theft and cyber-crime, along with being a pioneer in smartphone diagnostics (Xcaliber).

Following the 25th April trading statement, Blancco announced this morning that it had raised £9.8m (gross) in fresh equity, after placing 5.8m new shares at 169p each. We understand this top-up funding was very well received by existing investors, who were keen to support the board’s ambitious, yet realistic, expansion plans.

Such was the level of interest, that the size of the placing was more than double what had been originally envisaged 2 weeks’ ago (ie minimum of £4m), with the book building exercise concluded at no discount to yesterday’s closing price.

Importantly, by gold-plating the balance sheet the extra cash should help win further blue-ribbon contracts with large corporate and government clients worldwide, who inevitably request longer payment terms, and tend to only deal with suppliers with strong credit positions. June FY17 closing net cash is now expected to be around £4m, as opposed as to -£5.5m previously.

We make no change to our FY17/18 forecasts other than to reduce the interest charge and lift the share count accordingly (~10%, or 9.1% of the enlarged group)) – which together has nudged down the valuation to 220p per share, from 230p before.

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£4m+ top-up funding being sought

Published: 25th April 2017
Blancco is the world’s leading developer of ‘data erasure’ software, used to protect governments and corporates from ID/data theft and cyber-crime, along with being a pioneer in smartphone diagnostics (Xcaliber).

This morning it said that net debt is set to close June 2017 at around -£5.5m, or £2m higher than consensus. This temporary cash squeeze has arisen primarily as a result of the payment of previous acquisition earn-outs and advisors' fees, the expected deferred settlement of a £3.5m receivable (re Central American government contract) and the slippage of other license deals into June. 

Granted, this news comes somewhat out-the-blue, yet even so the shortfall should be manageable (say via a standard RCF) in the context of a highly profitable and cash generative £99m market cap business, growing organically at over 30% pa.

In fact, the business is still going like a train with FY17 sales and adjusted EBIT projected to be in line with consensus, boosted by Q3 revenues up 48% yoy (constant currency), split 36% Erasure and 189% (pro forma) Diagnostics.  

Going forward, we make no change to our profit estimates, albeit the valuation has been reduced from 290p to 230p/share, reflecting the new debt position and greater short term uncertainty. In terms of the dividend, we have assumed last year’s 2p payout is held, although as part of the forthcoming lender discussions, this might have to be trimmed/suspended – more as a gesture of goodwill, than financial necessity.

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View the Results Webinar

Published: 21st March 2017
You can now hear Pat Clawson, Chief Executive Officer, and Chris Hunter, Financial Controller, present the half year results for the six months ended 31 December 2016 on behalf of Blancco Technology Group plc.

To view simply click on the video below. 

Mobile Diagnostics going gangbusters

Published: 14th March 2017
Blancco is the world’s leading developer of ‘data erasure’ software, used to protect governments and corporates from ID/data theft and cyber-crime, along with being a pioneer in smartphone diagnostics (Xcaliber).

What’s the answer to protect ourselves against cyber-crime? One possibility is to introduce ‘kill switches’ that render rogue computers ‘safe’ again in the event of hacking. Enter Blancco with its proprietary erasure software, which can remotely and securely delete any corrupted data and/or malicious code, whilst importantly not damaging the (often expensive) hardware. 

Even better, investors do not have to wait, since headline results are already going like a train. In H1’17 turnover and adjusted operating profit (AOP) soared 43% to £14.2m (or 28% constant currency) and 33% (20% CC) to £3.6m respectively. Driving gross margins to 97% (vs 89%) and underlying EPS up 61% to 3.90p (vs 2.43p), with the interim dividend raised 10% to 0.73p (vs (0.66p).

From a divisional perspective, Erasure sales at £12.4m were up 25% (10% constant currency) whilst Diagnostics (acquired in Jan’16) chipped in with a maiden £1.8m (+200% vs £0.6m pre-ownership) - thanks to continued buoyant demand (especially in mobile and Live/Active erasure), geographical expansion (eg new offices in China and Singapore), new product launches, increasing regulation and forex benefits (weaker £). In total, 53 new customers were signed in the 6 months to Dec’16, along with 23 partner/distributor agreements.

Further out, we think management should be able to maintain the core cash conversion rate within the 80% - 90% range, due to the tightening regulatory environment and attraction of the firm’s applications. Moreover, net borrowings are set to drop to £3.5m by June, assuming of course settlement of the LATAM contract and robust underlying cash generation, partly offset by circa £2.2m of deferred consideration from previous acquisitions (eg Taberbus/Xcaliber, Blancco).

Bearing all this in mind, we make no changes to our FY17 turnover and EBITA forecasts of £32.0m and £8.1m respectively, but bump up the DCF valuation to 290p/share (from 275p) based on improving gross margin, retention (92% vs 88%) and ARPU (£59.5k vs £48k) metrics. There could also be substantial investor interest over the next year or so, thanks to new data privacy laws. Not least in Europe, where the Global Data Protection Regulation (EUGDPR), including the “Right to be forgotten”, comes into force in May 2018.


NB the CEO, Pat Clawson is hosting a webinar for investors this Thursday 16th at 5.30pm  REGISTER HERE

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Estimated 43% H1 sales growth drives FY17 upgrades

Published: 18th January 2017
Blancco is the world’s leading developer of ‘data erasure’ software, used to protect governments and corporates from ID/data theft and cyber-crime, along with being a pioneer in smartphone diagnostics (Xcaliber).

Cyber-crime is not only the scourge of corporates, consumers and governments alike, but also the bane of many politicians. The good news is that there’s help at hand from the likes of Blancco, who we estimate delivered a thumping 43% jump in H1’17 revenues (~25% LFL) to £14.2m (vs £9.9m), on the back of a buoyant data erasure market, better than expected diagnostics growth and forex tailwinds (weaker £).

Likewise, we predict H1 adjusted EBITA came in at a healthy £3.6m (up 28% vs £2.7m LY), despite a period of heavy sales, marketing and R&D investment, including the filing of two UK patents to further strengthen the group’s IPR and competitive ‘moat’. 

On the balance sheet, we understand underlying cash generation was strong, albeit offset in H1 by the payment of prior period expenses and one-off M&A costs – thus leaving net debt of £6m as at 31st Dec ’16 (vs £1m net cash June ’16).

We have lifted our FY17 turnover and EBITA forecasts to £32.0m (+5.1%) and £8.1m (+8.0%) respectively, as well as bumping up our valuation to 275p/share (from 255p).


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On track for another strong year

Published: 29th November 2016


Blancco is the world’s leading developer of ‘data erasure’ software, used to protect governments and corporates from ID/data theft and cyber-crime, along with being a pioneer in smartphone diagnostics (Xcaliber). It is roughly 7x larger than its closest competitor, and led by CEO Pat Clawson, who has 20 years’ experience in technology/IT security.

Once again, like clockwork, came positive news this morning that Blancco continues to deliver strong top line growth on the back of a buoyant data erasure market, excellent customer retention rates and increasing ARPUs. Here, we anticipate FY17 revenues will jump 25% organically, generating adjusted EBIT margins of 25.5%

This has been achieved despite investing heavily in product development, sales heads and brand recognition. Furthermore, given Sterling’s weakness against the $ (circa 40% of sales from the US) following the BREXIT vote, we suspect that there may even be some scope for upgrades in due course.

The stock at 215p appears lowly rated compared to other cyber-security peers, particularly in light of its top quartile growth rates, EBIT margins and FY17 PEG ratio of 0.44x.Indeed, although we make no change to our forecasts, the sum of the parts (SOTP) does rise to 255p/share from 245p , reflecting the group’s strong start to the year, updated sector comparatives and ongoing momentum. 

Finally, after 6 transformative years at the helm, Non-Exec Chairman and turnaround specialist, Matthew Peacock, has decided to step down (probably sometime in Q1’17) - and will be officially replaced after an orderly handover. We see this as a logical move given the €103.5m disposal of the Repair Services division in April and the firm’s successful transition into a pure-play software developer.
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View the Results Webinar

Published: 29th September 2016
You can now hear Patrick Clawson, Chief Executive Officer, and Jog Dhody, Chief Financial Officer, present the full year results for Blancco and answer investor questions.To view simply click on the video below.

Blancco delivers 34% organic growth

Published: 13th July 2016


Blancco is the world's leading developer of 'data erasure' software, used to protect governments & corporates from ID/data theft and cyber-crime, along with being a pioneer in smartphone diagnostics (Xcaliber).

With the £ collapsing 12% and 9% respectively vs the $ and € in just 3 weeks, then those UK listed stocks generating the bulk of their profits abroad should benefit handsomely from the sharp currency devaluation. One such firm is Blancco, the world's leading developer of 'data erasure' software - who despite deriving almost 90% of its sales from outside the UK, has oddly seen its shares fall 6% since the EU Referendum.

What's more, this morning the group said that FY16 revenues had jumped 34% LFL (or 49% including the Tabernus and Xcaliber acquisitions), with both sales and profits being in line with market expectations. Not to mention another senior hire as Chief Revenue Officer.

Looking ahead, we expect similar levels of strong demand to continue, since we understand Blancco's addressable market is worth ~$2 billion pa for end-of-life devices alone. This is on top of the LEE opportunity, which could add $100ms more. Consequently, overall, we envisage turnover will climb from £22.1m last year to £59.3m by FY20 (see below) - representing a CAGR of 27.9% - along with putting the stock (at 190p) on modest PE and PEG ratios of 9.2x and 0.32x in 4 years' time. 

On the numbers, we have held our previous projections intact, and reiterate the 225p/share Price Target. Furthermore, we do not think it is too far-fetched to speculate that takeover interest might be aroused at current price levels. 
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Blancco - Equity Development Investor Forum June 2016

Published: 5th July 2016
Jog Dhody, Chief Financial Officer,gives an overview of the business and touches on the effect of Brexit on Blancco.

Snaps up top-notch mobile diagnostics firm

Published: 18th April 2016

Blancco is the world's leading global developer of 'data erasure' software, used to protect governments & corporates from ID/data theft and cyber-crime, along with being a pioneer in smartphone diagnostics (Xcaliber).

Historically, you would normally have to send a broken mobile off to a repair centre, which could literally take weeks. Fortunately there is now a much faster, cheaper and simpler option - by plugging the device into Xcaliber's clever diagnostics software, which identifies and fixes the vast majority of common handset faults.

So good are the applications that today Blancco announced it had bought the remaining 51% stake of Xcaliber Technologies that it did not already own, for up to $5.5m in cash. $0.8m was paid on completion in March, with the other $4.7m spread over the next 3 years, dependent on the achievement of pre-determined revenue targets. 

Not only operating is Xcaliber active in a global addressable market perhaps worth >$200m pa: after a successful 6 month trial covering 200 in-store kiosks, it has signed a ground-breaking 3 year licensing agreement (non-exclusive) with a major North American telco network (as yet unnamed) that will see its programs rolled-out across >5,000 of the customer's US outlets. 

We have accordingly upgraded our forecasts, and believe that the acquisition will be earnings enhancing within the first 12 months. That said, the stock has risen by >10% since our previous note in March, meaning that the strike price for the forthcoming £50m tender offer (run as a Dutch auction with a 215p-250p range) is likely to be nearer 230p/share, as opposed to our original thoughts of 200p. Consequently with a higher assumed sharecount (ie post buyback), we have trimmed our share price target from 240p to 225p. 
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View the Results Webinar

Published: 11th March 2016
You can now hear Jog Dhody, Chief Financial Officer of Regenersis and Patrick Clawson, CEO of Blancco, present the half year results for Regenersis Plc (RGS) and answer audience questions.

To view simply click on the video below.

Blancco 'knocks the ball out the park' again

Published: 7th March 2016

Blancco is the world's leading global developer of 'data erasure' software, used to protect governments & corporates from ID/data theft and cyber-crime, along with being a pioneer in smartphone diagnostics (Xcaliber). The wider Regenersis group is in the process of selling its Depot Solutions (repair and refurbishment of electronic devices), Digital Care (insurance against damage to mobile phone screens) and set-top-box diagnostic operations.

Strong H1 results today delivered Headline Operating Profit (HOP) margins (pre central costs) of 35.4%, compared to our estimates of 33%, and trading was said to be in line with FY expectations. Indeed, we think there is a decent chance that Blancco could exceed our FY16 adjusted PBTA of £5.0m, having delivered £2.4m in H1.

Cyber-crime is so serious that corporates and governments are ploughing billions into protecting their IT networks - a market estimated to be worth $109bn this year and expanding at an 11.3% rate. Blancco has carved out an almost impregnable position in the 'sweet spot' of data erasure. Consequently, for the 6 months ending December, Blancco - assisted by the SafeIT and Tabernus acquisitions - saw turnover, HOP and adjusted EPS soar 46% (£9.9m), 109% (£2.7m), 285% (2.43p) respectively.

Blancco also achieved a world first by launching its 'smartphone erasure-and-diagnostics solution' incorporating Xcaliber technology (49% owned, and co-located in Atlanta). Xcaliber is moving towards EBITDA breakeven in H2'16, and as such we suspect it might become majority controlled by Blancco sometime in FY17. Strategically too, once the disposals of the non-core Repair Services Business (RSB to CTDI for €103.5m, or £78.4m) and Digital Care have been concluded, the group will be a 100% pure play software developer, backed by unique IPR.

Net debt closed December at £8.9m (vs net cash of £7.8m in June 2015), as a result of acquisitions (Tabernus), transaction fees, lower than expected cash conversion at the discontinued activities (50%) and dividends. However, we expect this to bounce back in H2, with net cash seen closing June 2016 at £9.9m, reflecting the receipt of the £78.4m in RSB proceeds, offset by the £50m tender offer.

We predict turnover to jump 43% this year to £21.5m and by another 29% to £27.7m in FY17, along with delivering adjusted EPS growth of >30% pa for the foreseeable future. Our valuation of Blancco nudges higher to £120m  on the back of the higher H1'16 margins and stronger FY17 top line growth. This is equivalent to a FY17 EV/sales multiple of 4.6x and generates an updated share price target of 240p per share (vs 227p before).

NB you can see the RGS management present at a webinar this Thursday 10th at 4.45pm:  Click here to register

 

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Clean exit from Repair Services at a premium price

Published: 7th February 2016

Regenersis (RGS) is the global number 1 player for 'data erasure' software to protect individuals/corporates from ID/data theft and cyber-crime, along with being a pioneer in the use of diagnostics for mobile phones (Xcaliber).

Last Friday it was announced that Communications Test Design Inc (a family-owned US engineering, repair and logistics enterprise) had agreed to buy RGS' non-core Repair Services business (RSB, incorporating Depot solutions and set-top box diagnostics) for €103.5m (£79.6m at £:€1.30) - representing an estimated exit multiple of 8.2x FY16 EV/EBITA. Completion is scheduled for Q2, but certainly no later than the long stop date of 5th August 2016.

We think this is a very satisfactory outcome, particularly in light of the potential impact on future M&A volumes/values due to the recent bout of stock market turbulence. More specifically the disposal allows RGS to make a clean break from a non-strategic asset, which suffered a major European contract loss last year (c. £22m turnover) - while the gross proceeds are towards the top end of our original expectations.

Further good news is that a large chunk of the proceeds - less deal fees and capital gains taxes (c.£8m in total) - will be returned to shareholders via a one-off £50m tender in Q2 (offer price tbc). RGS will have successfully completed its migration to become a pure play software developer, backed by strong IPR and unique technology. Here, it will be the world's undisputed leader (7x bigger than its closest rival) in the rapidly expanding data erasure space, be renamed Blancco Technology and led by CEO Pat Clawson. 

Despite the sharply reduced valuations across the cyber-security domain, our overall price target has only marginally dropped to 227p/share (from 232p), offset by the better-than-expected RSB disposal proceeds, assumed lower sharecount (ie post £50m stock buyback) and June proforma net cash of £5m-£10m. Over time additional upside could be significant, based on our 'none-too stretching' DCF scenario analysis.

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Fighting the global cybercrime epidemic

Published: 13th January 2016


Cybercrime has become the business world's #1 threat according to a recent poll by the BBC. In fact, at the last count in June 2014, the US Center for Strategic and International Studies reckoned that online theft costs the global economy an eye-watering $400bn annually, or 0.5% of GDP. This clearly demands urgent attention, such as deploying Blancco's proprietary data erasure software. 

Blancco is an extremely high quality asset, possessing an almost impregnable position in this rapidly expanding data erasure niche - especially after the strategic acquisition of #2 player Tabernus in September 2015. As such, we value the division at 6x sales (equivalent to 18.2x FY16 EBITA, excluding corporate expenses) which is conservatively 10% less than its US cyber-security peers (average 6.7x), despite being more profitable and growing at a faster pace.

The disposal of Aftermarket Services (ie Depot Solutions, 'Set Top box' diagnostics and DigitalCare) is progressing according to plan with "several indicative offers" already received. We anticipate this process will close by 31st March, and generate gross proceeds of between £60m-£80m.

In terms of trading, RGS said this morning that it was on track to hit its FY16 targets (consensus adjusted PBT of £13.9m), with Executive Chairman Matthew Peacock adding that both divisions were trading "in line with expectations".

Consequently, we make no change to our forecasts or 232p/share price target.
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'Blowing the doors off'

Published: 20th September 2016

Blancco is the world's leading developer of 'data erasure' software, used to protect governments and corporates from ID/data theft and cyber-crime, along with being a pioneer in smartphone diagnostics (Xcaliber). It is roughly 7x larger than its closest competitor. The Erasure division includes the Blancco business which enables customers to test, diagnose, repair and repurpose IT devices with certified software.

The company posted impressive figures this morning for the 12 months ending June 2016. Turnover climbed 35% organically to £22.4m (or +49% including acquisitions) - delivering a 1.09x Book:Bill ratio, adjusted EBIT of £6.1m (+51%, with 27% margins) and EPS of 5.6p (+97%). Better still, recurring revenues, underpinned by 1-4 year contracts, now generate approx 25% of sales, thus providing good visibility, as evidenced by the doubling of the year-end deferred income balance to £4.8m. 

Going forward, since Blancco today possesses a full suite of 'best-in-breed' software applications, we suspect most of its future growth will be organic - augmented by the odd one or two cherry-picked acquisition. For all intents and purposes, Blancco is already the 'gold standard' for secure, certified and automated data erasure within their <£100m pa niche.

We think Blancco can grow turnover, adjusted PBT and EPS to £59.5m, £17.3m and 19.8p respectively by FY20. In turn putting the shares (at 230p) in 4 years' time, on attractive PE and PEG ratios of 11.6x and 0.4x, which would look extremely cheap for such a high quality, science rich stock. 

On valuation, we have pushed up our price target to 245p/share (from 225p), mirroring Blancco's excellent results and slightly higher proceeds (€4.5m)  from the Digital Care disposal.

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'Blowing the doors off'

Published: 20th September 2016

Blancco is the world's leading developer of 'data erasure' software, used to protect governments and corporates from ID/data theft and cyber-crime, along with being a pioneer in smartphone diagnostics (Xcaliber). It is roughly 7x larger than its closest competitor. The Erasure division includes the Blancco business which enables customers to test, diagnose, repair and repurpose IT devices with certified software.

The company posted impressive figures this morning for the 12 months ending June 2016. Turnover climbed 35% organically to £22.4m (or +49% including acquisitions) - delivering a 1.09x Book:Bill ratio, adjusted EBIT of £6.1m (+51%, with 27% margins) and EPS of 5.6p (+97%). Better still, recurring revenues, underpinned by 1-4 year contracts, now generate approx 25% of sales, thus providing good visibility, as evidenced by the doubling of the year-end deferred income balance to £4.8m. 

Going forward, since Blancco today possesses a full suite of 'best-in-breed' software applications, we suspect most of its future growth will be organic - augmented by the odd one or two cherry-picked acquisition. For all intents and purposes, Blancco is already the 'gold standard' for secure, certified and automated data erasure within their <£100m pa niche.

We think Blancco can grow turnover, adjusted PBT and EPS to £59.5m, £17.3m and 19.8p respectively by FY20. In turn putting the shares (at 230p) in 4 years' time, on attractive PE and PEG ratios of 11.6x and 0.4x, which would look extremely cheap for such a high quality, science rich stock. 

On valuation, we have pushed up our price target to 245p/share (from 225p), mirroring Blancco's excellent results and slightly higher proceeds (€4.5m)  from the Digital Care disposal.

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