Checkit (formerly Elektron Technology) operates a SaaS platform that digitises and vastly improves the running of routine tasks/workflows, particularly with regards to efficiency, quality, standardisation and regulatory compliance.
In May’19, the group acquired Next Control Systems for £8.8m, with the ultimate aim of becoming a global powerhouse in real time operations management. Whilst simultaneously transitioning towards a pure 100% SaaS business across many sectors including Retail, Hospitality, Healthcare, Real Estate Management and Manufacturing.
There are 190 FTEs, and the firm is headquartered in Cambridge, UK with its Operations Centre in Fleet, and a Sales and Service office in California, US.
Interim results: resilience and confidence
Overall performance shows resilience to the impact of COVID-19, with comprehensive restructuring and a focus on recurring, software-driven, revenue streams. H1’21 revenue grew 2.3%YoY (normalised basis) to £6.4m. Checkit UK, acquired on 24 May 2019, contributed 2.5 months of earnings, in H1’20 equivalent to £6.2m on an annualised basis. Notably, gross profitability improved significantly from 21.9% at July 2019 to 9% by July 2020.The cash position as of 31 July was £13.4m, compared to £14.3m on 31 January.
With healthy cash resources and cost controls in place Checkit plans to continue a programme of product development and marketing, in which £1.0m was invested in the half year (H1’20: £1.2m). As a result, the company expects to record a near-term operating loss. COVID-19 has brought into focus the services Checkit offers, particularly as working practices change, perhaps permanently. This means management of dispersed workforces through more, data-driven, remote monitoring, an increased reliance on automated, continuous systems surveillance and access to analytical tools for improvement. The factors introduced by COVID-19 effectively define Checkit’s strengths in the provision of SaaS-based, automated monitoring and workflow management services (CAM, CWM and CBM) and analytical tools.
We reinstate forecasts based on estimated 2.3%YoY (normalised) revenue growth this year to £13.1m followed by +7%YoY in FY22 (£14.0m), underpinned by strong recurring revenue growth of 34% and 22% respectively. We expect continued investment in product, sales and marketing, resulting in near-term operating losses of £4.0m in FY21 and £3.0m in FY22 within a programme primed by strong cash reserves which we estimate at £10.1m at year-end FY21 and £7.5m at the close of FY22.Download Now Missing Out Get our research first
Trading update on 6 months to 31 July
In a Trading Update for the six months to 31 July 2020 Checkit reports that, on a normalised basis, recurring revenue rose 23.4% YoY to £1.9m, whilst non-recurring revenue, on the same basis declined by 6.8% YoY to £4.3m. Normalised data is based on ownership of Checkit UK for the whole period - it was acquired on 14 May 2019.
Facing the circumstances occasioned by the COVID-19 pandemic the Group continues to base planning on recurring revenues which have remained resilient, in contrast to a contraction in installation and project-based non-recurring revenue streams. Management also noted the impact of new installations and conversion to a subscription basis of Checkit UK calibration and maintenance contracts in the healthcare sector.
Cash control remained admirably strong, recording £14.3m at 31 January, £12.8m at the end of April and £13.4m at the close of Q2 in July.
This update introduces notes of optimism to counterbalance the uncertainties introduced by the COVID situation. Not just the self-evident strong cash and cost control, but also the resilience of recurring revenue streams and focus on healthcare as a promising demand vertical. All driven by ever increasing demand for remote and reliable monitoring.Download Now Missing Out Get our research first
House in Order
Checkit plc today announced FY20 Preliminary Results following restructuring, the highlights of which were: the sale of Bulgin and return of £81.0m to shareholders; acquisition of Next Control Systems for £8.8m, subsequently renamed Checkit UK Ltd.; renaming of Elektron Technology plc as Checkit plc; and a renewed focus on cloud-based Software-as-a-Service operational management solutions.
In line with the 14 April 2020 Trading Update on the impact of the COVID-19 pandemic on operations, Checkit has withdrawn outlook guidance. However, there are positive signs arising from: an emphasis on profitable recurring income from Connected Workflow Management (CWM) and Connected Automated Monitoring (CAM) operations; focus on larger enterprise customers such as BP, a FY20 contract win; development of SaaS-based revenue (reported at 30% of revenue); close ties with the NHS; new business opportunities.
In line with the company announcement on guidance we suspend forecasts, whilst noting a current enterprise valuation which stands at a 41% discount to FY20 revenue and 34% discount to the purchase price of Checkit UK Limited.Download Now Missing Out Get our research first