Rosslyn Data Technologies

www.rosslynanalytics.com
Ticker: RDT Exchange: AIM

Rosslyn Data Technologies is a pioneering software company that dramatically shortens time to business insight from days to minutes. Their cloud platform intelligently extracts, aggregates and enriches data from multiple sources so that clients gain a single view of employees, customers and suppliers for complete and accurate self-service reporting and analysis.

Latest Reports

In the right place at the right time

Published: 22nd September 2020

We think this ‘battle-hardened’, cash-rich (estimated April '21 net funds of £6.1m) & now profitable SaaS firm is ideally placed to benefit from strong secular demand for its cutting-edge & fully integrated Big Data, AI, spend analytics, SMDM (Supplier Master Data Management) & customs/duty handling applications.

The company has posted record revenues (FY20 £7.1m +2.1% LY) & profits, aided by the £49k acquisition of Langdon (+£0.9m) in Sept’19, partly offset by the elimination of low margin pass-through contracts (£0.6m). Encouragingly, EBITDA (pre SBPs) was positive for the 1st time ever at £36k (-£432k LY), despite expensing all £1.3m (£0.9m LY) of its R&D costs (18% sales).

In terms of FY21, we understand YTD trading is in line with expectations (ED est +£309k EBITDA on turnover up +7.1% to £7.6m), even after experiencing some order delays related to the pandemic. Here we are modelling flat H1 organic sales growth, followed by mid-single digits in H2 & 10%+ from FY22 onwards.

At 5.5p, we think Rosslyn shares not only trade on a modest 1.6x CY EV/sales (vs peers >5x), but are also targeting double digit top line growth from FY22 onwards, generates 84.7% gross margins, 40%+ EBITDA drop through rates and 88% recurring revenues – with healthy visibility.

Putting all this together, we have bumped up our valuation from 9.5p to 10p/share, reflecting the improved gross margins.

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CEO Interview

Published: 9th July 2020

Roger Bullen, CEO of Rosslyn Data Technologies, discusses the positive outlook for the business, how they have helped their clients deal with COVID-19 and the strategic ambitions for the group.

 

3 contract renewals worth £0.9m in ARR

Published: 25th June 2020

A key takeaway from COVID-19 is that the pandemic has accelerated ‘cloud’ adoption, and focused executive’s attention on cost savings, productivity & supply chain optimisation: all of these secular trends are right in the sweet spot of Rosslyn’s Big Data & Spend Analytics SaaS platform, RAPid.

The company today announced that it had extended 3 contracts, worth a combined £0.9m of ARR (annualised recurring revenues) and £1.5m in total value.

The extensions are with top quality clients: namely an international telecoms business, a world-renowned American university, and a UK government department to between Sept’21-Jun’23. Highlighting once again the criticality of the firm’s leading technology and services.

These 3 renewals add further visibility, support our £6.4m FY21 ARR estimate (£6.0m LY), and reinforce the modest 9.5p/share valuation.

Moreover, if the Board can achieve its strategic objective of tripling ARR by April’23 – then there should be no reason why the valuation could not justify at least a 3x-5x EV/sales multiple: equivalent to £54m-£90m, or 16p-26p/share.

 

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Turbo-charging growth prospects

Published: 27th May 2020

In recent years Rosslyn has meticulously built a leading Big Data & spend analytics SaaS platform (RAPid), supporting an illustrious roster of 100+ clients (many global multi-nationals). Topped off with the synergistic acquisition of Langdon in Sept’19, & becoming EBITDA positive in FY’20 for the 1st time ever - thanks to increasing ARR (+12% to >£6m) & favourable operational leverage (81% gross margins).

Today shareholders approved the heavily oversubscribed £7.3m placing at 5p. How many businesses can claim to have raised >70% of their market cap at a 22% premium to the preceding 20 day average? Indicating strong institutional support for future prospects.

The company plans to invest the funds to further accelerate the top line, launch new products (eg Master Data Management), bolster the balance sheet & maybe even execute one or two more opportunistic bolt-ons. A proven formula, that aims to triple revenues over the next 3 years (including M&A), whilst maintaining tight cost control and lifting profit margins.

FY20 turnover came in at between £7.0m-£7.2m (vs £7.0m LY) despite some year-end disruption related to the pandemic, alongside the strategic decision to curtail low margin ‘pass-through’ revenues. The platform is highly scalable, because once a client’s upfront configuration has been completed the software is essentially identical from an operational/cost perspective, working off a ‘1-to-many’ model

In light of RDT’s cutting edge technology and attractive expansion, we value the stock at 9.5p/share, equivalent to c. 3.4x FY21 EV/sales. As such, we believe the firm offers compelling value for patient risk-tolerant investors.

 

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Contracts coming in thick & fast

Published: 14th January 2020
Today almost every organization is having to respond to the data arms-race, with the desire to significantly improve efficiency, product quality and sales, whilst equally enhancing their customers’ operations.

Enter Rosslyn, whose proprietary RAPid Big Data analytics software, provides the necessary glue to help clients benefit from many transformational technologies, such as cloud, 5G, IoT and AI. Better still, the company has recently won 4 new contracts (aggregate value £2.2m) with some of the world’s largest corporates, and is set to become cashflow positive shortly.

That said, RDT is not totally immune to the economic cycle. Experiencing a temporary dip in H1’20 sales (-11.7% lower to £3.12m), due primarily to macro uncertainties and delayed customer decision making.

However C-suite confidence is returning, and Annual Recurring Revenues have now tipped £6.3m (+24.7% vs £5.05m Oct’18), with the orderbook mushrooming to £6.4m (+25.5% vs £5.1m Apr’19). And that’s before factoring in any extra ‘land & expand’ opportunities that are often secured post ‘go-live’.

Looking ahead, our FY20 EBITDA (post SBPs) target of -£110k has been retained, along with the 12p/share valuation, equivalent to c. 3.1x FY20 EV/sales. Net debt is scheduled to exit Apr’20 at £800k vs £975k in Oct’19. 
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On track to hit FY20 expectations

Published: 12th December 2019
Success in business, investing and life in general revolves around seizing opportunities, whilst equally trying to neutralise any associated risks. As illustrated in yesterday’s trading update by Rosslyn.

Here in September, the company acquired the IP, software, assets, client list, contracts and domain names of Langdon Systems Ltd for a mere £48,750 - directly from the administrator.

So 11 weeks on, how are things progressing? Well the good news is the integration has gone smoothly, with the majority of the 60 customers being retained. Hence albeit relatively small, we believe the deal could ultimately prove to be extremely value and earnings accretive. Generating at least £400k of incremental ARR – and perhaps a lot more, as new accounts are secured and selective price increases are put through.

Elsewhere, Rosslyn has also just won another major spend analytics contract (worth £410k over 3 years). This time with a global rail OEM, who manufactures rolling stock and other infrastructure, with initial revenues set for H2’20.

In terms of trading, the board guided that FY20 results would be more 2nd half weighted than usual, although we understand that the pipeline is healthy, and further high margin RAPid contracts are expected to be signed before yearend. Which when combined with continued tight cost control, means FY20 trading remains in line with expectations.

Finally with regards to the numbers, we have held our FY20 turnover and adjusted EBITDA (post SBPs) forecasts at £7.8m and -£110k respectively, along with reiterating our 12.0p/share valuation.
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Full year results interview September 2019

Published: 17th September 2019
Roger Bullen, CEO, and Ash Mehta, CFO, discuss the businesses increasing resilience as they move towards profitability, the quality of the clients they are winning, and the steady increase they are achieving in gross margins.  

Mining big value from Big Data

Published: 16th September 2019
How does a smart investor defuse some of today’s macro uncertainty? One way is to park more money in the bank - albeit interest rates are near zero, and cash doesn’t protect against either inflation and/or a currency devaluation.
Another approach is to look for deeply undervalued software firms with overseas exposure, high recurring revenues and wide competitive moats. We think one such cloud enabled SaaS stock is ‘Big Data’ expert Rosslyn Data Tech. Indeed its cutting edge supply chain focused ‘data mining’, ‘analytics’ and ‘artificial intelligence’ platform (RAPid) actually saves corporates a ton of money. A key customer benefit in the event of another recession.
Moreover with 80%+ gross margins, 5% churn and rich EBITDA drop-through rates - a large chunk of any future incremental turnover should fall straight to the bottom line.
Hence given the strong fundamentals, we reckon the company will become cashflow positive this year on revenues 12% higher at £7.8m (vs £7.0m LY) – and is worth 12p/share. Representing a forward EV/sales multiple of 1.7x, and equivalent to an unjustified 75% discount to peers at 6.7x.
Finally in light of its scalable technology, we suspect Rosslyn could ultimately even become a takeover target, reflecting the voracious appetite of overseas buyers for UK plc. CEO Roger Bullen adding: “We are confident of continued growth as we engage in numerous large client opportunities that we hope to be able to announce later this year”.

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Poised for major break-through

Published: 28th May 2019
In the good old days, you could put your money into a savings account in January, and hey presto, 12 months’ later the interest earned would be enough to buy the Xmas turkey. Not so today. Faced with such meagre returns, risk tolerant investors are increasingly looking for stocks that are primed for secular ‘breakouts’.
Enter Rosslyn Data Tech, a Big Data & spend control software solution provider, focused squarely on the supply chain. Its best-of-breed cloud platform (RAPid) enables corporates to not only significantly reduce costs and improve productivity, but also enhance revenues, optimise supplier performance and comply with regulations. Saving customers literally £ms in the process.
This morning, the company said FY19 sales were up 8.3% to £7.0m vs £6.4m LY - with Annual License Fees climbing 9.2% to £5.4m (£5.0m), and equivalent to 77% of the group. Likewise, cash from operations rose +£329k (-£3.45m LY), reflecting a 75% improvement in EBITDA (excluding SBPs) to -£432k (-£1.8m), alongside lower opex, which came in at £6.0m (£6.7m) despite absorbing £0.9m of R&D (12.9% sales).
Going forward, thanks to higher future investment in sales & marketing and a promising pipeline, we reckon turnover will jump 15% LFL in FY20 to £8.0m. In turn, driving EBITDA (pre SBPs) above breakeven this year, with Rosslyn becoming self-funded towards the end of FY21.
Indeed with Rosslyn signing numerous contracts last year (eg KLM, Diageo, BAe Systems) across various sectors, including International Logistics, Civil Defence, Healthcare and Pharma – we think the firm is perfectly poised for a major break-through over the next 2 years.

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Double thumbs up for new bank facility

Published: 9th April 2019
Refinancing loans can be a tricky exercise at the best of times, especially given today’s the political impasse at Westminster. Therefore, it was very encouraging to hear this morning that Rosslyn Data Tech had managed to replace its existing £0.75m debt with a new 3 year, £1.5m secured facility from Clydesdale Bank on equivalent terms (ie interest charged to be at 7.75% plus 3 month LIBOR). 

We think this is both a positive step forward to accelerate growth and a major endorsement of RDT’s future prospects. Particularly since the company should shortly become cashflow positive, and continues to win blue chip clients (eg KLM, Diageo, BAe Systems, etc), who benefit from its proprietary big data, analytics and AI platform (RAPid). 
 
In terms of the numbers, we have held our estimates, reiterate RDT’s 12.5p/share valuation and look forward to the pre-close trading update in May. What’s more, given the rebound in Big Data stocks during the past 3 months, the firm continues to look materially undervalued on a relative and absolute basis.

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Momentum continues to build

Published: 11th February 2019
The pressures associated with managing its uber-complex supply chain are immense. Having to not only balance real-time ‘demand forecasts’ against detailed raw material, production and finished goods requirements. But also hit tough cost, working capital & profit targets, alongside delivering just-in-time orders to supermarkets, convenience stores, wholesalers, consumers & alike.

Consequently, these type of business are usually forced to hold buffer stock  in order to smooth out any logistical problems, whilst further suffering product wastage, reflecting inefficiencies, customer returns, obsolescence and damages. So what can be done? 

The good news is that by deploying Rosslyn’s big data, analytics and AI software platform (RAPid), large corporates can now generate multi-£ms savings. Perhaps even shaving 1 week off working capital levels, improving yields by 1% and/or reducing procurement costs by another 5%. Thus paying for the software several times over, and in double-quick fashion too.

Hardly surprisingly therefore, that RDT is knocking the ball out the park in terms of contract wins. It signed a raft of blue chip clients in H1’19 - and today announced another 3, worth £500k in total, operating in the International Logistics, Healthcare and Pharma sectors. In turn, pushing annualised recurring revenues to >£6m (vs £5.05m vs 31st Oct’18), and putting the firm within touching distance of becoming cashflow positive. 

Although our FY19 estimates and 12.5p/share valuation remain unchanged, we nevertheless note that the contracts bolster RDT’s P&L cover for this year and next. Namely, FY19 turnover and EBITDA of £7,500k (Act H1 £3,532k vs Est H2 £3,968k) and £242k (Act H1 -£290k vs Est H2 £532k) respectively, generating a +3.2% margin, and rising to £8,250k and £812k (9.8% margin) in FY20. What’s more, the stock at 7.3p trades on a frugal 2.0x CY EV/turnover multiple, representing a substantial discount to Big Data peers at 8.4x

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Rosslyn Data technologies at the Equity Development Investor Forum, January 2019

Published: 1st February 2019
Roger Bullen, Chief Executive and Hugh Cox, Founder explained the history and leading capabilities of RDT whose technology allows some of the most recognised companies in the world to best use their massive quantities of data to enhance their profitability.

Big Data expert primed for major break-out

Published: 28th January 2019
Forget the $, € or ‎¥. Today, data is the world’s #1 currency and the lifeblood of any ambitious organisation wishing gain a competitive edge. Maximising its utility though is easier said than done - since many corporates operate numerous IT systems (incl. legacy), and are being attacked on all fronts by aggressive tech-enabled rivals (eg Amazon, Facebook, FinTech, etc). 

So what’s the answer? Well increasingly international businesses are turning to Big Data experts, like Rosslyn Data Tech (RDT) – who have combined cutting edge ‘data mining’, ‘analytics’ and ‘artificial intelligence’ into a fully integrated suite of cloud based, software applications (called RAPid). Enabling clients to not only cut costs, comply with regulations and improve cash-flows, but also enhance revenues, manage suppliers and create best-in-class supply chains.

This is proving to be a winning formula too. So much so that for the 6 months ending Oct’18, Rosslyn won a clutch of blue ribbon contracts with tier 1 clients, including a global defence organisation, a European logistics company, a UK based financial services firm and a speciality metals business. Driving H1’19 turnover up 11% (£3.53m), annualised recurring revenues (ARR) 12% higher (£5.05m) and cashflows towards breakeven. 

Nonetheless this is just the tip. We think the Big Data boom is set to deliver double digit top line growth for decades ahead 

The beauty being that – due to RDT’s 80%+ gross margins (Est FY19), 5% churn and rich EBITDA drop-through rates - a large chunk of this incremental revenue should fall straight to the bottom line. In fact, thanks to estimated LFL growth of 16.6% this year (H1 11% vs H2 est 22%) and 10% (prudently set) next, FY20 EBITDA & cashflows should move healthily into the ‘black’.

H1’19 gross margins climbed 3.5% to 78.4% (vs 74.9% LY), whilst the EBITDA loss narrowed to -£213k mirroring favourable operating leverage (on sales +11% £3.5m). For FY19, we anticipate turnover will jump 16.6% to £7,500k (vs £6,433k LY) with net debt closing Apr’19 flat at -£700k (vs -£757k Apr’18, -£451k Oct’18), reflecting tight cost control and working capital management. 

In our view there should be no reason why the firm cannot achieve sustainable 10%-15% pa organic top line growth, 22% EBIT margins and >100% cash conversion – ie in sync with the broader software industry. However we accept that our sales projections are conservative, compared to IDC’s forecasts for the Big Data market of >20% pa (on average) between 2017-22. 
With regards to valuation, employing a 15% discount rate, our DCF analysis calculates the stock to be worth 12.5p/share, offering >75% potential upside for risk-tolerant investors. 

NB investors can hear CEO Roger Bullen present the proposition on this Wed 30th at the ED Forum, registration here: CLICK HERE 
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