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Ideagen's revenue leaps as SaaS transition steams ahead

By Duncan Ferris

Date: Wednesday 17 Jul 2019

Ideagen's revenue leaps as SaaS transition steams ahead

(Sharecast News) - Ideagen on Wednesday reported a jump in annual sales on the back of higher recurring revenues, though profits were flat following an increase in costs.
The integrated risk management software supplier's revenue for the year ended 30 April came in at £46.7m, up 29% compared to the year before, as the annual recurring revenue book was up 44% at approximately £36.4m, representing 67% of total revenue.

Shifting to an SaaS model, Ideagen is targeting £100m in run rate revenue by 2022, with recurring revenues representing a minimum of 75% of the total.

However, revenue growth over the past financial year was largely offset by a 30% increase in operating costs to £28.5m and a 23% jump in cost of sales to £3.9m after the acquisition of InspectionXpert, Morgan Kai, Scannell Solutions and IPI.

Consequently, profit before tax edged 1% lower to £1.4m.

Ben Dorks, chief executive of Ideagen, said: "The group's focus this year was on the execution and delivery of our growth strategy, both organically and through acquisitions, whilst continuing the transition to a SaaS based business model. We are pleased to report that we have achieved our objectives this year, significantly increasing the group's global footprint, particularly in the US, and delivered another year of strong revenue and profit growth, underpinned by excellent cash generation."

The AIM traded company added that the board remained confident in the group's prospects as trading since the year end had remained robust as strong demand continues, while acquisitions made during the previous year were performing well, and the company's base of over 4,700 customers continues to generate growing recurring revenues and repeat business.

Analysts at Canaccord stated that the stock was "attractive" due to the growth of its contractually recurring revenues and scope for organic growth acceleration in the next 12-24 months as the company begins to convert its maintenance base to a SaaS model.

In a research note, the broker added that most listed enterprise software peers with similar characteristics traded on materially higher valuations, with analysts now seeing the potential for an 80% market cap uplift on a two to three-year view should management deliver on its revenue ambitions in 2022.

Ideagen's shares were up 1.18% at 146.20p at 1153 BST.

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