Beeks Financial Cloud : Progressive Note strong start to FY24

BEEKS FINANCIAL CLOUD GROUP

SOFTWARE AND COMPUTER SERVICES

6 September 2023

BKS.L

97p

Market Cap: £63.6m

SHARE PRICE (p)

190

140

90

40

12m high/low	166p/97p

Source: LSE Data (priced as at prior close)

KEY DATA

Net (debt)/cash	£4.4m (at 30/06/23)
Enterprise value	£59.2m
Index/market	AIM
Next news	FY23 results, October
Shares in issue (m)	65.6
Chairman	Mark Cubitt
CEO	Gordon McArthur
CFO	Fraser McDonald

COMPANY DESCRIPTION

Beeks provides low-latencyInfrastructure-as-a-Service (IaaS) for automated trading of financial products.

www.beeksgroup.com

PERLPARA

BEEKS FINANCIAL CLOUD GROUP IS A RESEARCH CLIENT OF PROGRESSIVE

ANALYSTS

Blaine Tatum

[phone] [e-mail]

Gareth Evans

[phone] [e-mail]

www.progressive-research.com

Growth in FY23, strong start to FY24

Beeks' FY23 trading update (12 months to 30 June) confirms that the group delivered impressive growth in revenue and profits during the year (revenue +20% YoY, underlying EBITDA +35%). Although this outcome is ahead of our forecast at the EBITDA level, we understand revenue progression was impacted by the shifting of certain Exchange Cloud revenues into FY24. The release signals a 'strong' start to FY24, with record ACMRR of over £25m and good visibility on FY24 revenue. Cash performance during FY23 was solid, with the group delivering positive free cash flow in H2 23 and closing the year with a £4.4m net cash balance.

• FY23: Double-digit growth across key measures. The update signals FY23 YoY growth in revenue, underlying EBITDA and underlying PBT of 20%, 35% and 10%, respectively. We believe that delivering double-digitgrowth across all three measures is a solid performance, and note that the implied underlying EBITDA of c.£8.5m is ahead of our £8.4m forecast (suggesting impressive margin expansion). However, FY23 revenue growth of +20% implies sales of £22m, behind our £24.5m forecast. We understand FY23 revenue progression was stifled by the shifting of certain revenues from Exchange Cloud, which typically have long sales cycles, into FY24.
• A 'strong' start to FY24, with good visibility. Beeks closed FY23 with (a then record) Annualised Committed Monthly Recurring Revenue (ACMRR) of £23.8m, which has now risen to over £25m as at 31 August 23. The release signals that the group has made a 'strong' start to FY24, and has a significant and growing pipeline of opportunities for each of its offerings. We note that £25m ACMRR represents over 85% of our FY24E revenue forecast. With initial revenues from the JSE deployment expected in the coming weeks, ACMRR, and by extension revenue visibility, should further improve.
• Solid financial position. Beeks delivered positive free cash flow in H2 23 and closed the period with an (unaudited) net cash balance of £4.41m (H1 23: £3.35m, FY22: £7.86m). With a net cash balance equating to roughly 7% of the current market capitalisation, we believe the group's financial position remains solid.
• Forecasts unchanged. We leave our estimates unaltered, as below, and will reflect FY23 results once fully detailed by the company in October.

FYE JUN (£M)	2020	2021	2022	2023E	2024E
Revenue	9.4	11.6	18.3	24.5	29.1
Adj EBITDA	3.3	4.1	6.3	8.4	10.8
Fully Adj PBT	1.4	1.6	2.1	3.2	3.7
Fully Adj EPS (p)	2.5	3.0	4.2	4.2	4.9
EV/Sales (x)	6.3	5.1	3.2	2.4	2.0
EV/EBITDA (x)	17.8	14.3	9.4	7.1	5.5
PER (x)	39.6	32.4	23.1	23.0	19.8

Source: Company Information and Progressive Equity Research estimates.

This publication should not be seen as an inducement under MiFID II regulations.

Please refer to important disclosures at the end of the document.

6 September 2023

Financial Summary: Beeks Financial Cloud Group

Year end: June (£m unless shown)
PROFIT & LOSS	2020	2021	2022	2023E	2024E
Revenue	9.36	11.62	18.29	24.47	29.12
Adj EBITDA	3.33	4.14	6.31	8.36	10.85
Adj EBIT	1.18	1.67	2.36	3.59	4.29
Reported PBT	0.68	1.26	0.07	2.89	3.41
Fully Adj PBT	1.43	1.61	2.06	3.23	3.75
NOPAT	1.29	1.84	2.50	3.95	5.15
Reported EPS (p)	1.13	3.07	1.43	3.99	4.75
Fully Adj EPS (p)	2.45	2.99	4.19	4.22	4.90
Dividend per share (p)	0.20	0.00	0.00	0.00	0.00

CASH FLOW & BALANCE SHEET	2020	2021	2022	2023E	2024E
Operating cash flow	3.26	3.26	4.70	6.99	8.00
Free Cash flow	(0.67)	(3.80)	(7.68)	(0.81)	(0.76)
FCF per share (p)	(1.02)	(5.80)	(11.70)	(1.24)	(1.16)
Acquisitions	(0.75)	(1.02)	0.00	0.00	0.00
Capex	(3.54)	(6.75)	(12.09)	(6.86)	(7.96)
Shares issued	0.00	5.01	14.76	0.00	0.00
Net cash flow	(0.91)	(0.31)	6.79	(0.81)	(0.76)
Overdrafts / borrowings	(2.18)	(1.49)	(2.30)	(2.30)	(2.30)
Cash & equivalents	1.43	3.37	10.16	9.35	8.59
Net (Debt)/Cash	(0.75)	1.89	7.86	7.05	6.29

NAV AND RETURNS	2020	2021	2022	2023E	2024E
Net asset value	6.72	13.77	30.77	35.08	41.83
NAV/share (p)	10.24	20.99	46.92	53.50	63.80
Net Tangible Asset Value	6.76	10.39	16.27	17.91	19.17
NTAV/share (p)	10.30	15.85	24.81	27.32	29.24
Average equity	6.17	10.24	22.26	32.32	35.25
Post-tax ROE (%)	23.2%	15.7%	9.2%	10.0%	10.6%

METRICS	2020	2021	2022	2023E	2024E
Revenue growth		24.1%	57.5%	33.8%	19.0%
Adj EBITDA growth		24.3%	52.4%	32.5%	29.8%
Adj EBIT growth		42.1%	41.1%	52.3%	19.6%
Adj PBT growth		N/A	27.9%	56.8%	16.1%
Adj EPS growth		N/A	40.2%	0.6%	16.1%
Dividend growth		N/A	N/A	N/A	N/A
Adj EBIT margin	12.6%	14.4%	12.9%	14.7%	14.7%

VALUATION	2020	2021	2022	2023E	2024E
EV/Sales (x)	6.3	5.1	3.2	2.4	2.0
EV/EBITDA (x)	17.8	14.3	9.4	7.1	5.5
EV/NOPAT (x)	45.8	32.2	23.7	15.0	11.5
PER (x)	39.6	32.4	23.1	23.0	19.8
Dividend yield	0.2%	N/A	N/A	N/A	N/A
FCF yield	(1.1%)	(6.0%)	(12.1%)	(1.3%)	(1.2%)

Source: Company information and Progressive Equity Research estimates

2

6 September 2023

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