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Northland Capital Partners View on the City dotDigital, Europa Oil & Gas and Netcall plc

Published: 08:07 24 Feb 2015 GMT

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dotdigital (LON:DOTD) – Interims  

Market Cap: £106m; Current Price: 37.2p    

  • Accelerated investment plan  
  • Revenue from continuing operations +32% to £10.0m with recurring revenue from dotmailer’s SaaS usage charges up 28% to £7.4m. Email related creative and managed service +38% to £1.1m. Group operating profit +17% to £2.5m and net cash of £9.5m (FY14: £5.2m). Capitalised development spend increased 19.6% to £0.8m.
  • >300 new clients signed in H1 and average monthly spend +40.8% to £400. Spend from new clients +62.7% to £480. >150 clients on the new Magento connector (ecommerce platform) with average recurring spend of £775 per month. 
  • $1.1m in revenue from the US (+150%). Plans to invest more in expanding the US team in the West Coast and Mid-America. Will also start to build out a channel sales team in Australia with a view to other APAC markets. Accelerated plan of up to £3m over the next two years.
  • Simone Barratt takes on the role of CEO. Peter Simmonds moves to Deputy Chief Executive.  

NORTHLAND CAPITAL PARTNERS VIEW: Continued strong momentum in the business with new customers signed and an improvement in the monthly spend per customer. Business has achieved a foothold in the US and there is considerable scope to expand, although it remains historically a tough market for European companies to succeed. Balance sheet is well capitalised to fund the accelerated investment plan. The moves of Peter Simmonds and Simone Barratt had been previously flagged.  

 

Netcall (LON:NET) – Interims  

Market Cap: £98.7m; Current Price: 72p  

  • Record H1 performance  
  • Adj. EBITDA up 8% to £2.7m on revenue up a modest 2% to £8.6m. Within this, recurring revenue increased 4% to account for 64% of the total. PBT +3% to £1.4m and net cash of £13.0m (FY14: £11.4m). R&D spend was flat at £0.9m with £0.35m capitalised. Adj. dil. EPS increased 4% to 0.84p reflecting a higher tax rate. 
  • Expanded product suite with multi-media capabilities and tighter product integration; increased cross and upgrade Liberty platform sales within the customer base. New customer wins included London Borough of Hackney and Cofunds.
  • Outlook: positive outlook given the existing customer base and growing sales pipeline. Will continue to look at acquisitions.  

NORTHLAND CAPITAL PARTNERS VIEW: Solid set of interims with modest top line growth supplemented by an improvement in margins. Demand for Netcall’s customer engagement platform remains robust as organisations look to offer multiple interaction channels (web, mobile, social media, web-chat, telephone and SMS). The balance sheet remains strong and there is scope for further add-on acquisitions. That said, the rating of 25.7x FY15 and 24.0x FY16 consensus EPS (assuming no upgrades on the back of the interims) looks reasonably full.  

 

Europa Oil and Gas (LON:EOG) – BUY: Well spud

Market Cap: £14.6m; Current Price: 7.1p; Target Price: 10p

  • From yesterday: Kiln Lane-1 conventional well spuds
  • Europa announced the spud of its Kiln Lane-1 well in PEDL 181, Northwest Lincolnshire.
  • The well is operated by Europa that has a 50% working interest; Egdon Resources (EDR.L) and Celtique Energie each have 25% working interests.
  • Europa estimates gross prospective recoverable resources of 2.9MMbo.
  • Drilling is estimated to take 36 days to reach TD of 2500m.
  • No change to forecast or price target.

NORTHLAND CAPITAL PARTNERS VIEW: This is an important well for Europa that is rated a 1 in 3 prospect, fairly standard risk for its exploration wells. Whilst still high risk, the well will target a closure clearly defined on 3-D seismic in an area relatively underexplored around 25km from the company’s existing production. Success here has the potential to de-risk a number of other leads in the licence. This would also herald short term cash flow in addition to any production that can be added from the Wressle well that will commence long term production testing in coming months. The well will represent Europa’s major capex outflow for this year (at around £2.4m in our estimates) but the balance sheet is in good shape with net cash and headroom for planned capex. We maintain our BUY rating and 10.0p price target. 

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