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Rosslyn Data Technologies PLC: THE INVESTMENT CASE

Rosslyn Data snaps up rival in bold move

Rosslyn said it will reduce the reliance on large contracts with long sales cycles
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INVESTMENT OVERVIEW: RDT The Big Picture
Management information is Rosslyn's bag

Cloud-based data analytics specialist Rosslyn Data Technologies PLC’s (LON:RDT) has made a major statement of intent over its future.

The group has snapped up rival data miner Integritie (UK) to provide a source of recurring sales and broaden its product reach.

Consideration will be £2.59mln to be funded from a £2.21mln placing and up to a further £500,000 through an open offer.

WATCH: 'They add tremendous value to us', says Rosslyn Data's boss on Integritie buy

Market value is just under £4.5mln at 5.7p, with the shares hit by the deep discount of the placing.

While it’s not a huge deal, given the size of the customer it is now dealing with, rising orders and Integritie’s recurring revenue the valuation looks more than a little on the mean side.

Structured and unstructured data on menu

Integritie’s speciality is analysing unstructured data and this will be an important add-on for Rosslyn according to chief executive Roger Bullen.

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“The customer base is complementary to our own and the acquisition will enable us to cross sell both structured and unstructured data services to an enlarged customer base.”

Another key attraction, Rosslyn said, is that it will reduce the reliance on large contracts with long sales cycles in its core data mining business, something that has led to uneven sales over the past three years.

The deal will generate a substantial increase in Rosslyn's recurring revenues, Bullen added, boosting the quality of earnings and reducing overall risk from the ‘reliance on the sale of cumbersome revenue items, the timing of which is always difficult to predict’.

Integritie made a loss of £2.4mln in 2015 on sales of £3mln.

Costs saving from merging the two companies are forecast at £0.8mln.

Contracts taking longer

Rosslyn flagged the slow sales cycle as an issue in its core business in November.

While the average and lifetime contract value was trending upward, and now exceeds more than £75,000 a year, closing deals was also taking more time and effort.

Though once signed, the churn rate – the proportion of the customer base that does not renew contracts each year is impressive at below 5%.

RAPid traction

The company’s core products are the RAPid Big Data platform, and RAPid Data Extract Studio (a new self-service tool).

Partnerships with the professional services firm PwC, the outsourcing specialist Genpact and Microsoft underline its credibility.

It has also won business from big blue-chip firms including Anglo American and Kingfisher as well as an unnamed global manufacturer.

Earlier this month, it underlined its appeal to big names with a data and analytics partnership with management information giant Dun & Bradstreet to help companies make sense of the welter of information stored within their business.

Demand for commercial information never greater

The company is borne of an era when IT teams are shrinking yet the demand for meaningful commercial information has never been greater.

This has led to a shift in data analysis with the departments, country offices and divisions of big firms carrying out their own number crunching rather than it being done centrally.

By extension, this means the process is being overseen by workers unfamiliar with the technology and coding needed to extract the data required of their particular part of the business.

Rosslyn has five interlocking technologies that make it easy for the lay user to do just that and that is the core of the RAPid data analytics platform.

For example, one partner is using Rosslyn’s technology to deliver 11 client projects analysing more than £38bn (€50bn) of transactions.  

This growth of the size of the contracts and the expansion of the customer base is driving the higher annualised recurring revenue.

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Rosslyn Data Technologies PLC Timeline

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