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Acquisition propels ATTRAQT to critical mass

The acquisition of Fredhopper looks a fantastic deal, bringing critical mass to ATTRAQT
Online shopping
The enlarged group will have around 250 clients

If you buy clothes online it is increasingly likely you will do so through a web site in some way facilitated by ATTRAQT Group plc (LON:ATQT).

The AIM-listed group has 121 retail clients currently but the number is growing and includes some of the best known names in the world of couture and importantly an increasing amount of US firms.

The likelihood of finding yourself shopping for clothes on a web site powered by ATTRAQT is even more likely if, as expected, the company’s reverse takeover of much bigger competitor, Fredhopper BV goes through.

Fredhopper, a division of SDL Plc (LON:SDL), is a cloud-based provider of onsite search, navigation, recommendation and visual merchandising solutions through a global software-as-a-service (SaaS) platform.

WATCH: ATTRAQT boss on "very good" acquisition ...

Fredhopper has a large recurring revenue base that accounted for 90% of total revenues in fiscal 2016.

It has a considerable number of long-standing key customer relationships, the best known of which is probably online clothing operator ASOS.

"As independent companies, ATTRAQT and Fredhopper have each built strong reputations, delivering products that significantly improve conversion rates and increase sales for their 250 e-commerce retail customers,” said Nick Habgood, chairman of ATTRAQT.

“Bringing the two businesses together will allow us to accelerate investment in sales and marketing, customer support and in on-going product development. Increasing our presence in the important North America market is a particular focus. Our objective is to deliver strong profitable growth whilst becoming a global technology partner of choice to leading online retailers," Habgood said.

It’s a land grab

The standard model for tech companies is to get the top line growing rapidly and worry about the profits later, and ATTRAQT is no different.

In 2016, revenue grew 22% to £3.6mln from £2.9mln the year before.

Recurring revenue increased 22% to £3.2mln from £2.7mln in 2015.

The group's business model is based on a recurring monthly service fee plus a one-off set-up fee and additional follow-on project fees. Clients contract up for a minimum of 12 months, with some larger clients signing up for a longer period of two years.

Adjusted underlying losses (LBITDA) in 2016 were in line with expectations at £1.l6mln, reflecting the accelerated investment in the business.

Loss before tax widened to £1.l9mln from £700,000 the year before.

The company ended the year with £1.2mln, down from £3.0mln the year before.

Merchandising and customer response

ATTRAQT’s platform plugs into a retailers e-commerce sites and enhances the site search, category pages and new product recommendations.

To give merchandisers greater control of what goes out online is the aim and this applies to devices such as in–store tablet computers as well as traditional e-commerce.

ATTRAQT’s Freestyle Merchandising platform allows merchandisers to mix and match product lines in the most effective way to maximise sales.

For example, the buyer of a new raincoat might be prompted to also consider acquiring a new pair of boots and a bag to match.

Tesco, Boohoo and Screwfix were among the early adopters, but were quickly followed by  Bonmarché, Brown Thomas, ESPA and World Duty Free in the UK and  Ben Sherman, Vix Swimwear and TUMI in North America.

Recent contrract wins include Fraser Hart & Fields, Volcom, Matches Fashion, Moss Bros., Russell & Bromley, JoJo Maman Bebe, Eddie Bauer, LK Bennett, The North Face, OKA Direct, Timberland, Vans (Europe) and Victoria Beckham.

The Freestyle Merchandising platform streamlines and optimises the display, search and recommendation functions. During 2017, it saw seven new core code releases, ensuring it remains cutting edge and state of the art.

ATTRAQT also offers three technologies in one (search, display and control over what is recommended), so the customer doesn’t have to go to multiple suppliers, giving a saving in time and cost.

Outlook

"ATTRAQT has seen another year of sustained growth of revenues and client base in the UK and North America, whilst at the same time increasing gross margin. We have signed 42 new deals in the period, including several marquee retailers and have delivered a 22 per cent. increase in revenue for the year," said chief executive Andrew Brown.

"Our objective is to deliver strong profitable growth and become the technology partner of choice for leading online retailers. With an exit rate of £3.9m, good growth in recurring revenue and a strong sales pipeline for H1 2017, we are confident in the continued success of ATTRAQT for 2017 and the foreseeable future," he added.

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