ActiveOps is in the high-profile sector of management process automation software. This is a fast-growing sector and ActiveOps has a relatively long track record, which shows that once customers are gained, they increase their spending over a number of years.
ActiveOps hopes to gain credibility with larger customers through being a quoted company. Although existing shareholders sold shares in the placing the management and employees still own a significant stake.
There are targeted new customers and management is adding partners that can help add to the direct sales.
The share price has risen from 168p to 190p in the first few days of trading since it joined AIM. This type of software company commands high ratings and ActiveOps is trading on more than six times revenues. That appears fairly valued for the short-term.
ActiveOps (LON: AOM)
Management process automation software
Flotation date: 29 March 2021
Issue price: 168p
Amount raised: nil
Float expenses: £1.6m
Market capitalisation: £119.8m
Nominated adviser: Investec
What does it do?
Management process automation software provider ActiveOps helps improve the efficiency and consistency of back office operations of organisations. The software enables clients to manage a complex set of issues.
The core product is ControliQ, which is a workforce optimisation product offering data consolidation, forecasting and planning. WorkiQ was acquired to be integrated in the Workware+ platform to provide employee productivity monitoring.
Management process automation is expected to be worth £6.3bn in 2023 and ActiveOps addresses a segment including banks and insurers that is worth around £750m a year.
One client example is a UK clearing bank that employed the software to control and reduce costs. Productivity in the UK improved by 12% and in the offshore Indian operations productivity was 18% better. A US health insurer managed to make $7m of annualised savings from using the software.
ActiveOps is generating revenue growth from a combination of adding customers and existing users spending more.
ActiveOps has a strong balance sheet and the £75.7m placing cash went to existing shareholders, after costs.
ActiveOps did not need to raise cash because of the 2019 acquisition of OpenConnect for £4.95m. The specific purpose of this deal was to acquire the WorkiQ software, which was integrated into the company’s Workware+ platform. The rest of OpenConnect was sold at the end of last year for an impressive £14.6m.
That meant that there was net cash of £8m at the end of January 2021. This provides enough cash to grow the business.
Revenues were £20.4m in the year to March 2020. ActiveOps has been losing money for the past two years, but it was around breakeven in the six months to September 2020. Advance payments help to increase deferred income and that is why cash inflows are ahead of the profit and loss figure.
Interim revenues improved from £9.42m to £9.78m, while the loss was more than halved to £557,000. That is before the £1.55m gain, net of tax, on the discontinued activities.
SaaS income was at record levels in the third quarter, while training and implementation revenues, which had been held back by the original lockdown, are recovering.
North American is a relatively small revenue contributor with 19% of the total and could become more important. Asia Pacific generates 26% of revenues and Europe 55%.
Sean Finnan (Independent non-exec chairman)
Annual fee: £65,000
Richard Jeffrey (Chief executive)
Annual salary: £200,000
Paddy Deller (Finance director)
Annual salary: £170,000
Mike McLaren (Independent non-exec)
Annual fee: £45,000
Hilary Wright (Independent non-exec)
Annual fee: £45,000
All the shares in the placing were sold by existing shareholders. Calculus Capital reduced its stake from 29.3% to 6.06%, while Neil Bentley cut his from 21.4% to 7.1%. Paul Moroney reduced his shareholding from 6.9% to 0.35% and the Haushild family sold its entire stake.
Chief executive Richard Jeffrey sold shares and reduced his stake to 9.83 million shares. Sean Finnan also sold shares, while the other three directors, who previously did not own shares, made purchases. Other employees sold shares.
BlackRock has taken a 5.78% stake, Schroders 6.28% and Canaccord Genuity 7.95%.