Potential buyers don’t see attractions of accesso Technology

Digital ticketing technology provider accesso Technology (LON: ACSO) has ended its formal sale process and says that its 2019 figures will be at the lower end of guidance.

The formal sale process lasted six months and it cannot have helped the progress of the business. The parties interested in buying accesso, whose clients are attractions and theme parks, such as Legoland Windsor, were not prepared to pay enough for it.

Considering the share price has fallen by around three-quarters over the past year that is not a good sign. The share price has fallen by two-thirds since the formal sale process was announced.

The potential buyers probably believe that accesso is in a weak position and were not willing to pay a significant premium to the market price – if any premium at all.

Numbers

Peel Hunt has trimmed its forecast 2019 revenues from $119m to $117m, EBITDA from $28.2m to $27m and underlying pre-tax profit from $15.2m to $14m. That pre-tax profit is much lower than the $24.4m made in 2018.

The cash generated from operations will be much lower than EBITDA. There will also be $33m of capitalised development spending, but a small net cash position has been maintained.

The profit does not take account of the likely write-downs of intangible assets that came into being through past acquisitions.

There were intangible assets of $195.8m at the end of June 2019, while NAV was $180.5m, which is more than the current market capitalisation of £95m. A large reduction in the value of intangibles would hit the NAV so there may not be a premium to the market value.

The company needs to grow revenues, which were effectively flat last year, and show that it can improve its margins which declined from 21.2% to 12.9%. The group performance is second half weighted so it will take time for any upturn to become noticeable.

Management

accesso is appointing Steve Brown as chief executive following the ending of the formal sales process. He founded accesso, which reversed into what was then known as Lo-Q in 2012, and previously held the role of chief executive between 2016 and 2018.

Paul Noland is resigning as chief executive after fewer than 22 months in the role. He worked at Walt Disney and was president of the International Association of Amusement Parks and Attractions. He was described as the ideal person to run the company when he was appointed but it does not appear to have worked out.

Share price

There appears to be little reason for a short-term share price recovery. The previously high profit multiples meant that the string of disappointments was always likely to lead to a diving share price.

The prospective 2019 multiple is less than eleven, but profit growth is expected to be modest in the next couple of years.

It is uncertain whether Steve Brown is a long-term leader for the group. If not, the decision on who is the next boss will be very important.

The group has been highly acquisitive in the past and it is attempting to integrate its products. There have been some initial integrated deployments, but the completion of the integration is not expected until the end of 2021. Bringing together the services and implementation should provide opportunities to make savings, but again that is unlikely to happen this year.

There is an enormous market for the digital ticketing services provided by accesso and it has good relationships with many of the major companies in the theme parks and attractions sector.

Profit could be flat for two years before the full benefit of the integration and reorganisation show though in the figures.

There will be more information with the 2019 results release on 24 March. There is no reason to be buying the shares prior to that.