The news that in the last few weeks Made Tech Group (LON:MTEC) has been awarded a massive £27m of new contracts by the Government, emphasises its potential to create sizeable profits in the coming year.

The £40m capitalised group is a specialist provider of digital, data and technology services to the UK public sector, enabling central government, healthcare and local government organisations to digitally transform.

The new contract wins are with the DVLA for £14m, the Department for Levelling Up, Housing and Communities for £8m and finally with the Cabinet Office for £5m.

Interim results due in next few weeks

Ahead of announcing its interims on Thursday 23 February the group issued a Trading Update declaring a strong first-half performance for the six months to end November 2022.

Group revenue was up 76% at £20.6m (£11.7m) while adjusted EBITDA was £0.5m (£1.2m), due to delayed bid submissions and ongoing project work.

The group had a net cash position of £9m, while its contracted order backlog at the period end was 53% up at a record £47.8m (£31.3m).

Going forward the group’s Board has confidence in its growth prospects, having right-sized its headcount, having reduced contractor numbers by 10% and improved cost controls.

CEO Rory MacDonald stated that:

 “We are delighted to have delivered another period of strong growth. It is pleasing to note that our contract sizes continue to grow as we become more established in the market. 

These wins, together with the new Home Office contract announced in November 2022, demonstrate Made Tech’s ability to deliver digital technology successfully, and highlight the strength of our reputation in this growing market. 

As a result, the Group remains on track to meet market expectations for the full year and deliver value to shareholders over the long term.”

Analyst Opinion – the most important indicators are flashing green

Analysts at Singer Capital Markets rate the shares as a Buy, looking for 76p a share.

Their estimates for the current year to end May are for £43.0m (£29.3m) revenues, with adjusted pre-tax profits rising to £3.4m (£2.3m), generating 3.4p (2.3p) per share of earnings.

For the next year they go for £50.0m sales, £4.1m profits and 2.6p earnings.

Conclusion – 40p for 2023 an easy objective

With its shares now trading around the 27p price level they are offering attractive upside, with 40p being an easy 2023 objective.

The World Cup helped drive a record fourth quarter for betting company Entain. Gaming revenue jumped 11% in the period as punters turned to their betting apps during the unusual winter football competition.

The company also pursued global expansion with acquisitions in Croatia and the Netherlands, and the continued roll out across the United States.

“Entain saw record fourth quarter gaming revenue and a spike in active customers as the winter World Cup gave punters plenty to sink their teeth in to. It’s no real surprise to see annual figures heavily biased toward the retail division growth, as performance laps times when betting shops were shut due to lockdowns,” said Matt Britzman, equity analyst at Hargreaves Lansdown.

“There were always concerns that the lockdown-induced boom for online betting would simply shift back to physical stores, but that doesn’t seem to be the case – online revenue is down a touch but remains well ahead of pre-pandemic levels.”

Britzman highlighted the importance of Entain’s US business and their joint venture with MGM.

“BetMGM, the joint venture with MGM in the US, remains a shining star. Recent performance beat expectations and cash profit should start to flow as we move into the second half of the year. The real question here is how long this will remain a joint venture, it seems unlikely both parties will want to continue their US gambling exposure in its current form indefinitely. If we had to put money on it, a bid from MGM to take full control looks the most likely outcome – time will tell.” Britzman said.

CLIQ Digital, the streaming services and digital marketing company, have achieved record sales and earning in 2022 as their memberships hit an all-time high.

CLIQ’s 2022 preliminary results exceeded both the management’s outlook and market expectations.

The streaming company’s FY 2022 sales surged 84% to €276m and helped EBITDA grow to €44m, up from €27m last year. The robust financials were driven by a 45% increase in members to 1.9 million.

“2022 was another fantastic year for CLIQ with record memberships, sales and earnings as well as the introduction of cliq.de – our new and most advanced streaming service tailored to the German market,” said Luc Voncken, CEO.

CLIQ Digital employs direct to consumer performance marketing campaigns to cost effectively win new members. Paying testament to CLIQ’s prowess in securing new customers efficiently, 2022’s marketing spend more than doubled to €112m, and CLIQ still produced record high sales and earnings.

CLIQ believes their marketing model will continue to produce strong results in 2023 and expects sales to exceed €345m with further increases in EBITDA.

CLIQ Digital dividends

CLIQ’s success has translated into bumper distributions for shareholders. CLIQ doubled their distributions to shareholders through dividends in 2022 and currently yields around 3.2%.

Despite paying sharply higher dividends, the company has increased their cash position which will allow for further investment in growth going forward.

“CLIQ concluded the year with the highest net cash position in the Group’s history, whilst also having paid record dividends. Despite macroeconomic headwinds, we continue to see a strong market for our streaming services,” said Ben Bos, member of the Management Board. 

Tekcapital shares rose in early trade on Tuesday after their portfolio company MicroSalt announced their low-sodium salt shakers will be stocked in additional stores in the US.

MicroSalt will partner with Giant Foods who operates 160 stores across the Delaware, Washington DC, Maryland, and Virginia. Giant Foods’ current product mix is aligned with MicroSalt’s mission to provide healthy low-sodium salt shakers that can help fight cardiovascular disease.

The Giant Food’s partnership adds to a recent commercial agreement with Prestly Foods and expands their footprint across US retail outlets. MicroSalt are stocked in over 2,000 Kroger supermarkets in the US.

Tekcapital shares jumped 5% to 18.8p following the announcement on Tuesday.

“We are extremely excited that Giant has joined with us to provide low sodium solutions to its customers. This is a tremendous step in our march toward reducing excess sodium consumption. Our MicroSalt shakers empower consumers to salt their food to taste with less sodium,” said Rick Guiney, CEO of MicroSalt.

MicroSalt are gearing up for an IPO this year after appointing Zeus Capital as their NOMAD for an AIM listing.

The growth in revenues and profits is showing through at the delivery solutions specialist DX (Group) (LON:DX.).

The first half trading was strong, some 15% ahead, leaving the group well-positioned for the second half period.

Both divisions, DX Freight and DX Express, contributed to revenue growth and both have improved margins against the same period last year.

The group, which is a well-established provider of a wide range of delivery services to both business and residential addresses across the UK and Ireland, reported operational improvements and price increases boosted margins, while net new business in each division was healthy, with a strong pipeline of opportunities.

It is continuing its depot network expansion, helped by the end period net cash of £36.4m, with its £20m invoice discounting facility undrawn. Four new depots were opened in the first half, with two expected to open in the second half year.

DX now provides one of the widest ranges of overnight delivery services in the market, as well as logistics services. Items that DX transports range from confidential documents and valuable packages to large, awkward-to-handle freight, unsuitable for automated conveyor.

Newly appointed CEO Paul Ibbetson stated that:

“I believe that DX is in a strong position to build on the firm foundations that have been established over the last five years and has further significant growth opportunities ahead of it.”

Analyst Opinion – Target Price of 50p

Analyst Gerald Khoo at Liberum Capital rates the group’s shares as a Buy, assessing a 50p a share target price.

His estimates for the current year to end June are for revenues to increase to £467m (£428m) taking pre-tax profits up to £26.7m (£20.2m), with earnings of 3.3p (2.6p) and a dividend of 1.5p (nil) per share.

For the prospective year he sees £490m sales, £32.4m profits, earnings of 3.8p and a 1.7p dividend per share.

Conclusion – further to rise in price

A year ago, dealings in this group’s shares were suspended and were then requoted last October. Since when they have been down to 21p, before gradually recovering in price to around 30p.

On the basis of Liberum’s estimates they are undervalued and could continue to increase in price ahead of the interim figures due at the end of February.

The FTSE 100 reversed early losses on Monday ahead of crucial central bank decisions later this week, which could set the tone for the rest of the first quarter’s financial market’s trade.

Both the Federal Reserve and Bank of England will meet this week and subsequently provide decisions on interest rates.

The FTSE 100 was trading 0.1% higher at 7,773 at the time of writing.

Voting members will weigh stubbornly high rates and softer economic conditions, while having to manage market expectations of rate trajectories. 

The Federal Reserve is expected increase rate by 25bps while the Bank of England is predicted to power on with 50bps.

With this weeks hikes largely priced into markets, investors will be keenly watching their press conferences for insight into the pace of future rate hikes.

“The FTSE 100 started Monday firmly on the back foot as investors started to display a bit of nervousness ahead of two big central bank announcements,” said AJ Bell investment director Russ Mould.

“For the most part 2023 has been smooth sailing for stocks but two icebergs lurk in the waters this week in the form of the Federal Reserve and Bank of England interest rate decisions.”

“How far might they dial back rate hikes and the hints they might drop about the future trajectory of their policy decisions are the two things which will be keeping investors up at night.”

Sainsbury’s

Sainsbury’s was again the top riser on the FTSE 100 following news of a stake purchase by Bestway last week. The purchase has undoubtedly increased speculation about a full takeover of Sainbury’s after a period devoid of major M&A rumours.