Despite operating in the hot field of cybersecurity, Falanx (AIM: FLX) has struggled to find its feet as a listed company since coming to AIM in 2013. Initial hype saw the shares run up to 60p only to collapse into penny share territory. However there’s been a lot of change over the last year which suggests that things are moving in the right direction.
Falanx has a profitable unit selling geopolitical intelligence reports, but the main upside potential lies in cybersecurity, which corporates will have to spend a lot more time and money addressing in future. The acquisition of ASC just over a year ago was an important catalyst in strengthening Falanx’s security monitoring operation. It provides a consulting-led sales process which has helped expand the number of customers from 6 to 29. It also strengthened management, leading to a relocation to Birmingham and consequent cost savings.
The other key development has been the introduction of MidGuard which is an in-house designed software platform. It saves on license fees relating to bought-in software and allows knowledge to be shared across all clients using the Falanx monitoring service. MidGuard also helps lower the entry-level price point, with CEO Stuart Bladen seeing an online sign-up and £1,000 per month fee for smaller corporates in due course. Meanwhile he is working with four channel partners to build the sales pipeline, with the internal team focusing on the larger prospects. The former focus on government contracts led to long sales cycles, so we should expect more commercial contracts going forward with a particular focus on financial services.
Cash in hand
A £2 million fundraise in May means cash shouldn’t be a problem if broker Whitman Howard’s numbers are right. It sees revenue growing from £2.7 million to £6 million over the next two years, which takes the company into profitability. Look out for news on contracts.