Access Intelligence: growing up fast

BUY

13/08/2010 James Crux

Repositioned as a provider of compliance software-as-a-service (SaaS) solutions, Access Intelligence has been turned around and set upon a profitable growth path by a new management team led by IT sector sage Michael Jackson, overseeing developments from the executive chair. Bulls believe that Access Intelligence is now perfectly placed for growth, against a rising tide of regulation and legislation engulfing private and public sector organisations.

Alongside Elderstreet VCT, Jackson, who chairs its manager, venture capital firm Elderstreet Investments, invested in Access in late 2008, establishing a new board to inject life back into its financials and sharpen its strategy. Famed in City circles for building accounting software group Sage from a sub-£5 million cap into a FTSE 100 titan capitalised at £3 billion plus, Jackson and his team have quickly restored the AIM company’s fortunes.

Annual numbers to last November, covering the first full year under Jackson’s guidance, showed Access moving from losses of £4.6 million to £566,000 pre-tax profits, on turnover up 52 per cent to £6 million. Tight cost control, as well as the formation of a new media and communications division in the wake of last summer’s acquisition of

public sector-focused SaaS business Ether Ray, helped drive the turnaround.

Today, Access Intelligence is a focused provider of SaaS-based compliance solutions whose technology not only saves clients money, but does so in ways that maximise efficiency and allow them to comply with specific legislation and regulation.

Access’s activities include e-procurement, where clients range from Ladbrokes to the Bank of England and a litany of large local government authorities. In the training and compliance space, growth prospects were recently enhanced by the £5.2 million acquisition of Cobent, which provides compliance software into the defensive FDA-, FSA- and HSE-regulated markets, where legitimacy and keeping records secure is of paramount importance. Post Cobent, a deal set to deliver much in the way of cross-selling upside, the division’s customers now range from RBS and Barclays to Merck and even the United Nations.

Additionally, Access sports a media and communications operation delivering solutions to ensure communications consistency, transparency and accountability. More than 275 clients have been amassed, spanning central and local government, the police and the NHS.

Recent half-year figures to May were impressive, revealing operating profits exceeding those of the entire previous full year. Turnover rose 63 per cent to over £4.1 million, while continuing pre-tax profits powered ahead from £169,000 to £470,000. ‘We had a strong half,’ enthused Jackson, highlighting ‘strong performances from the

e-procurement and media sides of the business’.

Repeat revenues – highly visible and strongly cash generative – burgeoned by 65 per cent to £2.4 million to represent 57 per cent of total sales. ‘Recurring revenues are a theme of our business,’ purred Jackson, also keen to highlight significantly improved net cash of £2.4 million, leaving the group with the balance sheet firepower to pursue further compliance-related acquisitions. ‘We need to get critical mass and momentum in the business before we start to pay dividends out,’ Jackson explained.

One concern is that public sector spending cuts have now begun in earnest and could have a negative impact on earnings. Nevertheless, Jackson is confident that the cost saving benefits of the company’s software, as well as the low-cost entry that hosted solutions provide, ‘will, to some extent, shield the group from spending cuts’.

Full-year forecasts point to top line progression from £5.8 million to £9.1 million and growth in pre-tax profits from £520,000 to £1.35 million. Next year, before any further acquisitions, the market will be looking for £10.7 million turnover and £1.95 million pre-tax profits.

Based on estimated EPS of 0.46p for 2011, the shares are swapping hands for ten times earnings. That multiple is undemanding for a venture with mounting recurring revenues and a clearly thought-out organic and acquisitive growth strategy.

Tags: AIM, Cash, Growth Stocks, Turnaround

Sector: Software & Computer Services

Companies: Access Intelligence

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