IMImobile performed well last year with gross profit (a revenue proxy) up an underlying 8% and 26% including the acquisition of 3C in the US. The core comms business was up 15% organically and now represents over 80% of the group top line. The US is going well with the 3C integration nearly complete, cross-selling initiatives progressing and a deal recently signed with a major retailer. Trading momentum was positive pre-covid-19 and CEO Jay Patel told us he had not seen any impact from the virus when we spoke on 9 April. IMI benefits from a blue chip customer base such as mobile network operators and the major banks. Much of this is utility-like activity and should hold up well, but there is likely to be some weakness with two-thirds of revenue variable and related to usage.
With £22m of net debt at the end of March, Patel has taken the opportunity to raise a similar amount of equity in a placing at 300p. He told us that the circumstances would have to be “dire” for him to really need this money; rather it ensures IMI remains financially strong and flexible. Under a stressed scenario with gross profit down 15% due to a 20% volume decline, the company would remain well within its banking covenants.