Pci-pal Share Discussion Threads

[gerihatrick] 08/11/2023 19:17

no but I am at Mello. Look forward to your nephew's feedback from either or both. Interesting rise today!

[simon gordon] 08/11/2023 17:24

Geri,

Marching on together!!

Will you go to the AGM?

I'm hoping my nephew will attend the Contact Centre Expo, he's a holder. He may even get to the AGM.

[gerihatrick] 08/11/2023 17:04

Simon, that clashes with the Mello Conference the same 2 days. It might be possible to see if Mello can invite someone from PCIP to come over and present to about 2-300 private investors. I will pass that on to Georgina the Mello secretary/manager.

Congratulations on your LUFC victory!

[simon gordon] 07/11/2023 11:04

Big Contact Centre exhibition at the Excel in London on the 29th & 30th November. PCIP and the competition have stands.

You can register for a free ticket:

[simon gordon] 06/11/2023 17:19

Simon French - 31/10/23

Time for Hunt to go with the flow

Back in July the Chancellor, Jeremy Hunt, unveiled his plans to reform the UK’s ailing stock markets. In that mid-summer speech at the Mansion House he signalled that final decisions on his Edinburgh Reforms would be made ahead of the Autumn Statement. With that Statement now under a month away what should investors and companies expect to hear?

The Treasury is acutely aware that investors in UK stock markets have been swimming against an outgoing tide for years. Institutional asset managers – namely pension funds and insurance companies – have been reducing their allocation to UK shares for at least two decades. At the turn of the century these long-term investors held 40% of all UK shares. Today that is closer to 4%. Whilst this pivot away from shares has been a global trend the UK investment industry has gone further, and faster. Equity investment that has taken place pivoted to global companies – listed outside the UK – as the UK stock market underperformed its peers. This has created something of a doom loop of falling liquidity and company valuations. The upshot is that UK companies looking to finance their growth through public equity are now at a significant and sustained economic disadvantage. Our analysis at Panmure Gordon suggests that the cost of financing a UK-listed company is 23% higher than an equivalent company looking to raise equity overseas. It is why UK companies are looking at international stock market listings or being bought by overseas private equity investors. There is little doubt that the poor productivity, investment, and wage growth of the last two decades is partially linked to this trend.

It is easy to dismiss this as a financial sector story. Poor bankers weeping into their newly unrestricted bonus pots. A sickly stock market is not a story that immediately attracts public sympathy, even though financial services make up 8% of the UK economy and contribute 12% of all tax revenues. However, that would be to ignore the central role that UK stock markets play in sharing the proceeds of economic growth, financing innovation, reducing reliance on foreign technology, and shortening supply chains. Whilst the US and China are pursing this agenda with huge subsidies and by running large deficits – a risky stance as interest rates reach a two-decade high – the UK would be unwise to follow suit. Mr Hunt will be looking for options that cost nothing and preserve order in the market for UK government debt – one of his Mansion House “golden rules”.

This is where the UK’s pensions industry – the second largest in the world – needs to step up and be encouraged to reverse flows out of UK equity markets. Staggeringly there have been net outflows for seventy-five of the last ninety months – totaling more than £43bn. This has dramatically raised the cost for companies looking to raise investment capital in the UK. So, what should be done?

An important thing to acknowledge is that the current Government, and the Labour opposition, are both attuned to the seriousness of the problem. The Edinburgh Reforms appear to have bipartisan support – a rarity in the current political climate. However, to date, jawboning on the need for reform has received an underwhelming response from investment decisionmakers. There are three proposals Hunt should be considering to reintroduce the “natural buyer” of UK shares. This is a natural buyer that has drifted away over the last twenty years leaving the financing of the UK’s corporate base in the hands of international investors.

The first area ripe for reform, and certainly the least contentious, is to put a floor under the amount of UK equity ownership held by public sector pension schemes. It was revealed recently that the parliamentary pension scheme invests a pitiful 1.7% of its assets in UK-listed companies. Whilst we should be cautious of government-mandated investment decisions, if there is a positive social and economic spillover from supporting UK companies then schemes that are underwritten by the taxpayer should be encouraging that outcome. This is consistent with the way the Treasury have been encouraged to take a “whole economy” view as part of the government’s Levelling-Up agenda.

Second, the government should consider returning the tax advantages of saving in a Stocks and Shares ISA to its original form – which was eligibility for UK-listed shares. The decision to widen this to global shares in 1999 was admirably globalist. But in the current race to develop a domestic supply chain, the UK’s commercial competitors in Europe, Asia and the Americas do not warrant a UK taxpayers’ subsidy on their balance sheets.

Third, individual share ownership in the UK has gone out of fashion. So many Britons feel disconnected from wealth creation and having a stake in the UK economy’s success. This is a culture that is inconsistent with a fast-growing economy. The Treasury has at its disposal a range of COVID-era loans that have been converted into equity, as well as twenty-four large assets managed by UK Government Investments. These could be the seed assets for a national wealth fund from which all UK citizens benefit. Such an approach is culturally powerful – it could blend both the popular “Tell Sid” campaign associated with the 1980s privatisations, and also a model used by the Swiss National Bank whose shares pay a regular dividend to Swiss savers and are listed on the Swiss stock market. It is striking that the Labour Party are looking at similar models developed in countries like Singapore. Such a fund can then take strategic stakes in UK companies, as has been successfully done in Canada and Australia.

There is little surprise that the sickly state of UK stock markets has gone largely unnoticed. More obvious economic challenges of Brexit, cost of living pressures, regional inequalities and strains in public services have a greater public resonance. However, the one thing that everyone agrees is that economic growth is central to addressing these challenges. There are few things that Mr Hunt can do between now and election day that would boost growth and cost him nothing. Transforming flows into the UK stock market is one. As one large US investor in UK companies told me last week: “get this right and UK shares could easily rally 30 to 40 percent”. Such views reflect the current negative stance on UK shares and from sustained outflows. Mr Hunt has shown himself to be a quietly ambitious reformer over the last year. It’s now time for him to go with the flow.

[simon gordon] 06/11/2023 10:46

Hearing was 24th Oct. Could be any day now.

[simon gordon] 06/11/2023 09:25

ELIX - was in at 250p and sold at 550p because I was nervous about the potentially cyclical earnings, then went to 730p. They keep delivering and haven't had a downgrade. Plenty of cash to keep adding to their services. Their goal is to become a one billion market cap company. That's a five bagger from here.

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I wrote to PCIP asking how long the Markman ruling would take, they've been told by their lawyers it could be two to three weeks from the hearing, though that's not set in stone.

[adamb1978] 06/11/2023 08:18

I looked at ELIX a while ago but was put off as its a pure consultancy

[adamb1978] 06/11/2023 08:18

I'm not sure LSE will die - companies need to list and listing in the US isnt viable until you're min £1bn market cap or more likely at FTSE100 size. The listing requirements, as well as ongoing reporting requirements, are onerous over there. Closer to home, there isnt much difference between LSe and other European markets.

There's some stat about the DAX that none of the comanies (bar spin-offs) were formed in the last 100 years!

[adamb1978] 05/11/2023 21:03

Yep, its an issue but the LSE isn't going to disappear.

The biggest related challenge is the lack of growth companies. That definitely IS a virtuous circle - investors in London aren't used to valuing growth companies appropriately, meaning growth companies are less likely to list in London, meaning investors aren't familiar with them or value them appropriately...etc

[simon gordon] 05/11/2023 20:43

Bloomie - 31/10/23

Shrinking UK Stock Market Is In a ‘Doom Loop,’ Peel Hunt Says

-FTSE Small Cap Index has lost 10% of its members this year

-Firms are choosing US listings; M&A also depleting market

Britain’s market for small and medium sized stocks is shrinking rapidly, challenging London’s status as a international financial center, according to UK investment bank Peel Hunt.

A lack of initial public offerings, along with a flurry of takeovers by overseas and private equity firms, mean there are more companies leaving the UK market than joining it. The trend is particularly pronounced for the FTSE Small Cap Index, which Peel Hunt says has lost 10% of its members and 20% of its market capitalization this year.

“We are currently in a doom loop, where valuations are low, liquidity is reducing, investors are seeing withdrawals and there is little desire to IPO,” Charles Hall, Peel Hunt’s head of research, wrote in a report. “If this continues, the UK could lose a crucial part of its financial ecosystem.”

While Peel Hunt’s analysis focuses on Britain’s smaller companies, the bluechip FTSE 100 has also been suffering. London lost its status as Europe’s biggest stock market last November, extending an equity slump that stretched back to Britain’s vote to leave the European Union in 2016. A recent rise in oil prices allowed the UK’s commodity-heavy gauge to regain the crown, but the market is still struggling amid a floundering economy and a trend of companies fleeing to New York for listings.

That includes would-be UK market champions that have chosen to list in the US, like chip designer Arm Holdings Plc, and firms that have shifted their primary listings to New York, like Irish building materials firm CRH Plc. Listings flops for several high profile London IPOs over recent years — including Aston Martin Lagonda Global Holdings Plc and Deliveroo Plc — haven’t helped.

A shrinking pool of stocks weighs on economic growth and investment, and becomes a vicious cycle for investor flows, Hall wrote. Peel Hunt’s analysis shows that 27 companies with a market capitalization of more than £100 million ($122 million) have received M&A offers so far this year, mostly from financial buyers or foreign suitors, and may therefore exit the market. Among them are FTSE 250 members Dechra Pharmaceuticals Plc and Network International Holdings Plc.

Hall said upcoming regulatory reforms for UK capital markets are welcome, but that attracting investment in smaller stocks also needs to be addressed by reforming taxation measures.

[simon gordon] 05/11/2023 12:45

The Atlantic - 30/10/23

The publicly traded company is disappearing. In 1996, about 8,000 firms were listed in the U.S. stock market. Since then, the national economy has grown by nearly $20 trillion. The population has increased by 70 million people. And yet, today, the number of American public companies stands at fewer than 4,000. How can that be?

One answer is that the private-equity industry is devouring them. When a private-equity fund buys a publicly traded company, it takes the company private—hence the name. (If the company has not yet gone public, the acquisition keeps that from happening.) This gives the fund total control, which in theory allows it to find ways to boost profits so that it can sell the company for a big payday a few years later. In practice, going private can have more troubling consequences. The thing about public companies is that they’re, well, public. By law, they have to disclose information about their finances, operations, business risks, and legal liabilities. Taking a company private exempts it from those requirements.

That may not have been such a big deal when private equity was a niche industry. Today, however, it’s anything but. In 2000, private-equity firms managed about 4 percent of total U.S. corporate equity. By 2021, that number was closer to 20 percent. In other words, private equity has been growing nearly five times faster than the U.S. economy as a whole.

[simon gordon] 04/11/2023 17:55

Going by the chart it could get down to 36p. It traded in the 40p range for most of 2020. The shares got a kicking in March due to a 30p fundraise. If you ignore that technically, August was the 36p low.


free stock charts from uk.advfn.com

[adamb1978] 04/11/2023 16:31

I think we've had the capitulation point for PCIP - after trading (I use that term loosely given the volumes) in the 50p-60p range for 18 months, it then fell into the 40p area

When the court case clears, it'll be like a re-IPO

[simon gordon] 04/11/2023 12:46

Yes, it's close to the tipping point for serious profit growth. The past six years have been about turnover growth:

2019 - £2.8m
2020 - £4.4m
2021 - £7.4m
2022 - £11.9m
2023 - £14.9m
2024 - £19.1m

From 2025+ it should be all about the growth in free cash flow.

It looks like some holders are cracking, with 75,000 sold at c.38p on Friday, and there seems to be plenty of loose stock around.

The thing with the market is that you can focus on the price too much and not enough on the business. I wonder if there is going to be a puke point at PCIP in the coming weeks or months as some holders get sea sick and lose their legs.

[adamb1978] 04/11/2023 11:54

Yes, and with the 90% gross margin new contracts fall through rapidly. Plus with 3% churn, there's limited customer loss to be replaced by wins.

Arguably PEs are the right way to value this sort of business. I was looking at a report from Software Equity Group this morning and you could make a case that PCIP should be on something like 8x ARR in a couple years - that gives you a share price of perhaps 350p.

I think they'll be taken out by then though

[simon gordon] 04/11/2023 11:10

Morning Adam

We'll know soon enough the 2025 forecast. I'm 2p, you're 3p to 4p.

An interesting aspect of the On Prem to Cloud transition is that there are some big contracts up for grabs. One biggie can transform the bottom line and share price. I can see why Sycurio are investing hard and trying to take down PCIP.

Three teams: PCIP, ECK and Sycurio are battling it out to be the number one Cloud payments provider in the CCaaS space. The network effect is vital through the channel partner sales pipeline. Sycurio have now set up a dedicated channel partner programme:

"Created to empower Sycurio’s extended partnership community - which includes Value Added Resellers, Platform Provider Resellers, Managed Services Partners, Technology Partners and Referral/Fulfilment Partners - and power growth, the Sycurio Partner Program gives partners access to a wide range of specialist resources and support that will enable them to amplify and extend their customer relationships, tap into new sales opportunities, and speed up time to revenue."



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Victor Value spotted recently that the ex-VP of Marketing at Sycurio is suing them.:

[adamb1978] 04/11/2023 10:34

Hi Simon

PCIP's financial are quite predictable. Let's look at FY25:

- based on the Aug TS, they would have have around £14.3m ARR or just under £17m TACV as at Jun-23
- to move that forward to Jun-24 you can add another £4m - £5m given that we know that H1 has started well enough (particularly given market conditions) and they signed £4.2m in the Jun-23 year
- Their revenues have typically been around 112% of the previous year's closing TACV or just over 130% closing ARR from the yr before. Therefore you can predict with reasonable confidence the turnover for the year to June 25. I have it around £24m

From there gross margins are just under 90% and you can take the opex add in some inflation and headcount growth.

On this basis, I get to EPS of:

- FY24: 0.5p-1p
- FY25: 3p-4p
- FY26: 8p-10p

This is why I think its reasonable to look for a share price of 200p within 2 years.

A strongly and consistently growing SW company operating in a market which is under penetrated, net cash, high margin, probably paying a dividend, and very comfortable a 'rule of 40' company...a PE of 20x-25x is easily attainable, arguably looking close to 40x would be more appropriate.

Apply those multiples to the FY26 EPS above given in 2 years time that will be the current year EPS, and you get 200p comfortably, possibly something more like 300p-400p.

Adam

[simon gordon] 04/11/2023 09:41

I was a bit harsh on the London market in post 857. The market has got strongly behind PCIP over the years:

-2018: £4.95m
-2020: £5m
-2021: £5.5m

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CX Today - 3/11/23

Five9 CEO: Enterprise CCaaS Penetration Is Still Less Than 20 Percent

Despite its promise of greater ease of integration, flexibility, and scalability, just a fifth of enterprise contact centers have stepped into the cloud.

That’s according to estimates shared by Mike Burkland, Chairman & CEO of Five9.

During an earnings call, he stated:

"In terms of cloud replacing on-premise, we believe that the [enterprise] penetration is still less than 20 percent."

Sometimes, CCaaS vendors understate this figure to inflate their total addressable market (TAM).

Yet, industry analyst Gartner also suggests low market adoption, predicting that only 33 percent have migrated – while including the midmarket in its calculations.

Meanwhile, CCaaS growth has slowed after it peaked during the COVID-19 pandemic.

Such slow growth has led to talk of financial instability across the CCaaS market – with Five9 one of the notable outliers, consistently achieving double-digit revenue growth.

Indeed, in the earnings call, Burkland revealed that Five9’s revenue had grown by 16 percent year-over-year (YoY) last quarter.

Convinced that CCaaS growth will accelerate again and bolster these numbers further, the CEO points to three critical market trends.

First, Burkland noted: “Companies are enthusiastically pursuing digital transformation initiatives to enhance customer experience, cut costs, and increase revenue.

Supporting this notion, Grand View Research suggests that the global digital transformation market will grow at a compound rate of 26.7 percent from 2023 to 2030.

Next, the CEO highlighted how prominent legacy contact center providers are encouraging customers to make the shift. Indeed, Burkland stated:

"Enterprises are developing plans in a greater sense of urgency to replace their on-premise contact center solutions as legacy vendors have retrenched and slowed or even stopped development in some cases."

Genesys is the obvious example here, with the provider publicly stopping its legacy innovation last year and pumping all R&D resources into its Cloud CX offering.

Yet, Burkland also notes how Avaya – which works with 90 of the Fortune 100 – is trimming its on-premise portfolio.

Indeed, he shared a $2.3MN – in annual recurring revenue (ARR) – customer win with a healthcare insurance organization that shifted from an “Avaya on-premise version that was being end-of-lifed.”

Such actions may well inspire further shifts to CCaaS. Yet, perhaps the primary driver will be AI.

“AI is becoming an even more important catalyst for enterprises to shift to the cloud,” said Burkland while noting how it’s allowing Five9 to broaden its business with existing customers.

“A good portion of our innovation continues to be centered around our AI and automation portfolio, and we are seeing significant traction as a result of this innovation,” continued the CEO.

"For example, our professional services team worked on more than 250 AI deployments during the last quarter."

These deployments will cross Five9’s deep portfolio of AI tools, which includes virtual agents, workflow automation, and conversational intelligence solutions.

Yet, agent-assist tech proved a primary driver of those 250 deployments – a trend sweeping the industry and one that will likely give CCaaS players a timely boost in 2024 and beyond.

[simon gordon] 03/11/2023 20:51

2024 100x is from the latest Cavendish note.

2025 20x is from my own guesstimate. Should know the actual number when the broker note is updated with the Prelims.

If they could start landing some large Federal contracts in America then that would put a rocket under the share price.

PCIP's new Government partner in America has devoted a section of their site to them and it lists some of their Government contracts:



If the HMRC contract is worth £2m, how much would the IRS one be worth?

[adamb1978] 03/11/2023 20:29

Where do you get those multiples from Simon?

FY24 is somewhat irrelevant given its breaking into profit, so a small change in assumptions results in a large change in multiples. Going out 1 year further, I think its on a PE of around 10x FY25 or perhaps 4x-5x FY26

[simon gordon] 03/11/2023 11:31

This is what I was basing my outlook on in Q4 2021:

FY24 Finncap speculative forecast - Sept. 2021

-T/O: 18.8m
-Adj. EBITDA: 3.3m

FY24 PCIP forecast - Sept. 2022

-T/O: 20m
-Adj. EBITDA: 2.3m

FY24 PCIP forecast - Oct. 2023

-T/O: 19.1m
-Adj. EBITDA: 1.7m

Meaning it's almost half of what I was thinking it could be.

If they hit 22m in 2025, you'd probably get 3.5m, which means it's a year behind were I thought it would be.

At the moment it is on 100x 2024 and maybe 20x 2025.

[adamb1978] 03/11/2023 09:47

Hi Simon,

Given that the revenue forecasts were trimmed by £1m by the analyst, I'd say that it was a small number of months rather than a year or two.

Adam

[simon gordon] 03/11/2023 09:24

Morning Adam,

I'm trying to work out if PCIP is one year or two years behind were I expected them to be after the profit warning. I think it hinges on whether they win the tender for the HMRC contract.

If they get a win from the Markman Hearing and move to dismiss, that could happen within the next three to four months. That leaves plenty of time in 2024 for someone to swoop on the cheap. It's happening all over the market and the trend is getting stronger. There are few catalysts to re-rate the share until they get closer to the start of FY26. They've been de-rated.