Shearwater Share Discussion Threads

[irish boy] 02/8/2022 08:28

And so the excruciating performance of SWG continues. There is little hope for any recovery in this until there is a complete re-think on the management and mission. Having overpaid for acquisitions in the past, this has been compounded by some poor managerial appointments including the current CEO whose stubbornness and lack of vision mean that stagnation is inevitable.

I just hope that competitors are eyeing-up SWG with a view to exploiting its undoubted potential under different leadership.

[rivaldo] 01/8/2022 10:08

Nice summary on the respected Richard Holway's Techmarketview web site:



"Friday 29 July 2022
Shearwater grows double digits

ShearwaterUK HQ’ed cybersecurity provider Shearwater Group plc (AIM: SWG), announced double digit growth for the year ended 31 March 2022, with strong demand for advisory work, penetration testing and managed security services

Revenue was up 13% organically to a Group record of £35.9m (FY21: £31.8m). Adjusted EBITDA was up 19% to £4.4m (FY21: £3.7m) with margin maintained at 12%. Adjusted profit before tax was up 24% to £3.0m (FY21: £2.4m). Shearwater ended the year in a strong financial position with zero debt and a year-end net cash balance of £5.6m.

The Software division saw revenue fall 23% due to the development and release of new product functionality taking slightly longer than expected. The Services division however saw revenue jump 19% yoy, with its Pentest business securing a significant win with a global technology business, supplying vulnerability assessment and penetration testing services. In March 2022, group company Brookcourt Solutions won two significant contracts; the first a three-year endpoint solution contract with a global financial organisation, worth US$4.1m. This was shortly followed by a win with a leading telecommunications and media company for the monitoring of the organisation's new 5G network totalling an initial £12.9m.

Average new customer spend was up 43% yoy with 186 new customer wins in the period (FY21: 155). 20 new clients were introduced to Group companies through cross-selling, up 54% year-on-year and fuelling future revenue opportunities. 64% of the client base has long-standing relationships of more than 3 years.

FY23 Q1 trading is in line with management expectations with good visibility of repeat revenue opportunities and high levels of enquiries. SecurEnvoy (which it acquired in 2017) has been further developing its cloud Identity and Access Management platform and the business expects strong growth in this area. The company also established a Mergers & Acquisitions Committee and continues to search and review potential opportunities with a clear strategic fit."

[sidam] 30/7/2022 22:11

A lot of posts are missing what is happening. Sorry wrong thread. The posts are on the other SWG thread.

[dunns_river_falls] 30/7/2022 20:58

I thought so also. I mentioned the results on Stocko, and it was quickly put down because of the perceived burying of the fact that at an underlying level there was a loss (not sure how it was buried when it was mentioned in the top 1/4 of the results). To me thats harsh given the one off nature of the costs that led to the small loss. With 2.1m amortisation of acquired intangibles + the deferred tax charge + the loan repayment. All clearly one off in nature.

With the chunky new contracts starting to contribute this year, and cash in hand. Hopefully we will be much closer to some of those broker targets come xmas.

[sidam] 29/7/2022 22:23

Maybe we will get a better idea from the presentation. Cyber security is a growth area but if Cenkos numbers are correct, EPS growth is 5% which is pedestrian. However, the expenditure on software could accelerate that. Time will tell!

[boadicea] 29/7/2022 18:22

I agree, sidam, that 380p sounds very optimistic but it is not out of line with what other stocks in the sector can go for, albeit mostly ones with a longer success run. However, I put in what I considered a reasonably optimistic scenario and probable (or at least possible) market multiples and came up with a figure of 340p in a time frame of 12-18 months, not so very different.
On current metrics it is well below market averages and should be around 225p imo if it is deemed to be a trustworthy outfit that is expected to sustain its current promise.

[sidam] 29/7/2022 16:47

It would be interesting to know how they get to that number and the time frame. Cenkos are going for EPS of 13.6 this year but state that there could well be upgrades as the year progresses and 14.3for next year. Cash generation is expected to be £1.4m and £2.5m next year resulting in cash of £9.4m. I am not sure that a projected enterprise value of £80m is justified on £2.5m of free cash flow projected for next year. I hope I am wrong as a holder, but 380p does look to high.

[rivaldo] 29/7/2022 13:18

Berenberg have today reiterated their Buy and 380p price target:

[davemac3] 29/7/2022 10:52

it's not a market, it's a casino

[igoe104] 29/7/2022 10:03

Some guy on twitter was bragging he made 6% on selling SWG today. Its the sad reality of todays markets...

[rivaldo] 29/7/2022 09:57

The large accrued income is simply a function of the large contracts won in the final quarter of the year and announced as such.

Note that the interims had hardly any accrued income, in fact reduced on the prior year.

So it's just a question of timing.

SWG made £4.4m positive cash flows from operating activities last year, so cash generation is fine before the working capital movements explained above.

[igoe104] 29/7/2022 09:55

Not many 32 million cap companies can produce numbers like SWG can. 20 new clients, high level of enquiries, so lots of new potential work. The company is certainly on the up...

[lammylover] 29/7/2022 09:51

Assume you are hanging around here 2LB to scare private investors into selling, so you can buy shares back cheaper? If not, why are you hanging around here with negative comments on a solid FY results statement for period to end March 22?

[lammylover] 29/7/2022 09:51

Assume you are hanging around here 2LB to scare private investors into selling, so you can buy shares back cheaper? If not, why are you hanging around here with negative comments on a solid FY results statement for period to end March 22?

[2lb] 29/7/2022 09:17

Accrued income up from £341k to £14.8m , ie booking enormous amounts of income in advance of receiving any cash - hence the negative cash outflow over the 12 month period.Makes for a stronger looking P&L but it's just window dressing and you run the danger of building up a problem for the future if things unwind against you.Also means weak / non existent cash generation making M&A a non starter , you will get nothing in this sector for £5m so it will be back to the market for yet more dilution.

[northwards] 29/7/2022 09:10

Buying from here on in will turn us blue.

[2lb] 29/7/2022 09:02

Market isn't stupid , doesn't take too much financial knowledge to unpick the smoke and mirrors and find the alarming issue hiding in the details of the numbers.

[northwards] 29/7/2022 08:40

An earnings enhancing acquisition funded from cash pike and shares would lead to a re rate.

[rivaldo] 29/7/2022 08:36

Cenkos's update today says Buy and sees 200p as fair value.

They've left their forecasts for this year unchanged at 13.6p EPS and £4.8m EBITDA, with the cash pile rising to £6.9m at the year end.

They summarise:

"Shearwater Group Plc More beats The prescient demand for cyber security protection is shown in these results, with double-digit organic revenue and EBITDA growth. Major contracts wins are reinforcing revenue visibility and the re-platforming of the Software division bodes well for new sales once completed.

 FY22A results. Adjusted EBITDA of £4.4m is 5% ahead of that flagged in April’s FY trading update, and 16% ahead of the estimate we had at the close of the fiscal year. Organic growth amounted to +13% YoY to £35.9m in revenue terms, +19% at the adjusted EBITDA level. Adjusted EBITDA margins rose 60bp YoY to 12.3%. Net cash ended the year at £5.6m (-7% YoY), just shy of our £6m forecast, after a large working capital unwind versus prior year. This is a good set of results."

" Visibility. A bunching of new contract wins announced in Q4A amounting to £25m contributed to last year’s performance but part will help revenue visibility going forward. This currently stands at £14m, or 37% of this year’s forecast.

 Forecasts unchanged. We are leaving our adj. EBITDA forecast of £4.8m (+9% YoY) in FY23E unchanged and introduce FY24E forecast of £5.0m (+4% YoY). We note that prior years have started out similarly cautiously and been upgraded as the year progressed. A pipeline of software deals now that functionality has been broadened and modernised could be the catalyst for a similar pattern. We continue to see fair value at 200p+, which on FY24E forecasts would be c8x adjusted EV/EBITDA. Buy."

[northwards] 29/7/2022 08:29

Suspect a few weak holders who punted ahead of results have sold. Let them exit then see whether happens ...

[someuwin] 29/7/2022 08:03

Excellent results. And these don't take into account the significant £21m new contract won in April...

13 April 2022

"...Shearwater Group plc, the organisational resilience group that provides cybersecurity, professional advisory and managed security services, announces that its group company, Brookcourt Solutions, has secured a significant new contract win to the potential value of up to c.GBP21.0m with a leading telecommunications and media company."

[jbravo2] 29/7/2022 07:49

Worth 2 quid easy

[solarno lopez] 29/7/2022 07:31

Which is what very good news rivaldo

[solarno lopez] 29/7/2022 07:29

First class results