07.02.2025
This morning’s Trading Update from Ingenta (LON:ING) covers the period to end-December 2024, the subsequent broker analysis points the company out to me as a very inexpensive situation that has to be followed.
Its shares are down 4p at 67p, valuing the group at only £10m – but read further about its profits and its cash!
The Business
Ingenta helps solve publishing challenges and the unique problems faced by information providers.
It has a suite of industry-specific software products and business development services to create the most robust publishing solutions for intellectual property management and content management, advertising and content services.
Robust range of publishing software and services
As the industry’s only provider of the full spectrum of publishing solutions, its consultative approach simplifies the management, promotion, and delivery of content.
The company’s fulfillment systems have handled the physical distribution for many of the world’s largest publishers for four decades, while the Ingenta Commercial suite has evolved to cover the publishing process from end-to-end for both print and digital content.
Long a destination for scholarly research, the Ingenta Connect service hosts tens of thousands of publications from about 140 publishers, and the Ingenta Edify platform takes content delivery to the next level with semantic enrichment, sophisticated access control and responsive web design for individual publisher sites.
Ingenta PCG closes the loop, supporting publisher sales and marketing strategies and conducting leading industry intelligence for 25 years.
Ingenta Connect is the flagship product of Ingenta and is the content home to over 140 publishers from all over the world. Ingenta Connect hosts more than 4.2m
articles and serves content to over 1.6m users a month.
Publisher clients benefit from a ready-made user base and an established network of partners made up of library services, subscription agents, abstracting and indexing database providers and document delivery suppliers.
Over 26,000 librarians are registered with Ingenta Connect and with users in 195 countries.
Trading Update For 2024
This morning’s announcement covers the year to end-December 2024, which the group now guides to expect revenues of £10.2m (£10.8m) and EBITDA of £1.8m (£2.2m).
The company generated a substantially improved positive cash flow of £0.9m (£0.3m), providing a closing cash balance of £3.6m, while the group has no debt.
The company is prioritising acceleration of new business acquisition to offset the expected larger scale reduction in revenues from legacy platforms in the current year and beyond and return the company to growth in revenues and profits.
The momentum of new business wins is already accelerating: the company reported four substantial new contracts won since the year-end, with aggregate contract values of £1.9m over 2-5 years, broadly spread across the Edify, IngentaConnect and Commercial platforms.
This equates to the total amount of new business won in the first half of 2024 and underpins management's confidence that the group will resume growth in top-line revenues in 2025.
To build a larger and longer-term pipeline of new business beyond 2025, the Board has sanctioned a £0.5m investment in the group's sales and marketing activities during 2025.
As a result of that investment, EBITDA for 2025 is likely to be lower than in 2024, despite the expectation of increased revenues.
Management Comment
CEO Scott Winner stated that:
"I am pleased to report that we have won substantial new business in 2024, broadly based across all the Group's current platform offerings, and it is disappointing that delays in implementing these new services due to customer-induced delays have resulted in this impacting on the overall results for the year.
The rate of new business wins has accelerated since the year end with four new clients, and an aggregate of £1.9m contract values, already in 2025, which provides us with a firm foundation on which to invest further in our sales and marketing resources.
Looking ahead to the longer term, this new investment will further reduce our reliance on revenues and profits from legacy platforms and aim to ensure that the transition of long-standing customers away from higher-value legacy products will be more than offset by increasing new business from our current and next generation offerings.
Although this will impact on profits in 2025, it is an investment in the future which we expect to bear fruit in accelerating growth in future years."
The Equity
There are 15,098,125 shares in issue.
The larger holders include Kestrel Partners (21.46%), Canaccord Genuity (8.79%), Hargreaves Lansdown (4.95%), Criseren Investments (4.82%), while MC Rose and J Sykes hold 14.51% and MC Rose has another 13.99% holding.
Broker’s View
Analyst Andrew Renton, at Cavendish Capital Markets, considers that this group’s valuation now looks highly compelling, while fixing a 260p a share Price Objective.
His estimates for the 2024 year are for revenues of £10.2m (£10.8m), with adjusted pre-tax profits of £1.6m (£1.9m), decreasing its earnings to 11.1p (12.6p), while paying out a maintained 4.4p per share dividend.
For this year he goes for £10.5m sales, £1.2m profits, 8.2p earnings and that 4.1p dividend per share.
My View
On the face of it I can’t quite understand why the broker gives the group a 260p a share valuation.
With its shares at just 67p the company is capitalised at only £10m, which to me looks to be a low rating, especially considering that this little group is highly cash generative, with £3.6m estimated net cash at bank, making £1.2m profits.
Despite its lowering profit line, I now ask - could this be a ‘no-brainer’ at 67p?
I initiate my comments on the company with the setting of a Target Price of 85p.
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