Journeo – last year saw doubled profits and they could more than treble again this year
Although no date has as yet been announced, I believe that Journeo (LON:JNEO) the information systems and transport technical services group could soon be announcing its Interim Trading Update.
Just a month ago the group was the Winner of the Small Cap Awards 2023 Transaction of the Year for its Infotec deal.
Last year the Trading Update was published on 1st August, the year before it was issued on 26th July – so it is fair to assume that we are close to seeing just how well the group has performed in the first half year to end June.
We already know that the 2022 trading year was transformational for the company, being seen as a defining point in its development.
I late March the Ashby-de-la-Zouch based company reported a 35% increase in revenues for the year to end December 2022, to £21.1m (£15.6m), with the underlying pre-tax profits doubling to £1.2m (£0.6m) and more than doubling earnings to 9.80p (4.46p) per share.
The Interim Update could be reporting upon its various contract wins in the period and their subsequent progress – that should be good enough to renew interest in the Journeo shares.
The £30.5m capitalised business currently has three operating companies:
Journeo Fleet Systems: CCTV video surveillance to improve passenger & driver safety, telematics for vehicle and driver performance monitoring, real-time communications for remote condition monitoring and automatic passenger counting.
It provides fleet operator systems, including automatic passenger counting, driver displays, next stop announcement displays, on-board Wi-Fi, camera monitor systems, and telematics and driver behaviour for buses, coaches, and specialist vehicles; and forward facing and saloon CCTV, automatic passenger counting, station information security systems, and train Wi-Fi for rails.
Revenues in 2022 were £12.49m (£9.29m).
Journeo Passenger Systems: design, manufacture, installation, and management of hardware and software for electronic public transport information systems, in and around towns, cities, ferry terminals and airports which includes smart-ticketing and wayfinding.
It offers passenger transport infrastructure systems, such as bay, stretched in-shelter, summary, full-colour LED, low-power E-ink, and solar-powered TFT displays, as well as interactive wayfinding totems, air quality sensors, in-shelter closed circuit television (CCTV), and bus station Wi-Fi.
Sales £8.63m (£4.06m).
Infotec: design, advanced manufacture, installation and software management of information displays hardware for rail applications in stations, on-platform and on-vehicle.
This company was acquired in an earnings accretive £8.7m deal earlier this year.
Big advance in SaaS subscriptions
The group reported that there was a strong growth in SaaS subscriptions to the Journeo Portal, increasing connections by 150% over the period to 10,000 connected vehicles (2021: 4,000).
The highly secure web-based SaaS application empowers transport operators to monitor the health and performance of their systems in real time. The subscriptions generate monthly recurring revenues.
During the year there was a large-scale adoption of the group’s technologies, including its largest ever three-year £9m framework agreement with First Bus UK and largest software-led sale following a two-year £1.2m agreement with Scotrail.
Elsewhere the company expanded its Airport capabilities following the £0.7m award at Dublin Airport for passenger transfer solutions and £0.9m order for high-precision airside telematics at Heathrow Airport.
It has recently won a contract with Gatwick and is soon working on another at Bristol airport.
It also gained another couple of contract wins in Wales, supplying passenger information systems worth £1.6m.
In mid-April its SaaS contract with Arriva UK Bus was extended for another year, covering their fleet of 5,000 buses.
In late March, on announcing the group’s 2022 results, CEO Russ Singleton stated that:
"I am very pleased with our performance in 2022 which saw sustained improvement in order intake, revenues and profits. This performance was delivered in a continuing challenging market environment coupled with pressure on our global supply chain.
It is a reflection of our unwavering focus to execute on our strategy, which is proving effective.
The recent acquisition of Infotec, complements our existing business and strategy well, and the enlarged group strengthens our position further with a healthy order book and growing sales pipeline based on our intellectual property and expert knowledge."
There are 16,217,439 shares in issue.
The larger holders include Canaccord Genuity Group (10.16%), Slater Investments (9.75%), Robert and Virginia Millington (7.84%), Downing (6.63%), Premier Miton Group (5.1%), Octopus Investments (4.49%), Colin Stone (4.05%), Herbert and Hanna Bottomley (3.45%), Russ Singleton (2.47%) and William Campbell (2.17%).
Broker’s View – trebled profits for this year
Analyst Andrew Renton at Cenkos Securities, brokers to the company, rates the group’s shares as a Buy.
His estimates for the current year to end December are for a 56% increase in revenues from £21.1m to £33.0m, with a trebled lift in adjusted pre-tax profits from £1.2m to £3.6m, while basic earnings per share are set to rise from 10.3p to 17.8p.
Renton considers that the group’s valuation looks attractive, while being well below the rating given to its peers.
I will assume that upon the imminent Trading Update Renton could well upgrade his estimates and also look forward into the next couple of years.
My View – heading back up through the 205.88p peak
The group, which has a growing sales pipeline and a healthy order book, also enjoys a good cash balance, expected to be around £6.6m by the end of this year.
In mid-March I stated my view that the group’s shares, then 147.5p, could soon rise to 175p or thereabouts.
On Friday night they closed at 183p which was a little back from the 205.88p peak on 27th June.
Will they go higher again and break through the 200p level – my definite answer is that yes they will and probably go even higher still.
(Profile 07.04.21 @ 95.5p set a Target Price at 120p*)
(Asterisk * denotes that Target Price has been achieved since Profile publication)