Please find below our weekly update covering themes that we feel that are of interest to investors and participants in the small and mid-cap TMT sector as well as commentary on recent newsflow. The cost of Allenby Capital's research on individual clients is paid for by our research clients.

For the purpose of MIFID II, the content of the following email qualifies as “non-substantive material or services consisting of short-term market commentary on the latest economic statistics or company results” and so can be treated as ‘acceptable minor non-monetary benefits’ and not as ‘chargeable research’ per the European Commission’s Delegated Directive of 7.4.2016.

Allenby Capital TMT Update - 16.03.20 (CPX.L, ECSC.L)

CAP-XX Ltd* (CPX.L, 2.75p/£11.6m)
Interims: Manufacturing expansion project on track (16.03.20)
Note published

Allenby Capital comment: Interims from CAP-XX Ltd, the leading designer and manufacturer of thin, flat supercapacitors and energy management systems, were in line with management expectations with growth in revenue, improved gross margin and operating costs essentially flat resulting in reduced losses. The project to transfer the former Murata manufacturing assets remains on track. As set out in November’s note, this transaction provides access to established product designs, proven manufacturing assets and potential customers in its small form factor target markets. Management also continues to pursue its IP licensing/patent infringement strategy. Management reports strong sales pipelines for both prismatic and cylindrical can supercapacitors although some customers and suppliers are starting to report a negative Covid-19 impact with delivery dates extended and manufacturing constraints. Hence, we temper our revenue growth assumptions (50% to 41% in FY20). FY21 growth unchanged but off a lower base.

* Allenby Capital acts as Nomad and Broker to CAP-XX Ltd.

ECSC Group plc* (ECSC.L, 95p/£8.6m)
Managed Services contract wins (12.03.20)

  • Managed Services contracts for a national charity and high street retailer worth in aggregate >£590k over the three year terms – representing >20% of the current Managed Services order book. Both contracts utilise ECSC's proprietary Kepler Artificial Intelligence, managed from the Group's Security Operations Centres (SOC) in the UK and US. The Charity contract is the first Managed Services contract via ECSC's indirect channel.
  • No reason to change forecasts at this point - more an underpinning of our Managed Services growth forecasts for FY20 and FY21. We are forecasting 30% growth in Managed Services in FY20 and 10% in FY21. This benefits gross margin as utilisation of ECSCS’s facilities increase.
  • These were not displacement sales nor a response to breaches but organisations recognising the need to step up their cybersecurity cover.
  • No change to forecasts, FY19 results are scheduled for 25 March.

Allenby Capital comment: Good contract newsflow from ECSC, the UK's longest running full service cyber security provider, with growth in Managed Services revenue that offers both higher visibility and margin accretion through increased utilisation of the company's SOCs. The Partner Programme has been a source of Consulting clients to date and the Managed Services customer win is an encouraging development. January's pre-close pointed to revenue of c. £5.9m (FY18: £5.4m) that indicates record H2 revenue of c. £3.3m, up 21% on H2 FY18 and 25% sequentially. This included >25% growth in Managed Services revenue and a good recovery in Consulting in H2. Cyber security remains high on the agenda for all organisations with the number of high profile attachs and the threats of fines under the GDPR regime. ECSC is well positioned to capitalise. 

* Allenby Capital acts as Nomad and Broker to ECSC Group plc.

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Allenby Capital "paid for" research services

The changes initiated by MiFID II has had far reaching implications on both the quantity and continued availability of research on smaller cap companies, including those within the TMT sector. We would therefore remind interested companies that Allenby Capital can offer a  "paid for" research service for those corporates that wish to retain an alternative and authoritative source of research that can be accessed freely by the entire investment community. If you would like further information on this service please contact d.johnson@allenbycapital.com.

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