Checkit (CKT), which provides a platform designed to connect people, assets, and buildings in real time, said in a trading update today that it had continued to grow its annual recurring revenues (ARR) in line with market expectations, and that it had renewed a major contract with John Lewis.
It said that ARR had risen by 24% to £12.6m – including a 41% uplift in the US - lifting reported group revenue for the six months to 31 July 2023 to £5.7m, a 19% increase. It said that recurring revenue reflected bookings made in the last financial year and accounted for 95% of sales in the first half.
The company put its continued growth down to high customer retention rates – which hit a net 113% - and the success of its “land and expand” strategy which focuses on upselling and cross selling across its customer base. It said that half of its growth had come from the latter approach, as customers recognise the productivity benefits the platform offers.
Among the clients successfully retained is John Lewis, which renewed its £6m contract for three more years. The retailer uses Checkit’s platform for advanced workflow, asset monitoring, and digital building solutions across 270 Waitrose stores, 60 convenience branches, and 30 John Lewis stores. It also said that it had added three more contracts with Compass Contract Services after signing a master service agreement with the food service giant in April.
Checkit ended the period with net cash of £12.8m, down from £15.6m at the start of the period as a result of continued investment. The company’s plans include investment in marketing and increasing its sales reach to increase its market share in the US, including the development of strategic partners to accelerate customer acquisition, with two partners signed so far.
The company also plans to develop closer integration with Internet of Things applications to create more use cases in its target verticals – healthcare, retail, and hospitality, within which are found large numbers of multi-site organisation with high numbers of deskless workers. It estimates a total addressable market of 800m workers.
Broker Edison expects sales of £12.5m in the current year to 31 January 2024, which would result in a loss per share of 4.9p. It notes that on an EV-to-Sales multiple of just 0.6x the shares trade at a significant discount to UK and US software-as-a-service peers, which currently trade at an average of 2.5x and 6.9x, respectively. Should Checkit trade in line with these multiples, the shares should trade at between 43p and 94p, against the current price of 24p.