Amino Technologies have now released their interim results for the year ending 2019.
Revenues declined when compared to the first half of last year as a $557K growth in ROW revenue was more than offset by a $3.1M decline in North American revenue, a $2.2M decrease in European revenue and a $1.8M fall in Latin American revenue. Cost of sales also decreased to give a gross profit $1.4M lower. Operating expenses fell by $3.5M, amortisation was down $730K but there was a $305K escrow release paid to employees and redundancy costs grew by $351K to give an operating profit $2.6M higher. After tax charges were up $433K the profit for the period came in at $2.4M, a growth of $2.2M year on year.
When compared to the end point of last year, total assets decreased by $11.8M, driven by an $8.1M fall in receivables, a $1.8M decline in intangible assets and a $984K decrease in cash. Total liabilities also decreased during the period due to a $9.3M fall in payables. The end result was a net tangible asset level of $18M, a decline of $761K over the past six months.
Before movements in working capital, cash profits increased by $1.9M to $7.2M. There was a cash outflow from working capital and after a small increase in tax payments then net cash from operations was $6.2M, a growth of $1M year on year. The group spent $1.8M on intangible assets to give a free cash flow of $4.4M which did not cover the dividends so the cash flow for the half year was an outflow of $974K and the cash level at the period-end was $19.3M.
The performance in the North American market has been on target which was a good result given the US tariffs delaying and disrupting purchase decisions. Contract wins in the region included Waverly Utilities who selected their Multimedia over Coax capabilities. It delivers IP over existing coaxial cable deployed to the home. They also saw good momentum in existing customers migrating to their next generation devices.
Latin America continues to be an important market. They have made good progress with follow on orders from key customers and also secured a significant new contract with Entel, the national telecoms operator in Bolivia, supporting a major country-wide fibre roll out.
In Europe the group has seen significant growth in active subscribers across its customer base with a 22% increase in the period. They have also rolled out AminoTV across Delta and Caiway on a multi-tenanted platform and therefore expect this growth to continue into the second half. The territory has also been strengthened by the creation of a new distribution agreement with Scansource to cover all EMEA. During the period they officially certified the next generation of these devices with Google on their Operator Tier Android TV platform.
Software and service revenues decreased by 22% in the first half, primarily as a result of lower AminoTV professional services for their largest customer as part of the natural cycle to a shift to project maintenance after implementation. Device revenue declined as expected as a result of the focus on higher margin accounts.
The group exceeded their $5M annualised cost saving target through the transformation programme. They are starting to see pricing and supply constraint pressures on key components easing, which remain dependent on external market forces.
In May the US added Huawei to the BIS entity list. Subject to the outcome of recent discussions between the US and China, this may mean that certain US companies are unable to trade with Huawei. Whilst the outcome of these talks is not yet clear, there is a risk that this may disrupt discrete elements of their supply chain for a small number of products. The board do not believe that this will have a material impact on their performance but they have taken mitigating steps by dual-sourcing key components.
Going forward, ongoing progress with their transformation strategy allied to their strong order book, backlog and sales pipeline coverage underpins the board’s confidence in guidance for the full year despite the expectation that the challenging market conditions will continue into the second half.
At the current share price the shares are trading on a PE ratio of 14.2 which falls to 12.3 on the full year forecast. At the period-end the group had a net cash position of $19.3M compared to $15M at the same point of last year. After the dividend was kept the same the shares are yielding 5.8% which is forecast to remain the same for the full year.
On the 15th July the group announced the acquisition of 24i Media, an online video specialist providing Apps as well as user experience, solutions and services for a total consideration of €21.4M.
The acquisition will enable the group to deliver full end to end and on-demand personalised content to its customer base and will build momentum in their software and services revenues, as well as recurring revenues. The business has an HQ in Amsterdam and has a presence in the Czech Rep, Brazil, the US and Spain. It had revenues of €7.1M last year and a pre-tax loss of €100K. Double digit revenue growth is expected to continue. The business has net assets of €3.6M so the acquisition generates goodwill of €17.8M.
The initial consideration of €19.3M comprised €16M in cash and €3.3M in Amino shares comprising 3.2M shares to the founders. The deferred consideration of €2.1M comprises €1.1M in cash payable on the first anniversary of the transaction subject to the founders remaining managing the group and €1.1M in cash payable on the second anniversary subject to the founders remaining.
The acquisition is expected to be earnings accretive in the first full year of ownership.
Overall then this has been a fairly decent period for the group. Profits increased due to lower expenses and the operating cash flow improved. Some free cash was generated but not enough to cover the dividends, however, and net assets did decline. There are a number of issues affecting the market at the moment such as US tariffs and the issues with Huawei but despite these all markets seem to be performing fine. The forward PE of 12.3 and yield of 5.8% doesn’t look too taxing and I am thinking of buying in, although the acquisition does add some risk.
On the 9th December the group released a trading update for the year. They expect to report a performance in line with expectations. They have a net cash position of $1.4M. The integration of 24i with the group acquired in July is complete and it continues to make good progress. They have announced their first joint contract, an agreement with Dutch mobile virtual network operator Youfone to provide a fully integrated end to end video solution to refresh and expand its TV and OTT offering. Youfone will deploy a solution that combines the group’s IPTV and TV Everywhere expertise with 24i’s video experience design.