Beeks – Contract Wins

Beeks today announced two contract wins amounting to an annualised £1.1m / year.

In the context of FY 2019 revenues of £7.4m, Beeks were fully justified in describing these as “significant”, but they are not obviously game changing. My estimates already factored in two new contract wins contributing to their H2 although in aggregate the contracts are significantly larger and accrue somewhat earlier than projected. Given the likely ramp-up profile, the impact remains limited in FY 2020 and my revenue estimate increases only modestly from £10.0 to £10.3m.

Much more importantly, FY 2021 revenue forecasts of £13.5m now look fully achievable and the risks have now moved from the downside to the upside with good potential for Beeks to land further tier 1 contracts and to expand existing ones. Potential also exists for improved sales performance in the mid-market end of their “traditional” business.

I previously questioned whether Beeks’ ability to repeatably win large contracts had been proven. While some people would have been convinced at the second contract announced in July (jamais deux sans trois [1]) and others would have been happy at three (once is a fluke, twice a coincidence, three times a trend etc), I am more cautious when it comes to my investments. But even for me five contracts is enough – they have now proven their ability to win in this market and amongst a variety of customers / subsectors.

With their entry in to the tier 1 market now solid it would be understandable if they were not to announce every contract going forward and focus instead on issuing timely trading updates where necessary to minimise revenue and earnings surprises come results time.

I bought back in this morning and will be looking to add further on weakness.

[Edit: I am not expecting broker upgrades prior to the H1 results, at the earliest]

[1] Or, for those in search of riches: Tudo que acontece uma vez poderá nunca mais acontecer, mas tudo o que acontece duas vezes, certamente acontecerá uma terceira

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