7:59 cut – Beeks H1 Results

Beeks have issued their H1 2020 results this morning. The key figures are revenues of £4.29m (up 23%) and terminal recurring revenue up 37% to £10.20m. Revenues are moderately below my model for H1 apparently principally due to weakness in their core business. There also appears to have been no growth at the CNS acquisition, but this was as guided.

I note the change in depreciation policy for computer equipment that flatters YoY profit comparisons. Older equipment has less economic value due to less performance per watt, but it is clearly not worthless after four years and furthermore production problems at Intel have significantly delayed efficiency improvements over the past couple of years. Therefore I currently consider five years to be perfectly prudent, but technological progress could quickly change this.

Beeks say “Current trading is positive and is within the range of market expectations”. Given the H1 figures and the use of the word “range”, I take this as a very mild revenue warning. At this time I do not see how they can meet FY 2020 revenue consensus forecasts of £10.7m, but it is probably more appropriate to look further forward to FY 2021.

[Edit: Progressive have reduced their FY 2020 revenue forecast to £9.6m, lower than I expected. For context, my previous most recent forecast was £10.3m. I will produce my own updated forecast based on the H1 figures shortly.]

[Edit2: I just realised that Progressive Equity Development also reduced their FY 2021 forecasts significantly. I have been consistently much closer to reality than initial broker forecasts but also consistently overoptimistic on this company. While I can hope than FY 2021 forecasts are on a much more prudent basis than in the past, any reasonable outsider would conclude that the company is now significantly overvalued, especially given current elevated risk premia, and especially given the historic unreliability of forecasts. The company is clearly not following the investment thesis that underlined by purchase in November and accordingly I have sold. I will nonetheless update my model and report back in due course.]

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