While NetDimensions Holdings Ltd (BE:NETD) announced a modest reduction in H1 revenue due to a decline in services and support, this masked an 8% improvement in high-margin licence revenues to $6.8m. Costs fell dramatically, enabling a sharp reduction in the EBITDA loss. New business is increasingly lumpy as the group targets large enterprises in high-consequence industries and we have conservatively eased our numbers. Nevertheless, the quality of business continues to improve with the emphasis on recurring software rental revenue. Following the recent decline, the shares look attractive, given the $11.2m cash position (c 16.5p per share), an attractive growth profile, the cash-generative business model and an EV/sales rating at just 0.4x.
Interim results: High-margin licence revenue up 8%
Group revenue slipped by 1% to $10.5m but costs fell, enabling the group to reduce its EBITDA loss by 58% to $0.8m. Secure SaaS revenue lifted by 6% to $5.4m, while software licensing (mostly onsite rental) rose by 11% to $1.3m. Services revenues were weaker due to the delay in roll-outs highlighted in the July trading update, while the de-emphasising of perpetual licences led to a 33% decline in support and maintenance revenue. Invoiced sales to clients in high-consequence industries represented 91% of total invoiced sales. The group is becoming increasingly specialised on a select few verticals including precision engineering (especially automotive) and healthcare, with the latter growing by 11%. The group generated $0.3m in H1 gross operating cash flow and modestly positive free cash flow, but the net cash position dipped by $0.8m to $11.2m over the six months, due to the decline in sterling as the group has significant GBP deposits.
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