The market’s knee-jerk reaction to today’s multiple news from automation software outfit Blue Prism (PRSM:AIM) was pretty bad. Inside an hour of the market open the stock had slumped nearly 10% from last night’s £13.50 close.
Word that directors were falling over themselves to flog £30m worth of stock appears to have spooked many investors. Then there was an extra £40m cash call, via a discounted share placing.
Full year results to 31 October were also unveiled.
DIRECTORS REMAIN MASSIVE BACKERS
There’s two important points to consider here. First, the stock's rise has been meteoric. Since joining AIM on 18 March 2016 at 78p the share price has soared, chalking-up a 1,630% return based on yesterday’s close.
In that time there have been no significant share sales from founder and board members. Begrudging a team that has created such significant value for shareholders, on paper at least, a chance to cash-in some of their own chips is unfair, not to mention unrealistic.
It is important to note that Alastair Bathgate, largely the brains behind Blue Prism, remains a significant stake owner even after today’s sales. He flogged less than 10% of his stake and so retains a position I the company worth millions of pounds.
GROWTH THAT KEEPS ON GIVING
The second point is growth. Blue Prism just can’t stop growing, with the 2017 results showing exceptional levels of increasingly international growth from new and existing customers.
What’s more, 90% of the £24.5m revenues earned in the year to 31 October 2017 are recurring licences. That means they can be relied on to repeat for the term of the contract, typically three years.
With the added firepower from this morning’s placing and already noting a strong start the year, 2018 looks like it could be another milestone period for the business.
MARKET SLOW, BUT GETTING THERE
It appears investors have gradually awoken to these factors as the trading continues into mid-morning on Thursday. All of those early share price losses have been wiped out as of 10am, leaving the stock back where it started at £13.50.
The real problem for investors is how to value the business. Such rapid growth needs to be balanced versus still enormous cash burn, which totalled £8.3m last year. That meant pre-tax losses almost doubling to £9.5m.
Automating the mundane - what is RPA
RPA software works by mimicking computer keyboard inputs a human would perform on an application user interface (UI) to perform routine rule-based clerical administration tasks. Not only does this improve input accuracy and speed, it also helps customer organisations reduce running costs by freeing the human workforce to concentrate on other valued-added tasks.
The key to Blue Prism rapid success is its extensive channel partner network of IT-based consultancies and infrastructure groups that resell the platform. Partners include many blue-chip global organisations such as Accenture, Deloitte, Capgemini, Hewlett Packard Enterprise and IBM.
