Interactive Investor

AIM high-flyer Sopheon eyes rapid recovery

22nd August 2019 14:03

Graeme Evans from interactive investor


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Sopheon reassured investors today, but this AIM high-flyer is still short of the highs seen in 2018.

A month after losing a fifth of its market value, AIM-listed enterprise software business Sopheon (LSE:SPE) won back investors today by insisting that its prospects "have never been brighter".

Shares rose 9% to 842p as Sopheon said weaker half-year revenues and earnings should not be allowed to cloud its growth potential following several years of impressive expansion.

The first-half downturn, which Sopheon flagged in a trading update last month, was blamed on an unusually strong comparative from 2018 and a shift back to a more traditional second half weighting in this year's results. 

Sopheon noted that market and commercial momentum was increasing, with a 48% rise in sales pipeline value between January and June expected to drive a strong second half. Both the volume of deals and number of larger deals in the pipeline have risen to all-time highs.

The proportion of Software as a Service (SaaS) business in the expanded pipeline has risen sharply, accelerating the transition to a higher recurring revenue model and greater lifetime customer revenue.

Chairman Barry Mence said: “The future prospects of the business have never been brighter, and we do not believe this first half pause in the impressive financial performance of the past several years has a bearing on Sopheon’s unique potential and growth opportunity.

"The business remains profitable and cash generative, and our balance sheet is stronger than ever."

Analyst Andrew Darley at house broker finncap said Mence's optimism was supported by the company's record of achieving three years of second half growth ahead of City expectations. He added that investors would grasp the prospect of “better quality but mildly tamed growth” while SaaS should also enhance multi-year visibility.

Darley reiterated his price target of 1,425p, which represents an upside of 85% to last night's closing price. This is higher than the 1,370p recorded in December, which marked the peak for Sopheon shares in a remarkable 2018 that saw the stock surge as much as 270%.

Sopheon, which has operating bases in the UK, United States, Germany and the Netherlands, provides customers with enterprise innovation management solutions, enabling them to achieve long-term revenue growth. It launched the first version of its Accolade software in 2001.

One area of opportunity is the digital transformation market, where Sopheon can digitalise corporate strategic initiatives into a single platform.

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