Kape Technologies: Strong H1 Performance
Edison | Sep 25, 2018 02:26AM ET
With Kape Technologies' (LON:KAPE) transition to a consumer cybersecurity business essentially complete, investors can focus on the trends in its core business. The interim results highlighted big improvements in both margins and visibility. A doubling of subscribers helped drive a 178% y-o-y rise in underlying EBITDA. We leave our estimates unchanged but with Intego adding $3m in subscription revenue in H2, the mix and margins should improve further. Stripping out $52m of cash, Kape trades at 19x FY19e EPS.
Improving trends in App distribution…
Following the disposal of Media and acquisition of Intego in July, Kape is now 100% focused on consumer cybersecurity. Headline figures for the core App distribution business were disclosed in July’s trading statement (revenues up 14% y-o-y) but the interims showcased the underlying trends. Customer retention rose 5pp to 74%, the shift towards subscription substantially improved visibility and a 16pp y-o-y jump in segment margin (from 31.7% to 47.6%) drove a 71% rise in profit (see Exhibits 1 and 2). These trends primarily reflected the focus on subscription in Reimage plus the contribution of CyberGhost, which traded ahead of management expectations and was consolidated for a full period.
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