Amino Technologies plc (LON:AMO) is the topic of conversation when Progressive Equity Research’s Analyst Blaine Tatum caught up with DirectorsTalk for an exclusive interview.
Q1: What have Amino Technologies announced this week, and why is it important?
A1: The company have announced PayTV deployments in Malta and Cyprus. Contract win is usually a positive announcement in itself. This particular release is interesting for two reasons:
Firstly, that it represents deepening of an existing customer relationship, so it demonstrates that management can drive growth in the business from existing clients.
Secondly, it also shows how well the group is positioned to capitalise in ongoing shifts in the global TV industry.
Q2: Which are the long-term trends in the TV industry affecting the company?
A2: We believe the key trend in TV delivery is the convergence between PayTV and streaming video. In particular, what we’re seeing is that consumers want to access all their content in one place.
Plenty of evidence that it’s happening – PayTV operators continue to see “cord-cutting” where subscribers are disconnecting, but streaming video providers like Netflix and Disney+ are delivering impressive customer growth. Netflix has got over 200m subscribers globally, good going for a business that was founded in 1997 as DVD rental company. Disney+ reported 95m subscribers in December 2020, quite impressive for a business that had only been operating for about a year.
The company saw spotted this trend early on and have developed an end-to-end multi-screen TV and video platform that’s focussed on giving consumers what they want. From a business perspective, it allows both Pay TV and streaming video providers to improve their competitive positioning.
As analysts, when we use phrases like “industry turbulence” it’s usually negative, but we believe their offering and platform position it well to capitalise on change in the TV industry.
Industry sources forecast the global TV streaming market to double by 2025 to $167bn, clearly the opportunity for them is both large and growing.
Q3: The company’s 2025 strategy clearly involves M&A, what track record does the group have in mergers and acquisitions?
A3: They have a strong track record of M&A.
Most latterly with 24i acquisition in July 2019, pure software busines that bought new products and customers to the group.
Back in 2015, the group acquired Entone in the US and Booxmedia in Finland. Entone gave them greater presence in the key US marketplace. Booxmedia was a smaller deal but filled a capability gap – the ability to deliver TV anywhere.
Three important acquisitions there, all have been successfully integrated into the group.
Q4: What have been other highlights of recent news flow from Amino Technologies?
A4: The company announced FY 19/20 results in early February. Against backdrop of COVID-19, in our view it was a very solid performance. Revenue up 7% at the group level, software sales particularly strong – up 49%.
Business is transitioning to a software-led business model. 40% of group gross profit now comes from software. One of the benefits of that in the results – 2pp improvement in gross margin at the group level accompanied with double-digit growth in recurring revenue.
Another highlight was re-affirmation of dividend policy, the company intends to pay between one third and one half of adjusted EPS as dividends going forward.