Web and mobile products and services provider zamano (LON:ZMNO) was a star performer on Thursday, as its results caught the market on the hop.
Revenue, pre-tax profit and cash generation all moved in the right direction in 2014 on the back of strong performance in the UK, and though the market might have expected such a result after a good first half to the year, it appears the company has been flying below the radar.
Shares shot up to 9.53p at one point from 8.125p overnight, before ebbing back to around 9.15p for a still not-to-be-sniffed-at 12.7% gain on the day.
Proactive Investors asked chief executive Ross Conlon and chief financial officer Michael Connolly whether it was a case of the results being better than expected or an example of the market not paying full attention.
The answer was “a little of both”. With a market capitalisation of less than £10mln, zamano is, as the directors conceded, a “small company” that is not that well researched, but the hope is that the market will begin to sit up and take a bit more notice after the latest set of results.
In 2014, revenue rose 23.9% to €19.86mln from €16.03mln the year before, with UK revenues of €15.18mln up 56.5% year-on-year. Profit before tax climbed 13.5% to €2.18mln from €1.92mln in 2013.
Cash flow is often a problem for growth companies, but zamano saw a significant improvement in net cash during the year from €2.14mln at the end of 2013 to €4.60mln at the end of 2014.
The cash should provide firepower for the bolt-on acquisitions the firm is keen to make – at the right price.
“We got close [to making an acquisition] a couple of times last year, but we stuck with our acquisition criteria. We felt we could not get the value,” Conlon explained.
Apparently, smaller acquisition targets tend to have a slightly warped sense of the value of their company, whereas bigger companies – those valued at €10mln or more – tend to bring in professional advisers to negotiate, and so the valuations are generally more realistic.
“We’re looking at companies in a similar space to ourselves, that are profitable, with revenues in excess of STG£2.5mln a year,” Connolly said.
After another year of solid cash generation the company is “probably in a better position to do an acquisition this year”, though the option of using the company’s own paper is always there and is one of the major benefits of being a quoted company.
The group is looking at companies in the mobile media, billing and messaging areas.
“zamano's significant expertise in data analytics, mobile media and mobile billing/payments makes it an attractive partner for a growth orientated technology driven business operating in those areas,” Conlon told investors.