This has become an emerging opportunity for UK software suppliers as retail increasingly goes digital and multi-channel, but it's proved a double-edged sword for many, as I have previously explained. Lots of new (ish) small specialists litter this niche space with grand ambitions and hockey stick growth hopes, I'm think firms like digital coupons business Eagle Eye (EYE:AIM) and online displays techy Attraqt (ATQT:AIM), for example.
Similarly, yesterday saw rampant top-line growth but still loss-making figures from a relative newcomer to AIM, OneView (ONEV:AIM).
For such companies the main challenge now is balancing growth investment with an investment community need for real cash and profits. As CanaccordGenuity analysts points out in their most recent edition of their Digital Download report, 'investors grow tired of young companies with hockey stick sales projections and no profits or cash generation.'
But there are real profits and cash to be made in this arena. Out today are interesting full year results to 31 March from IMImobile (IMO:AIM) showing revenues up 26% to £61.6 million including an 11% jump in organic sales. EBITDA is 17% higher at £10.7 million, aided by September's Archer acquisition, and there's strong cash conversion to boot.
Philip Carse, analyst at IT consultancy boutique Megabuyte says 'IMImobile stands out among its mobile-focussed peer group, with evidently predictable (and growing) revenues, good margins and most importantly, good underlying operating cash conversion married with modest levels of capex/capitalised R&D.'
Among the more established in this specialist area is Sanderson (SND:AIM), which has been helping retail clients for donkeys years. In it latest half-year results, published on 6 June, though largely solid and retaining promise of matching expectations for the full year, certainly showed signs of slowing demand, perhaps not surprising given the sticky high street backcloth since Brexit.
We'll know more about the relative health of the digital retail enablers perhaps over the coming days. K3 Business Technology (KBT:AIM), one of this niche's leaders, is due to update the market on its own full year to 30 June in the coming days. What the retail software runes will say is hard to predict. It could be that high street operators are pulling in their horns as footfall, real or virtual, drifts but it might equally show that digital initiatives will be at the forefront of retailer thinking as they attempt to draw consumers through the digital, or physical, doors.
