RHP - Rhipe Limited

[Dona Ferentes]

Following the withdrawal of rhipe Limited’s market guidance for the financial year to 30 June 2020 and the cancelling of its interim dividend,
- Prudent? or, what else is there? Cash burn, tenuous engagements/ growth?

.... following the close of the third quarter to 31 March 2020, the Company continues to be pleased with its performance during unprecedented times with management continuing to closely monitor trading activities. The highlights of the unaudited trading results for the nine months to 31 March 2020 (compared to the same 9-month period to 31 March 2019) were:
• Sales growth of 32% and Revenue growth of 19% versus pcp.
• Growth in sales of Microsoft’s Cloud Solution Provider products continue to drive our sales and revenue trends and growth in Microsoft Office365 and Azure products remain broadly consistent with previous announcements.
• Operating profit up 14% to $9.7m excluding investment in our new Japanese joint venture versus pcp. Operating profit growth was up 5% including the investment in Japan versus pcp.
• Our new Japan joint venture has now signed up 10 partners with the first sale, albeit small, occurring in March 2020 for the purchase of Office365 licences.
• Cash at 31 March 2020 was $23.5m

 

[Dona Ferentes]

and a Trading Halt .... Capital Raising

 

[Dona Ferentes]

looking to continue its recovery:

The financial results for FY20 show rhipe’s resilience in the face of the COVID-19 global pandemic. Despite economic headwinds resulting from the pandemic, the Company has continued to grow across geographies, products, and services. In FY20 rhipe delivered an operating profit, excluding our investment in rhipe Japan, of $15.0m and reported EBITDA of $11.6m, a year on year increase of 17% and 16% respectively. Importantly, the operating profit of rhipe’s core licensing business grew 36% or $3.3m compared to the FY19 financial year.

During the second half of FY20 the Company undertook a capital raise of $32.5m, net of costs, to enable rhipe to take advantage of future acquisition opportunities. As a result, rhipe is pleased to report that our year end cash position was $60.9m, compared to a cash position of $25.5m at the end of the prior year. Excluding the cash proceeds from the capital raise our cash position increased by $2.9m in the financial year despite $2.8m paid in dividends and $2m cash payment in relation to our acquisition of a Melbourne based software encryption product called SmartEncrypt in August 2019.

In addition, the Company continues to invest in its Platform for Recurring Subscription Management which many partners and vendors use to help build and grow consumption of their cloud licences in Asia Pacific. The Directors believe that the cash position of the business will continue to be strong and as a result the Board has announced a final dividend of 2 cents per share.

6 months, daily

 

[Dona Ferentes]

Highlights of Q3 YTD FY21 Results

• rhipe has continued to deliver solid revenue growth of 15% driven by continued momentum in Microsoft public cloud products including Office 365 and Azure, with growth in our solutions and services business
• Microsoft Office 365 seats at 31 March 2021 were in excess of 775,000, with the monthly seat addition continuing around the 16,000 seats per month in the current financial year.
• Group operating expense growth was 5% in the 9 months to 31 March 2021 with increased investment in Q3 likely to continue into Q4.
• Group operating profit of $13.2m was up 36% year on year due to solid revenue growth alongside careful cost management. This is consistent with first half results for this financial year.

rhipe expects its full year operating profit for the financial year ending 30 June 2021 to be in excess of $18 million ahead of previously disclosed guidance of $17.5 million.

Recently, RHP moved to acquire 100 percent of the share capital of emt Distribution Pty Ltd (Australia) and emt Distribution Pte Limited (Singapore).

emt is an Australian headquartered cyber security distribution specialist that focuses on sourcing innovative security software vendors and working with channel partners, to deliver both on-premise and cloud-based security solutions, aimed at protecting companies against cyber security attack..... Services provided by emt include pre and post sales technical support and professional services.

so, another layer of consultancy? The existing Rhipe cyber security software offering is centred around Microsoft’s product stack and also the recent launch of rhipe’s own SMB focused encryption product “SmartEncrypt”.

rhipe provides cloud and technology solutions, giving partners business advisory and deep domain technical expertise to operate in the growing cloud market. rhipe is focused on subscription software licensing in Asia Pacific, tied in with Microsoft Office 365 implementation and other global vendor solutions.

 

[Dona Ferentes]

rhipe notes the recent Oslo stock exchange announcement by Crayon Group Holding ASA (CRAYN.OL) in which Crayon stated it is pursuing an acquisition of a leading player with a similar business model.

rhipe confirms that it has received a confidential, non binding, conditional proposal from Crayon (www.crayon.com) to acquire 100% of the shares in rhipe by way of a scheme of arrangement for $2.50 per rhipe share (less any dividends or distributions declared by rhipe after the date of the proposal).

The Proposal assumes a net cash position of rhipe at closing of at least $31 million, and a few other conditions.

...
- up 20% to $2.50

 

[Dona Ferentes]

and closed at $2.55 , above the offer


one analyst reckons there is more in it

Our preliminary estimates put Rhipe - if being acquired at the peers’ multiple with our estimate of synergies - at $2.66. With a more typical control premium on top of this, that would equate to $3.40. We would expect further interest (if around) to generate a price closer to $3. We note this excludes any vendors that may be brought to Rhipe.

 

[System]

On November 4th, 2021, Rhipe Limited (RHP) was removed from the ASX's Official List in accordance with Listing Rule 17.11, following implementation of the scheme of arrangement between RHP and its shareholders in connection with the acquisition of all the issued capital in RHP by Crayon Software Experts Australia Pty Ltd, an indirectly wholly-owned subsidiary of Crayon Group Holdings ASA.