Casting an eye on the IT stock that is knocking the charts: CAT

  • Jul 24, 2020 AEST
  • Team Kalkine
Casting an eye on the IT stock that is knocking the charts: CAT

Summary

  • Even though worldwide, professional sports leagues were postponed amid Covid-19, the Company managed to retain its existing clients, apart from winning new customers.
  • Lately, Catapult Group notified that it has shifted FY (financial year) end from 30 June to 31 March and presentation currency to USD from AUD, as a result of substantial global growth witnessed in recent times.
  • CAT provided a preview of an unaudited FY20 result wherein it stated cash in hand of AU$27.5 million, noted on 30 June 2020, showcasing that the Company is exceedingly well-positioned and capitalised to make an investment via self-funding for growth ahead.

In the contemporary world, technology has been reshaping businesses and economy. As a matter of fact, technological innovation has become a megatrend, while bringing along various breakthroughs in the form of advanced communications, collaborations, automation, and enhanced productivity across sectors.

Undoubtedly, technology has made our lives move faster and tasks easier. Moreover, anyone would agree to the fact that currently, we live in an era that is considerably driven by technology.

In a nutshell, technology has been in the limelight from quite a long time, and the need for technological advancements are growing at an accelerated rate.

The S&P/ASX 200 Information Technology (Sector) index was trading at 1659.0 points, declining by 2.62%, as on 24 July (at AEST 1:34 PM). Simultaneously, the Australian benchmark S&P/ASX200 index was trading at 6019.1, decreasing by 1.24%.

Lately, technology stocks have been performing well and booming on ASX.

Did you read; Shedding light on 7 ASX Tech Titans that have rebooted Growth Investment Style

Numerous tech companies have witnessed immense growth over the past couple of years due to increased use of technology, and the requirement for smart and technology-driven solutions.

One of the small market cap companies, sports technology player that is looking to thrive in the present technology-driven scenario is Catapult Group International Ltd (ASX:CAT).

Source: ASX

CAT’s share price has been swaying on ASX and has generated a 74.74% return over the last three months. On 24 July 2020, CAT was trading at AU$1.725, up by 3.916% (at AEST 1:38 PM).

Also, the impressive 3-month return is buoyed by the positive business updates during the last few months, showcasing soared earnings, and continuous uptake of its product during the crisis period.

With this backdrop, let us deep dive and appraise ourselves with the latest updates from the Company.

CAT’s financial year-end shifted from 30 June to 31 March

On 24 July, CAT notified the market that effective from the beginning of financial year 2021, Catapult’s year ending would be 31 March. To reflect the shift, CAT would function a 2021 financial year of 9-month period, comprising of months closed 31 December this year, along with a final period closed 31 March, next year.

The shift took place as a consequence of considerable global growth across recent times, as presently above 85% of CAT’s revenues are earned in the northern hemisphere markets that have main selling season between May-August.

Also, its presentation currency would be USD than AUD. CAT’s financial report in USD would start reflecting in the interim results for the period closed 31 December this year.

This change came about because of the of late global growth, wherein beyond 70% of the Company’s revenues are represented in USD.

Impressive business performance during FY20

On 20 July 2020, Catapult unveiled an unaudited FY20 performance and highlighted net free cash of AU$9 million for the period.  It reflected an increase of AU$24.1 million on last year. Notably, the Company attained cash flow positivity a year before than prediction.

Despite the fact that worldwide, sports related events were either cancelled or deferred due to the pandemic, the Company survived it and emerged stronger by acquiring new customers and retained its existing clients.

The Company ascribed this resilience to its subscriptions-based business model, which contributes ~ 75% to its revenue, underpinned by long-term contracts and customer relationships.

Furthermore, Catapult also divulged its bolstered financial position with AU$27.5 million cash in hand at the end of 30 June 2020. The boosted cash position was maintained by CAT following an adoption of a conservative approach by implementing cost-saving methods and handling working capital, during the beginning of coronavirus outbreak.

CAT also advised that its scalable, subscription-based business model fuelled growth in Group’s revenue and EBITDA.

Additionally, Catapult anticipates reporting:

  • Revenue for FY20 in the range of AU$100 million - AU$101 million.
  • EBITDA for FY20 is anticipated to strike amid AU$11.5 million and $12.5 million.

Catapult is expected to release a detailed review of its FY20 results in late August 2020.

Stay tuned for full-year earnings update.

Did you read; Stocks Under Discussion: WSP, HUB, TYR, CAT

Appointment of former Amazon executive as CAT’s Chief Operating Officer

On 16 July 2020, CAT announced the appointment of Chris Cooper for the role of COO to inflate Catapult’s scalability further and drive its strategic growth, significantly.

The appointment was subsequent to the lifting of coronavirus operating cost mitigation methods, as stated on 13 July 2020.

Of late, CAT announced that it had begun the ending of cost-cutting measures from its COVID-19 mitigation plan.

The Company disclosed that it was able to make a move earlier than anticipated, as negative effect of the pandemic on its business was less than expected.

Catapult had taken early precautionary cost reduction measures such as implementation of furlough leave for the workforce in a few areas, and trimmed salaries for others primarily to mitigate operating cost during the pandemic. Pleasingly, Catapult ended these measures starting 13 July 2020.

 


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