Technology Growth Stock

ServicePower Technologies is a UK-listed technology company that is focused on the development of mobile workforce and field service management software, a market which has been estimated to have reached $1.3 billion in 2013, having grown by a compound annual growth rate of 13% (source: Gartner). Used by some of the world’s leading companies in 27 different verticals, ServicePower’s range of software has demonstrated an ability to increase productivity - at times by a factor of up to 50% - while also reducing costs and improving the customer experience. It is our view that the relatively high costs of software and field service management industry experts, as well as a sufficiently high required level of marketing spend, make it challenging for new players to enter the market. If ServicePower was to be acquired on a similar ratio to that recently paid for a comparable company, ClickSoftware, then the suggested price paid would be £39.37 million (or 17.30p). While noting the risks, we feel that a potential catalyst of the stock is a further uptake in its offerings, with higher revenue generating companies within the SaaS space typically commanding a higher EV/sales multiple (source: Software Equity Group).

Business Summary

ServicePower provides configurable optimisation and mobile workforce management software, with unique features and algorithms and cloud/SaaS product options (SaaS is now deployed to 71% of its customers). Its patented technology provides field service organisations with a fully mobilised scheduling and dispatch field offering, based on logic that enables clients to intelligently deploy multiple field labor resources, minimizing costs and improving first time fix rates. It mainly follows a subscription-based revenue model, with recurring revenue now accounting for 81.5% of total revenue. For the six months to 30th June 2015, gross profits increased by 26% to £3.40m on revenues up 13% to £6.94m and gross margins of 49%.

Market

Increasing competition, changing customer dynamics and reduced margins are driving field service organisations to implement technology that will improve their competitive edge and increase productivity, efficiency, and customer satisfaction. Mobile workforce management software is applicable in several industries, including telecommunications and cable, healthcare and heavy engineering, mining and manufacturing, to name just a few.

Valuation

ClickSoftware was acquired for an all-cash transaction fee of $438m, equating to an EV/sales multiple of 3.1x and representing a 40% premium to its previous share price. The main risk is a slower than expected uptake in its offerings as it continues to migrate to more of a SaaS model.