Talking Tech

George and Ian catch up on recent news and events in UK small and mid-cap tech and discuss the (limited) SaaSpocalypse scenarios for Cerillion, DotDigital and GB Group – a few of the UK listeds that have been seen their share prices caught in the crossfire.

Cerillion might look to techies to be an easy AI technical target its business model, market position and end customer knowledge give it a major moat. DotDigital and GB Group are collections of mainly less than bleeding edge technology solutions, but there is considerable value in their established market positions. GB Group is sorting itself out whilst DotDigital faces the challenge of how to keep top line growth growing in a business area that is seeing constant innovation and change, but neither looks to be facing fundamental challenges from AI.

George and Ian consider the Saint Valentine’s day tech massacre. 

In face of the carnage, we take a step back and remember that writing software is only part of the story.  You need to plan, develop, test, sell and maintain. AI is untested in customer support for AI and much else besides.

We have flashbacks to when Open Source became a thing and look to the SaaS transition and lessons learned and not learned.

There is value amongst these hard-hit tech software stocks, but survival and growth in the face of AI is more than about having embedded products.  It’s also about the company structure and culture, and scarily for UK investors, its code base too.

We consider the realignment of earnings multiples. After over a decade of analysts and investors assuming SaaS revenues go on forever, it’s now increasingly obvious that many software companies can and will die, and it might be messy.

George and Ian take comfort from FY25 trading updates but look forward to a year in which reality may bite back.

Trading updates from Raspberry Pi, and news flow from Intel and Samsung, remind us that things rarely happen as smoothly or as predictably in real world tech as is hoped – particularly in semiconductors.

Computacenter’s update has confirmed George’s view on hardware sales and serves as another illustration that cash flow matters and should not be taken for granted.

Looking to the US the traditional SaaS stocks are underperforming, dragged down by the question of what AI does to them and, importantly, software pricing. No sign of the market asking these fundamental questions of the UK stocks just yet.

Ian and George wish ChatGPT a Happy Birthday before cantering through recent UK small tech updates.

ActiveOps – going well but could short term brokers and metric obsessed fund managers stop this little gem from reaching its full potential

Cerillion – a pause for breath year, still well positioned, cash generative with excellent margins

GBG – it is going to be hard work but the management look to be up to the challenge

Then, looking to Autodesk, George considers changing charging / accounting models when faced with AI and difficult wider economics – doesn’t the market see right through this?

George and Ian catch up on the news and events affecting UK-listed tech companies.

George and Ian consider Sage’s recent full-year results and where it can go from here. Its cloud-based US acquisition Intacct, has shown what can be done, but is Sage condemned to a life in the slow lane by its parochial home market’s love of yield and misunderstanding of growth.

They also ponder the challenges that the new CEO faces at Tracsis. Not least of which, in a similar theme to Sage, is its technical debt. Although it’s worth remembering its customer base, which might be more suited to a legacy approach after all.

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George and Ian catch up on the news and events affecting UK-listed tech companies.

Rightmove’s share price reaction to management’s decision to accelerate its investment in AI suggests that the market is not comfortable with AI and is in bear case hunt mode. Looking at Rightmove, Trainline, Autotrader et al. it is clear that AI is going to make a difference, but it is not changing that many business models.

We consider Kainos’ results and George talks us through how the business has evolved before contemplating whether there will be or, perhaps can be, a budget flush coming as those with IT budgets use it or lose it in the final months of the year.

We look forward to Sage’s forthcoming results by looking at Xero’s just gone and consider how business models and routes to market have evolved, then look to the potential float of Visma next year.

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George and Ian catch up on news around the UK small and mid-cap listed tech space.

Picking up on concerns about the challenges AgenticAI from our last podcast, George highlights Forrester’s forecast that next year 40% of AgenticAI projects will be cancelled.

On UK companies we have Dotdigital and Advanced AdvT contrasting growth by acquisition styles, with a quick reflection on GBG. (Platform vs management impact vs random name based)

Trainline and the impact that AI can have to add value, with a nod to the ‘it’s just APIs’ issue.

Closing with Ian’s thoughts on attending the SETsquared Investment Futures event – the partnership of six of the UK’s leading universities for the development and funding of spin-offs. Very positive, plenty of innovation and a great session led by the LSE on finance. Most notable was the recognition that the space has challenges and that participants are solving these for themselves, creating new solutions and changing the way they work - in marked contrast to the public markets approach.

The big, big question facing everyone is how do you make an original comment about the AI bubble.

Ian and George tack away from Cisco vs Nvidia and nonsense PE comparisons and revisit ‘F’d Companies spectacular dot-com flameouts’ - the basis for Ian’s recent blog, looking for real lessons and how not to avoid post-bubble mistakes.

Key points are:

Dotcom was lots of relatively small things and a bit random. Much of the headline grabbing nonsense was for ventures with only single digit $m of funding. AI is big money spend in a relatively few areas. 

Much of the nonsense worked eventually – webvan, Pets.com and furniture.com – but maybe not Ocado. Beware of throwing away things that don’t work first time around.

Key parallels – Application Service Providers, short term fail but long-term success (as it morphed into SaaS) – will AgenticAI follow this path when it’s just too difficult at the first try? 

George and Ian catch up on events in and around the UK small and mid-cap listed tech.

Big Beautiful Trade Prosperity deal – George tries to put in it some kind of context vs the scale of what is happening elsewhere. Has the UK sold its soul or did that really happen years ago?  Look to the positive and question Germany’s and France’s position.

Then Oracle – the big jump. The whole world now knows what it’s like to be a UK small-cap fund manager. The big ego tech boss with a track record of missing results declares that he has HUGE committed revenues ahead of him with limited visibility on both the final customer and the funding, sounds all too familiar  What does Larry Ellison understand by commitment anyway – probably depends on which of his six wives you ask. 

Feels a bit like Jan 10th 2000 AOL – Time Warner.  But it’s different this time – why?  Because the internet needed funding and so the bankers and brokers had been seeing the big dollar signs for several years by that point. This time Wall Street has been restrained, and analysts have frequently asked tricky questions, but all that could change now.

Looking at UK company news George highlights SThree’s concerning results, Tinybuild’s recovery, whilst Ian ponders Judges Scientific in the light of Spectris and asks why UK fund managers and analysts seem to be stuck in an analog world.

UK vs US tech valuations – reflecting on wider and individual stocks.  Looking at several leading UK tech stocks, including Computacenter, Raspberry Pi and Kainos, George examines the ‘p/e discount’ issue but it’s clearly more nuanced than just growth. 

Ian questions why it takes so long for the UK market to trust and understand new tech stocks.

Results from Computacenter with George looking to the US reminding us that UK listed companies can grow globally when the fund managers allow it.

IQE’s profit warning is hardly a surprise and it now looks like AIM could be seeing another departure. So much value destroyed because a once sensible business became more about being a stock than a business.

Gamma’s results show the value of the Placetel and Starface acquisitions in Germany with their strong organic growth. The management look to be getting far better returns on their investments than the fund managers, so surely buy backs are the last thing fund managers should be demanding.