finnCap Tech Chat | Chicken-Licken was wrong

January is a dull time of the year and with the interminable lockdown this one is particularly tough. What little fun and festivities you could have last year, are over, the decorations are packed away, the presents are all opened and the alcohol is all drunk (maybe that’s just our house). New Year’s resolutions have waned, we are back to work under wet and grey skies with just a few precious hours of daylight. Last Monday was the third one of January - Blue Monday, the most depressing day of the year.

But actually there is a lot to look forward to in 2021. The days are already lengthening, the vaccination programme seems to be making steady progress. There is opportunity in the new US Administration getting a grip both on the virus over there and on trade relations with China, avoiding the major trade war looming under the last Administration. And whether you think it’s opportunity or suicide, Brexit is at least done.

Moreover, January is also trading update month: so far the trend in tone is overwhelmingly positive, despite the progressive reversion to tier 3 then 4 then lockdown. Companies which can preserve revenue in 2020 will have had a good year for profits on reduced sales & marketing and office costs. Quartix, Eleco, and Kape trading updates showed the benefits of high levels of recurring revenue and worked hard to maintain or grow those valuable long term userbases through the pandemic, at least maintaining their revenues and delivering healthy YoY growth in earnings. It will be interesting to see how much of the newly discovered efficiencies can be retained post-COVID.

We don’t feel the marketing cuts will impact future growth since competitors are in the same boat and the market has in effect been frozen like a dropped Zoom call. dotdigital, which delivered a very well received demo to finnCap’s loyal virtual demo audience (available to view here) showed omnichannel marketing automation through SMS and email has been thriving in lockdown, with at least 20% growth in all key metrics and opportunity for future upgrades. Reduced marketing spend should instead read “re-focused marketing spend” in most cases, with DOTD the beneficiary of a trend to digital marketing which is not temporary. The re-focusing of advertising spend to Connected TV from linear TV has seen Tremor deliver record December trading, and upgrades to FY20 and FY21 EBITDA of +16% and +10%.

Some have reported they are even better placed post-COVID to grow revenue. IQGeo revealed it had beaten expectations as the expansion and upkeep of telecoms and utilities networks has become even more vital. Telit reported 2020 revenues down 12% with COVID’s immediate impact on the IoT industry, but profits likely to be up YoY thanks to reduced spending on offices and sales & marketing. Some of that is structural, with a refocused operation. In the longer term the IoT market will be another big beneficiary of the pandemic. Increased remote monitoring and interaction is now a priority for many businesses and as strictures ease, the group is well positioned to take advantage.

So Chicken-Licken was wrong; the sky is still in place; trading updates to date have been encouraging. Blue Monday has actually opened a green week for stock prices and the outlook is for better weather and brighter skies as we push into 2021. If you are feeling down, here is the key tip from finnCap’s own HR team; focus on what you can control not what you can’t - a valuable lesson our companies seem to have taken on board. If you want a tech solution to the interminable lockdown I hope you got the amazing Oculus Quest 2 for Christmas and can wander the beaches of the Caribbean, the peaks of the Himalayas or the depths of the ocean from your living room. But we will discuss more of that in our upcoming quarterly on VR and AR.

Happy friday