Checkit (LON: CKT), the Cambridge-based software firm behind an “intelligent operations platform” for hospitals and food-service businesses, reported its first half-year of adjusted EBITDA profit on Monday, but confirmed in the same statement that it has abandoned the formal sale process launched in March.
Shares in the AIM-listed company slumped as the takeover premium that had been propping up the stock unwound.
Checkit shares fell roughly 30% in early trade on Monday to 15.74p, from Friday’s close of 22.5p, having ranged between 15p and 19p intraday. That puts the stock close to its 52-week low of 12.35p and well below its 52-week high of 27p.
The interim results, released via RNS before markets opened on Monday, showed adjusted EBITDA from continuing operations improving by £1.2m to a profit of £0.3m in the six months to 31 July, against a £0.9m loss a year earlier. Recurring revenue, which makes up most of the top line, rose 4% to £6.1m, while annual recurring revenue rose 5% to £12.8m. In the same announcement, Checkit confirmed that the formal sale process it launched on 26 March had been terminated, with no offer the board could recommend to shareholders.
The improvement follows the retirement of a legacy product tied to a single customer, which removed £1.6m of annual recurring revenue but cut around £0.7m of annualised costs. Gross margin rose to 69% from 67%, and the pre-tax loss narrowed to £1.2m from £2.5m. Checkit has set a two-year target of 105-110% net revenue retention, a measure of repeat spending by existing customers, up from the current 102%. Despite the improving numbers, the market’s reaction shows it had been pricing in a takeover far more than it credits the underlying turnaround.
Chief executive Kit Kyte framed the ended sale process as validation rather than failure.
We also announced today the termination of the formal sale process that commenced earlier in the year. The process provided valuable external validation of the strength of our technology, customer proposition and position in regulated environments.
Kit Kyte, Chief Executive Officer, Checkit plc
Medical, which includes NHS and US plasma-collection customers, accounted for 71% of first-half revenue, underlining how reliant Checkit’s turnaround remains on that single sector.