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I first started to notice EU Supply (TIDM Code - EUSP) when I saw @MGInvestor on Twitter had bought into them a while back and I find he is excellent at finding very small companies that have growth potential but are actually real businesses rather than the usual Loss-making Speculative rubbish that kicks around in the dark and dismal corners of the AIM Market and is best given an extremely wide berth.
If you follow me on the Tweets you might have noticed that every morning starting from just after 8am I tend to work my way through the RNS Statements of the Day (most ones worth reading appear at 7am but because I tend to go to Bed around Midnight I set my Alarm for 8am because I need some sleep !!) and I bang out Tweets on anything that I find interesting and that I think Followers might find helpful. What you might not have realised is that I am doing this from my 3rd Office (which is otherwise known as my Bed) and I am reading the News using the Investegate.com Website which I access via an ancient 7” Tablet that I have (I really must get a new one - I actually dropped this one a few years ago and it cracked the corner but worse still it actually came totally apart and I gingerly managed to snap it all back together - after finding the On/Off button lurking under my Sofa - and was stunned when it actually worked. It is even more amazing that it has continued to work for many years since then.)
Once I have a Company in my sights (and at any one time there are loads of these in my head) I tend to take extra-special notice of any RNS Statements they put out and the thing that really perked up my interesting in EUSP was the seemingly never-ending flow of Contract Wins which they were putting out. Sadly that flow has not been quite so strong of late although on the 21st February 2018 they announced 2 new small Wins.
In a totally unconnected way I noticed that Shares Magazine and Cenkos were holding another of their ‘Growth & Innovation Forum’ Events at the Business Design Centre in Islington, which took place on Tuesday 30th January and I have been to several of these before and I tend to find they can be very helpful for finding one or two decent Companies to invest in - and I saw that EUSP were presenting there. Before such Events I always look to see which Companies are due to attend and have a Stand and stuff and I tend to find that the vast majority just don’t interest me at all and there might be a handful at the most which appeal to me. In this case there were just 2 that really excited me (FFX is the other one and I have written a Blog on this already - see ‘Related Blogs‘ at the bottom of this one) so I decided a few days before the event to have a really good look at EUSP.
The more I looked the more I liked (and I already had a lot of Cognitive Bias in favour of the Company anyway and most of this was probably ‘Confirmation Bias’ !!) and the key thing that really got me eager to buy was that once I actually figured out what they produced in terms of Software I realised it was something I had huge experience of in my last Role at Fujitsu as a Proposal Manager working on Bids to Major Companies and to Government Departments and the odd Local Council thing.
I left Fujitsu about 9 years ago but in the last year or so that I was working there a clear trend was noticeable (but very much embryonic) that Companies and Government Bodies were occasionally starting to use Software in the form of a Website through which Suppliers like Fujitsu who were Bidding for Contracts had to submit our Tenders. At that time we were coming across various different Procurement Software designs which were clearly offerings from all sorts of Suppliers and at that time it was a pretty crowded Marketplace - although it is unclear to me how many of these survive now as I suspect many will have fallen by the wayside, although it does seem to be a quite competitive space. Apparently these are called ‘eSourcing’ Platforms (or sometimes ‘eProcurement’ Platforms).
These Websites took on various forms but the consistent theme was that they were all a right pain in the backside for us as Suppliers. Before such Platforms arrived on the scene we usually had to produce Tender Documents (these could vary from as few as just one Document through to perhaps as many as 50 Documents for some Major Government Bids for Outsource Solutions etc. and there could also be Spreadsheet Files for Pricing and suchlike) and we would email these to a certain Contact Address that we were given by a certain time and we were usually expected to Print out and Bind all of the Documents in many multiples. One Bid I worked on needed us to deliver a whole Pallet of Folders containing 50 Copies to the Customer - utter madness.
Of course all this Printing of Materials could take some time and usually the Customer would want the Emailed Versions of the Documents by a certain Date and Time and then the Printed stuff could come perhaps one or two days later - it varied a lot really. However, once we got these new Procurement Portal/Website/Platform things appearing they just added another layer of complexity because invariably the Customer wanted the Printed Documents just like before !! The catch for us was that on some Portals it was quite easy because you just uploaded Files to their System but on many you had to be ultra organised and had to Copy and Paste Responses under the Questions they had in their System - and there could be hundreds of these. It was horrendous really and I am glad I left when I did because I doubt it has got much easier as these Systems were probably not built with the Suppliers in mind much !!
However, one thing I did pick up from chatting to the EUSP Guys at the Shares Innovation Show (I spoke with the CEO and the CFO - there are more details on them below) was that very soon the EU is mandating that all Tender Documents and related information have to be submitted via such an Online Portal/Website thing - so at least the Suppliers won’t have to bother Printing stuff out anymore - sounds like a good idea for the Environment although I must say I did used to take pride and get a lot of satisfaction from seeing our glorious and colourful Bid Folders piled up for despatch to the Customer !! I understand this Rule is coming in as early as April 2018.
After doing this Research into EUSP I had some Cash kicking around and I decided to buy a Small Stake of EUSP in the days leading up to the Show. It is an extremely small Company with a Market Capitalisation of just about £7.6m at the time of writing and for this reason I have not bought much - just a bit less than 1% of my Portfolio Value. However, as with all my Buys I am very much in here for the Long Term and if things go well for them then I might be adding to this Position over time.
I paid 14.5p a Share and if you look on my ‘Trades’ page you will see the Entry on the 29th January 2018.
On their Website, EUSP describe their Software Offerings like this:
“Complete Tender Management (CTM) is a best of breed eSourcing platform to manage the end to end process for tender management and contract management.
CTM is a proven platform available as a fully hosted “Software as a Service” with users only requiring browser and internet connection for use. CTM is also available for hosting on a dedicated environment if so required.”
This is pretty much as I described these kind of Websites/Portals in my Introduction but one thing I must point out is that they also mention “contract management”. Now we mustn’t get too excited because I asked the Gents about this on their Stand at the Show and in reality it is not all that amazing - it is simply a System for Customers which keeps a record of the Contracts they have in place with Suppliers and it flags up when they need renewing - it sounds pretty basic really and I can’t see this being much of a money spinner but it is sold as an Add-on to the basic CTM Package I think.
This bit from their Website under ‘Extensive Procurement Suite’ helps to explain the Benefits of such Systems and also lists the Modules that can be bought - I would guess most Customers take the majority of these Modules and it is worth noting that the CEO told me most Solutions they sell are very much a Product Based sale and need little Configuration or Customisation:
Actually, the Website isn’t all that impressive although it does really tell us what we need to know. That Link I just put in leads you to a Page of Information but when you click around the Website all the other Links take you to chunks of the same Page - sneaky devils !!
I must point out that their Software can handle large Procurement Contracts (for instance, a big new IT System or something) but it can also deal with Contracts for smaller items etc. (more along the lines of Stationary really). In addition, one thing I did come across when working for Fujitsu was the idea of an ‘Online Auction’ or perhaps a ‘Reverse Auction’ where Suppliers had to make Bids over the Web with regard to the Price at a certain Date and Time - we only did these a few times but they were not really fun from the Supplier viewpoint, but of course we had little choice. I note EUSP’s CTM Package can come with an Auction Module.
eu-supply.com svenska AB (“Svenska AB”), the precursor to the current Group, was founded by among others, Thomas Beergrehn, the Group’s Chief Executive, in May 1999 focusing on the provision of e-auction management for contractors, builders and property developers and the public sector. That original incarnation actually went bust and the History since that is laid out clearly here:
From my discussions with the EUSP Gents it was clear that the focus is on the EU Countries and the UK - this makes perfect sense and they seemed to think there were more than enough Sales Opportunities here to keep them very busy. With new EU Regulations around Fully Electronic Procurement coming in this makes a lot of sense.
EUSP has roots in Sweden, Denmark and Norway and it seems to be using this as a ‘Base’ from which to expand from. It has already got quite a presence in the UK and in Ireland and it makes sense to grow in this controlled manner.
The CTM Platform which EUSP offers is very much a ‘Productised’ thing with very little customisation for individual Customers. The approach tends to be that EUSP present the Customer with the various Module Options and then a ‘Tick List’ is used to identify the correct Modules for the Customer need. They will consider Customisation but this is fairly opportunity-based and Enhancements to the Product will be done if there is a clear Business Case for being able to offer this to other Customers. Note that they have not Capitalised any Software Development Costs onto the Balance Sheet - they have all been expensed against the Profit & Loss Account up to now.
This text from the Website is clearly very important and shows how new Regulation can drive demand for new Modules and increased Revenue etc. for EUSP:
“In July 2013, the Group was successfully awarded the Doffin contract, which has an initial term of seven years (with options for extensions for up to five more years) and is expected to contribute £0.4 million of revenue per annum, starting in January 2014. Doffin is the Norwegian government’s platform for the mandatory publication of notices of public contracts, and for economic operators to search and view contract notices of interest. The Group is now delivering the enhancements required for Doffin ahead of the system launch in December 2013. The enhancements include services for receipt of contract notices from external platforms, instant “as you type” full-text search, notice templates and other enhancements, all of which are expected to strengthen the Group’s competitive position in the EU. The Group is building these enhancements in a modular manner to allow Contracting Authorities to, subject to applicable legislation, procure and simply turn “on” additional modules when required to comply with the pending EU directives.”
I really like this line from the Company Website:
“The Group is particularly careful to avoid costly tenders, leads from unqualified sales organisations into new territories and invitations to perform demonstrations to less mature, low value prospects in very competitive markets.”
Having worked in IT Sales myself for many years, I understand fully that unless you are embedded with a Customer in the early Days of a Buying Journey then there is little chance of you Winning and the sheer Costs of Bidding can be immense - the CEO emphasised this to me at the Show and of course a tiny Company like EUSP simply does not have the resources to waste time on poorly qualified Bids.
Just below this bit it talks about how EUSP will work with Partners for elements such as Sales Lead Generation, Distribution in a Territory in which EUSP lack a Local Presence, and also in a Prime Contractor type of arrangement. I took the following text from the Annual Report 2016 which shows this Partnering in action:
“In the last quarter of 2016, the Group signed a distribution agreement with T-Systems Multimedia Solutions GmbH (“TSystems”), a subsidiary of information and communication technology provider T-Systems International GmbH, part of the Deutsche Telekom AG group. Under this agreement, T-Systems will distribute the Group’s CTM™ platform’s services in the German market and provide local user support and implementation services while the Group will provide the SaaS platform and back-end support.”
The Company Website can be viewed here:
Here is a link to the EUSP Portal which their Customers use and their Customers’ Suppliers also use to submit Tenders etc.:
Interestingly without Logging in you can click on some of the Links and for example the ‘Current tender opportunities’ Link gives a list of Contracts which are up for Tender.
When I worked for Fujitsu nearly a decade ago these kinds of Procurement/Tendering Software Systems were just appearing - at that time there were many of them and clearly competition was pretty fierce. However, since that time and after chatting with the EUSP Guys at the Share/Cenkos Tech Show, I got the impression that many competing Products had fallen by the wayside and EUSP seemed to have a strong capability in achieving Sales which I would say largely comes from the knowledge of the CEO and the way in which they work with potential Customers early on to define the Requirements and to install Pilot Solutions. Clearly this has a disadvantage in that there is only one CEO and it may be difficult to scale up his knowledge (having said that, I must say I was quite impressed by the knowledge the CFO seemed to have about the underlying Business and the Products, although he has not been with EUSP all that long - quite often I speak to CFOs who are great on the Numbers etc. but appear to know very little about the many facets of the Business which they are involved with, or they just tend to understand it at a very high level.)
I noticed recently that Proactis PHD, who are also listed on AIM, bought an eProcurement Business called ‘Perfect Commerce’ and this is a new, although sort of related, Strategic Direction for PHD. They have previously been focused on Software to help control Costs and maximise Revenue so there is some sort of synergy from combining the two. The obvious thought is that perhaps PHD will look to combine with EUSP in the future….
It was clear from my chat with the EUSP CEO that it was quite a competitive space - the fact they get in early on in the Sales Process was clearly important.
I took the text below from the 2016 Annual Report which supports what I have said above:
“Although there has been some consolidation, the European market remains, in the Board’s opinion, very fragmented with a handful of competitors in each of the EU and EEC countries. As a result, the Group is still experiencing strong pricing pressure in open tenders and therefore continues to focus on those sectors and sub-sectors of markets where it considers that reasonable or better pricing can be achieved for its CTMTM platform and related services.”
Country of Incorporation
The Company was incorporated as EU Supply Plc in England and Wales on 2 May 2013 with registration number 08513444.
Gävlegatan 16, 10tr
113 30 Stockholm.
EU Supply PLC
10 Queen Street Place
London EC4R 1AG
NOMAD (Nominated Adviser) and Broker
100 Wood Street
London EC2V 7AN
+44 (0)20 7601 6100.
Financial PR (Public Relations)
Newgate Communications LLP
Sky Light City Tower
50 Basinghall Street
London EC2V 5DE.
Legal Advisor (Solicitors to the Company)
asb law LLP
108 High Street
West Sussex, RH10 1AS.
Auditors and Reporting Accountant
10 Queen Street Place
London EC4R 1AG
Neville Registrars Limited
18 Laurel Lane
West Midlands B63 3DA.
Annual Reports can be found on this Page in PDF format:
At the Shares Mag Innovation Show I had a long chat with both Thomas Beergrehn the CEO and Fredrik Wallmark the CFO - both clearly understood the business very well and were very open to questions and discussion around the Company, the Products and their Marketplace and they certainly struck me as People who I could trust - that is a good thing !!
Their brief résumés from the Website are here:
“Thomas Beergrehn founded the Group and its precursor, having previously spent five years with McKinsey & Company. His expertise was in strategy under uncertainty and time to market process change, particularly in the communication/software sector. Projects included strategy and large scale change of time to market processes based on best practices from leading global companies like Microsoft, Oracle and Trilogy. Prior to working at McKinsey, Thomas was Commander of a naval patrol craft, following graduation at the top of his class at the Swedish Navy Academy. Thomas holds a PhD and an MSc in Systems Engineering from Case Western Reserve University, Cleveland USA, as well as an MSc in Engineering Physics from the University of Uppsala, Sweden (all with perfect GPAs). Thomas has been elected a member of the European Commission’s eTendering Expert Group.”
Note that last bit about links to the European Commission - he is clearly well connected.
“In August 2017 Fredrik Wallmark joined as Chief Financial Officer and a Director of the Company. Fredrik was previously CFO of Footway Group AB, an e-commerce retailer, which he joined from AcadeMedia AB (publ), one of the largest private educational providers in Northern Europe and listed on the Nasdaq Stockholm Stock Exchange, where he was Group Business Controller. Previously, he had been Internal Program Manager at Elite Hotels of Sweden AB and a management consultant at Applied Value in Stockholm and New York. Fredrik holds an MSc of Industrial Engineering and Management and a BA in Business Administration.”
Other Directors are covered here:
These can be viewed on this page - you might need to scroll down a little bit:
Recent Director Dealing
On the 31st January 2018 it was announced via an RNS that the Non-Executive Chairman David Cutler had bought 60,000 Shares at 14.75p (this brought his Holding up to 502,477 Shares).
On the 30th January 2018 (funnily enough this was the date of the Show and the CEO told me he had bought that morning), the CEO Thomas Beergrehn bought 65,000 Shares at 13.5p each - bringing his Holding up to 9,045,903 Shares (13.36% of the Company’s Share Capital).
On the 25th January 2018 the CFO Fredrik Wallmark bought 10,000 Shares at 12.5p each, bringing his Holding to 20,000 Shares.
Details on Major Shareholders are listed here:
It is pleasing to see Hargreave Hale and Herald Investment Management on that list.
While I was in SharePad to do the Calendar bit below I decided to chuck the ScreenShot below in for you as well (you gotta admit, I am so lovely to you Peeps !!):
The ScreenShot below is taken from SharePad - note that these dates are ‘Unconfirmed’ (if you click on the Picture it should grow bigger so you can see it):
That’s it for Part 1 - the final bit should follow next week and will cover the usual bits like Recent Trading, Valuation, Targets and the Chart situation.
Here is the ‘Stock Idea’ blog I wrote on FairFX FFX recently:
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