Computime Group’s leadership on its IPO, growth strategy and fintech expansion

Two key leaders from Computime Group, a future-thinking IT company and a respected name in the local tech sector for 45 years, Group CEO, Andrew Borg and Group CFO, Alistair Mangion, provide insights into the strategic decisions that have ensured a success story and discuss some exciting news: the upcoming launch of their share offer.

From innovative solutions in the AI, ICT, and fintech space to a robust growth trajectory, there is a lot to unpack about where the company is headed and how the share offer will help accelerate that progress. In this interview, Andrew and Alistair talk about the company’s vision, the strategic motivations behind the share offer, how they plan to navigate the next chapter in their growth story and what investors can expect from the Computime share offer.

Computime is well known in the enterprise IT space, however some might not be familiar with your company. 

Ever since its inception in 1979, Computime always operated in the business-to-business space. Whilst our brand is well known in the enterprise world, we have never been present in the consumer market. As a company we grew organically maintaining a healthy profit and growth rate over the years. In the last three years we achieved an Operating Profit CAGR (Compounded Annualised Growth Rate) of 22 per cent.

Do you foresee any major changes in the Computime business model in the coming years?

We operate three different lines of business, the System Integration, Business Software and Fintech divisions, each having different growth rates and are independently profitable. By design we do not depend on any singular contract, client or industry. Our model is resilient and relatively predictable. The good news in all this is that we foresee continuity.  

In the past months our longstanding senior management have been invited to participate in the ownership of the company and we are now floating up to 37 per cent of our shareholding.  Our team’s experience and agility allow us to ensure we can both address future challenges and continue to innovate and grow the business.

Looking back, what specific business decisions do you believe reflect your company’s strong performance today and growth potential leading up to this share offer and beyond?

Traditionally IT depended on project work. As a result, revenue was very dependent on a steady stream of projects. This leads to many spikes and dips in revenue and stresses cashflow and profitability. At Computime, we have always been aware of this challenge so starting many years back, we took the necessary steps to de-risk the business by consciously identifying opportunities to increase our subscription, support and maintenance business. In practice this means that at the start of the financial year, a large portion of our annual revenue is already contracted. Consequently, this allows for better business planning and smoother operations.

Does Computime have a dividend policy and what are expectations for dividend payments going forward?

Computime Group has a strong dividend track record, made possible by (a) years of sustainable growth supported by the substantial recurring revenue (i.e. that portion of revenue that is renewable on a yearly basis); and (b) a business model characterised by particularly robust cash flow generation. Going forward, the Boards’ policy is to recommend a dividend distribution of not less than 60 per cent of the profit after tax in each year. As for financial years 2024 and 2025, the company is planning to distribute 75 per cent and 70 per cent of the Group’s distributable profits respectively, subject to the profit forecasts for these years being met. Based on the planned payout ratio and the Company’s profit projections, a NET dividend yield of 5.5 per cent and 6.1 per cent (Gross 7.9 per cent and 8.9 per cent) is being projected for financial years 2024 and 2025 respectively.

How have the financial metrics improved over the years, and what do they indicate about your business model? 

The Group’s financial performance has been quite impressive over recent years, with an Operating Profit annualised growth rate of 22 per cent between financial years 2020 and 2023. We are expecting double digit growth to continue over the coming years, with each one of the three divisions contributing to this profit growth. Balance sheet metrics are strong as well, with retained earnings and cash reserves at very good levels, and zero long-term debt. We are very careful in our working capital management and especially in managing project cash flows and in credit control.  

We focus on recurring revenue or that portion of total revenue that is renewable every year, like maintenance agreements, managed services and software subscriptions. In fact, 66 per cent of the total Gross Profit for financial year 2023 was derived from this recurring revenue. This is a key metric, and we have been able to grow it slowly but steadily over many years. Strong recurring revenue means sustainable profits and cash flows, which in turn lead to dividend stability for investors. 

 Interested investors can access the prospectus on Computime’s website.

Prospective investors are urged to read the prospectus before making an investment decision in order to fully understand the potential risks and rewards associated with the decision to invest in the shares forming part of the share offer. The approval of the prospectus by the MFSA should not be understood as an endorsement of the shares forming part of the offer or admitted to trading on a regulated market.