Plexure Group leaps after renewing contract with anchor customer, Macca’s: Guides to significantly higher earnings

While the S&P/ASX All Tech Index (ASX: XTX) may have been trading sideways today, shares in NZ smallcap Plexure Group (ASX: PX1) were up 82% at the close after the cloud-based customer relationship management (CRM) solution’s provider consolidated its inroads with fast-food giant McDonald’s.

While Plexure is no stranger to McDonald’s – which currently holds a 9.41% stake in the company - both parties have agreed to a revised commercial model having concluded that the previous Master Services Agreement was not fit for purpose.

As well as pricing issues, it’s understood the previous arrangements did not reflect the importance of Plexure’s platform and solution to the McDonald’s Affiliates/Licensees.

As a result, the company has agreed to provide its platform to McDonald’s – the company’s single biggest customer - for the next five years, for net positive cashflow per annum, subject to operational performance.

Plexure’s digital customer engagement platform and unique data-driven capabilities supports 147m customer interactions daily for McDonald’s.

Transformation underpins group profitability

Management advised investors that the renegotiation of contracts completes the transformation of the Plexure division under the new management team in place following the merger of TASK and Plexure.

Mid-August 2021 Plexure entered into a conditional agreement to buy Sydney-based transaction platform provider TASK Retail for $120m, paid for in a mixture of cash and Plexure ordinary shares.

The recent post-merger transformation, adds CEO, Dan Houden helps leverage the company’s combined technology stack to provide an end-to-end cloud engagement and transaction platform at scale for the global QSR and hospitality sector.

“Plexure’s technology powers digital loyalty, personalisation, ordering and payment via the McDonald’s mobile app for customers across 66 markets, including major markets such as Italy and Japan,” the company notes.

“[The] TASK division continues to deliver profitable revenue growth through its enterprise solution to stadiums, casinos, multi-site QSR or casual dining and large-scale food services companies across the globe.”

Earnings guidance

Overall, the company expects total revenue of about NZ$56m ($50.5m) for the year ending March 31, up 72% from NZ$32.6m in the previous year.

Earnings (EBITDA) adjusted for non-cash employee share charges of NZ$5.2m, is expected to be a profit of NZ$3.7m for the year, compared with an adjusted earnings (EBITDA) loss of NZ$13.1m last financial year.

Consensus does not cover this stock.

Based on Morningstar’s fair value of $0.58 the stock appears to be undervalued.

Late-May Ord Minnett upgraded Plexure to Speculative Buy from Hold, and believes the workforce is right-sized to facilitate global growth in key customer McDonalds and capitalise on the synergies from merging TASK with Plexure.

The broker’s target falls to 36c from 50c.

Plexure Group share price.