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№ 074 35 filings · 2021-05-10 → 2026-04-27

CHECKIT PLC

CKT
Technology Market cap £27m Overall fit 620 /1000

Strong fit on valuation discipline (cheap on EV/ARR with sale-process optionality) and operating leverage (post-restructuring fixed cost base inflecting), partially undermined by only a partial AI-receiver angle — Checkit is using AI internally and embedding it in product, but is not a clear picks-and-shovels beneficiary of AI capex.

Fair value range 32p–52p Mid case · £45m
Absolute upside +68.1% vs current market cap
Conviction 3/5 confidence in undervalued call
Supports the call
  • Formal Sale Process provides external valuation anchor
  • 96% recurring revenue with clean SaaS metrics (95% GRR, 104% NRR)
  • Net cash balance sheet limits permanent capital loss
Limits the call
  • Standalone vs takeover valuation gap is binary on the sale outcome
  • Sub-scale absolute profit means multiple does most of the valuation work
Methodology

EV/ARR multiple with EV/Sales and takeover-comp cross-checks

In one line · bull case

A debt-free, newly-profitable hardware-enabled SaaS platform trading at ~1.6x EV/ARR with a live Formal Sale Process providing both a valuation anchor and a clear catalyst.

In one line · biggest risk

The Formal Sale Process may conclude without a bid, leaving a sub-scale standalone with stagnant top-line growth and meaningful customer concentration.

Drivers
AI beneficiary 45 /100
Asset Intelligence is a real AI/ML module embedded in hardware-software workflows, but Checkit is more an AI user/embedder in vertical SaaS than a direct picks-and-shovels beneficiary.
Operating leverage 78 /100
High fixed-cost base, 72% gross margin, 96% recurring revenue and a materially lower post-restructuring breakeven point — incremental ARR should drop disproportionately to profit.
Earnings vs expectations 60 /100
Pattern of beats since FY26 reset, but tarnished by the April 2025 guidance cut following earlier in-line years.
Growth momentum 40 /100
Headline ARR down 1% (constant currency +2%); underlying +5% ex one US customer — broadly flat rather than accelerating.
Moat 50 /100
Switching costs from hardware integration and embedded workflows (95% GRR) provide a real but narrow moat; not a network-effect business.
Earnings quality 60 /100
Reported EBITDA flattered by £1.8m capitalised development; £1.1m of non-recurring items in FY26 and £32m unrecognised tax losses point to ongoing one-offs but no aggressive accounting.
Management quality 55 /100
Delivered the cost reset and EBITDA inflection on plan; aborted Crimson Tide merger and slow ARR growth temper the score.
Cyclicality 30 /100
Mission-critical compliance/monitoring SaaS with high renewal rates is structurally defensive, though sales cycles lengthen in downturns.
Leverage 8 /100
Fortress balance sheet: £3.0m net cash, no debt, no refinancing in FY26.
Value-trap signals · 4
  • Revenue declined 2% in FY26 with only ~2% constant-currency ARR growth
  • Material guidance cut in April 2025 following multiple in-line years
  • Aborted Crimson Tide merger consumed cash and management bandwidth
  • Persistent chairman commentary on share-price disconnect across multiple years signals structural investor scepticism

CHECKIT PLC (CKT) — Investment Research Note

Executive summary

Checkit operates a hardware-enabled SaaS platform that combines IoT sensors, digital workflows and analytics for "deskless" frontline operations across healthcare, biopharma, retail and facilities management. Across the five-year period the company has executed a transition from a low-margin, project-based hardware business into a 96%-recurring software model — culminating in a structural cost reset (£4m annualised savings, headcount cut from 165 to 117) that delivered Adjusted EBITDA profitability of £0.3m in FY26 versus a £2.3m loss in FY25 2026-04-21 final results. The single most important point for valuation today is the Formal Sale Process announced on 26 March 2026: the Board commenced it after receiving six unsolicited expressions of interest, framing the current public-market valuation as failing to reflect a now-profitable, debt-free recurring-revenue platform.

Fair value estimate

  • Fair value range: 32p – 52p per share (implied market cap £35m – £56m)
  • Mid-point: ~42p / £45m
  • Methodology: EV/ARR multiple, sense-checked against EV/Revenue and the Formal Sale Process backdrop. With ARR of £14.3m, net cash of £3.0m, no debt, and a freshly-profitable Adjusted EBITDA run-rate (H2 FY26 alone was £0.8m EBITDA, implying ~£1.6m annualised), peer SaaS multiples of 2.0x – 3.5x ARR feel reasonable for a sub-scale but profitable, hardware-moated platform.
    • 2.0x ARR + £3m cash = £31.6m mcap = ~29p (downside, no takeover)
    • 2.75x ARR + £3m cash = £42.3m mcap = ~39p (central, standalone fair)
    • 3.5x ARR + £3m cash = £53.1m mcap = ~49p (upside / takeover case)
  • Cross-check (EV/Sales): 2.5x – 3.5x £13.7m revenue ⇒ £37m – £51m EV ⇒ £40m – £54m mcap ⇒ 37p – 50p.
  • Cross-check (takeover comps): hardware-enabled SaaS deals in this segment have historically cleared at 3-5x ARR; the Board's commentary that fair value is "well below" current implies they expect bids above the current 24.5p.
  • vs. current £26.5m mcap (~24.5p): mid-point upside +63%; range spans +30% to +112%.

Sector context

ICB classification (Technology / Technology) is correct — specifically vertical SaaS + Industrial IoT. Quality is above average on revenue mix (96% recurring, 95% gross retention), in line on growth (underlying ARR +5%), and above average on balance sheet (net cash, no debt). Margins are still sub-scale (Adjusted EBITDA ~2%) but the fixed-cost base post-restructuring sets up strong incremental drop-through. Closest UK-listed comparables: Crimson Tide (now-aborted merger target, similar size/profile), Eagle Eye Solutions and Cerillion for the SaaS framing; IQGeo for the vertical-IoT-software framing.

Investment thesis

  1. Cheap recurring-revenue platform with realistic takeover optionality. The Formal Sale Process commenced 26 March 2026 followed six unsolicited inbounds; the Board explicitly states the public valuation does not reflect the asset 2026-04-21 final results. Even absent a deal, ~1.6x EV/ARR is well below SaaS norms.
  2. Cost reset has visibly created operating leverage. Annualised cost base cut by £4m, headcount from 165 → 117, EBITDA breakeven ARR threshold materially lower. H2 FY26 delivered £0.8m EBITDA and was cash-generative on broadly flat ARR — incremental ARR should now drop disproportionately to profit 2026-04-21 final results.
  3. Hardware-enabled moat protects against AI commoditisation. Unlike pure application-layer SaaS, Checkit integrates physical sensors, embedded workflows and Asset Intelligence (AI/ML) into customer operations — high switching costs (95% GRR, 104% NRR ex-one customer) and a defensible data flywheel as Asset Intelligence accumulates structured operational data 2026-04-21 final results.

Key risks

  1. Formal Sale Process may not deliver. "There can be no certainty that any offers will be made… that any sale will be concluded" 2026-04-21 final results. If the process ends without a bid, the share price would likely give back the recent takeover premium.
  2. Customer concentration and recent US churn. One customer represents 13% of revenue; FY26 ARR was held back by a £0.4m contraction from a single US customer 2026-04-21 final results, 2025-08-26 interims. A repeat would erase underlying ARR growth.
  3. Sub-scale balance sheet for a small-cap. Net cash of only £3.0m and an FY26 cash outflow of £2.1m provides limited buffer if profitability slips before the H2 trajectory annualises (not disclosed but inferred from balance sheet).

Operating leverage

This is a classic operating-leverage story now in inflection. The visible mechanics: revenue was essentially flat year-on-year (£14.1m → £13.7m), yet Adjusted EBITDA swung +£2.6m (loss £2.3m → profit £0.3m). The H1→H2 FY26 EBITDA progression (–£0.5m to +£0.8m) on broadly similar revenue is even more striking. Gross margin is structurally high at 72% (FY26: £9.9m gross profit / £13.7m revenue). Operating costs charged to the income statement fell 18% to £9.8m, and 96% of revenue is now recurring — meaning each incremental £1m of ARR carries near-gross-margin contribution (~70p) against an essentially fixed cost base 2026-04-21 final results. A 10-20% revenue beat would plausibly more than double operating profit at this scale: 15% on £13.7m = £2m extra revenue × 70% GM = ~£1.4m incremental EBITDA, on a base of £0.3m. Management's own framing explicitly leans on "inherent operating leverage" and a "materially lower EBITDA breakeven point." Caveat: ~£1.8m of development costs are still being capitalised, so reported EBITDA flatters true cash margins.

Value-trap signals

  • Revenue stagnation (–2% reported, +2% constant-currency ARR) rather than the double-digit SaaS growth the multiple framework assumes.
  • Repeated guidance reset in FY25 (April 2025 strategic update cut prior FY25 LBITDA guidance further; growth guidance reduced to 2-5%) followed two prior years of in-line/beat results.
  • Aborted Crimson Tide merger consumed £0.3m of professional fees and management attention through 2024-25 2025-08-26 interims.
  • Repeated chairman commentary on the "disparity" between performance and share price across three consecutive annual reports suggests structural investor scepticism, not just market mispricing.

Earnings vs. expectations

  • FY23 trading update (Feb 2023): ARR £11.5m vs consensus £10.8m — BEAT.
  • FY24 (Apr 2024): in line with Board/market expectations; LBITDA £3.4m, a 46% improvement — MET/BEAT.
  • H1 FY25 (Sep 2024): ARR +9%, in line — MET.
  • FY25 outlook (Apr 2025 strategic update): management explicitly CUT prior guidance — growth now 2-5% (vs previously higher), LBITDA worse than the £0.7m loss previously guided.
  • H1 FY26 (Aug 2025): in line with reset expectations — MET.
  • FY26 trading update (Feb 2026): Adjusted EBITDA at break-even ahead of expectations; net cash £3.0m ahead of expectations — BEAT.
  • FY26 final results (Apr 2026): EBITDA £0.3m vs break-even indicated — BEAT again.

Pattern: small beats during 2022-24, a notable downgrade in April 2025, then sequential beats on the reset bar through 2025-26. The current trajectory is meet-to-beat, but on a lowered base.

Conviction

3 — moderate. Anchored by: (i) clean, well-disclosed AIM accounts with consistent definitions of ARR/NRR/GRR; (ii) the Formal Sale Process providing a market-tested valuation anchor; (iii) recurring revenue mix and net-cash balance sheet limit downside scenarios. Limited by: (a) wide range between standalone fair value (~30p) and takeover-clearing levels (~50p+) hinges on the sale process outcome — binary in nature; (b) sub-scale absolute profit (£0.3m EBITDA) means the EV/ARR multiple is doing most of the work in the valuation.

Filings consulted · 39

Every document the LLM read for this note. Click any row to open the source.

  1. 2026-04-27Posting OF Annual Report And Notice OF Agm2026-04-27_9539692_posting-of-annual-report-and-notice-of-agm.md0.95
  2. 2026-04-21Final Results2026-04-21_9529267_final-results.md1.00
  3. 2026-02-19Fy26 Trading Update2026-02-19_9437269_fy26-trading-update.md0.85
  4. 2025-08-26Interim Results2025-08-26_9071340_interim-results.md0.77
  5. 2025-06-05Result OF Agm2025-06-05_8915578_result-of-agm.md0.26
  6. 2025-05-29Posting OF Annual Report And Notice OF Agm2025-05-29_8901404_posting-of-annual-report-and-notice-of-agm.md0.81
  7. 2025-04-24Final Results2025-04-24_8843078_final-results.md0.65
  8. 2025-04-17Notice OF Results And Investor Presentation2025-04-17_8835708_notice-of-results-and-investor-presentation.md0.46
  9. 2025-04-08Strategic Update2025-04-08_8818389_strategic-update.md0.62
  10. 2025-03-11Offer Update2025-03-11_8772261_offer-update.md0.52
  11. 2025-02-11Recommended All Share Merger With Crimson Tide2025-02-11_8730280_recommended-all-share-merger-with-crimson-tide.md0.49
  12. 2024-09-12Interim Results2024-09-12_8412411_interim-results.md0.58
  13. 2024-09-04Notice OF Results And Investor Presentation2024-09-04_8398123_notice-of-results-and-investor-presentation.md0.46
  14. 2024-04-25Final Results2024-04-25_8155604_final-results.md0.45
  15. 2024-04-17Notice OF Results And Investor Presentation2024-04-17_8143081_notice-of-results-and-investor-presentation.md0.32
  16. 2024-02-15Trading Update2024-02-15_8038754_trading-update.md0.38
  17. 2024-02-05Investor Presentation2024-02-05_8020754_investor-presentation.md0.32
  18. 2023-09-14Interim Results2023-09-14_7754321_interim-results.md0.41
  19. 2023-08-24Investor Presentation2023-08-24_7714170_investor-presentation.md0.32
  20. 2023-08-10Trading Update Notice OF Results Amp Contract2023-08-10_7687166_trading-update-notice-of-results-amp-contract.md0.38
  21. 2023-06-08Result OF Agm2023-06-08_7566935_result-of-agm.md0.14
  22. 2023-05-15Posting OF Annual Report And Notice OF Agm2023-05-15_7527477_posting-of-annual-report-and-notice-of-agm.md0.24
  23. 2023-04-13Notice OF Results And Investor Presentation2023-04-13_7489387_notice-of-results-and-investor-presentation.md0.17
  24. 2023-02-16Trading Update And Notice OF Results2023-02-16_7482095_trading-update-and-notice-of-results.md0.21
  25. 2023-01-05Contract Wins And Investor Presentation2023-01-05_7310203_contract-wins-and-investor-presentation.md0.17
  26. 2022-09-15Interim Results2022-09-15_7316231_interim-results.md0.23
  27. 2022-09-06Investor Presentation2022-09-06_7211554_investor-presentation.md0.17
  28. 2022-08-11Trading Update And Notice OF Interim Results2022-08-11_7060335_trading-update-and-notice-of-interim-results.md0.23
  29. 2022-06-09Result OF Agm2022-06-09_6874997_result-of-agm.md0.07
  30. 2022-05-13Posting OF Annual Report And Notice OF Agm2022-05-13_6890547_posting-of-annual-report-and-notice-of-agm.md0.24
  31. 2022-02-17Trading Update2022-02-17_6851465_trading-update.md0.21
  32. 2021-11-26Result OF Placing2021-11-26_6641614_result-of-placing.md0.17
  33. 2021-11-26Proposed Placing2021-11-26_6640454_proposed-placing.md0.17
  34. 2021-09-16Interim Results2021-09-16_6865193_interim-results.md0.23
  35. 2021-08-12Trading Update And Notice OF Interim Results2021-08-12_6501153_trading-update-and-notice-of-interim-results.md0.23
  36. 2021-06-29Capital Markets Day2021-06-29_6470006_capital-markets-day.md0.24
  37. 2021-06-03Result OF Agm2021-06-03_6615468_result-of-agm.md0.07
  38. 2021-05-13Trading Update2021-05-13_6372179_trading-update.md0.09
  39. 2021-05-10Posting OF Annual Report And Notice OF Agm2021-05-10_6314081_posting-of-annual-report-and-notice-of-agm.md0.10

This research note was authored by a large language model after reading 35 regulatory filings published between 2021-05-10 and 2026-04-27. Each citation refers to a specific RNS announcement in the underlying data set. The note is an opinion, not advice. Do your own work before risking capital.