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№ 301 29 filings · 2021-12-15 → 2026-10-08

MADE TECH GROUP PLC

MTEC
Technology Share price 50.40p Market cap £72m Overall fit 630 /1000

Strong fit for the strategy: direct AI-implementation revenue in a structural growth market, debt-free balance sheet with fair-to-cheap valuation, and visible beat-and-raise momentum. Downgraded from the 700s because operating leverage is services-scale rather than software-scale, and customer concentration plus small AIM-cap limit the quality score.

Fair value range 50p–65p Mid case · £84m
Absolute upside +17.3% vs current market cap
Conviction 3/5 confidence in undervalued call
Supports the call
  • FY27 revenue well-covered by £115m contracted backlog
  • Company-provided FY27 guidance brackets forecast tightly
  • Comparable UK digital-services peers exist for cross-check
Limits the call
  • Historical margin volatility and prior SaaS impairments
  • Small-cap AIM liquidity and customer concentration cap confidence in multiple
Methodology

EV/forward-EBITDA cross-checked with forward P/E

In one line · bull case

Debt-free, founder-led UK-sovereign public-sector IT services specialist capturing structural AI-implementation demand at an undemanding valuation with 10%+ operating-margin runway.

In one line · biggest risk

Customer concentration combined with government procurement timing lumpiness could cause a single-vertical setback (as already seen in Health) to disproportionately hit guidance.

Drivers
AI beneficiary 65 /100
Directly captures UK public-sector AI implementation revenue; built DfE's first production AI service and Government Digital Service security delivery.
Operating leverage 60 /100
Services business with meaningful fixed-cost absorption — FY26 revenue +27% drove EBITDA +69% — but gross margin only 30% caps upside vs software.
Earnings vs expectations 70 /100
Consistent material beats and consensus upgrades through FY25-26 following uneven FY23 miss.
Growth momentum 78 /100
Backlog £83.5m → ~£115m post year-end; FY27 guidance upgraded; H1 FY27 expected to be strongest half-year ever on bookings.
Moat 40 /100
Growing trusted-partner status and framework positions, but IT services competition remains broad and switching costs modest.
Earnings quality 65 /100
Operating cash £4.2m vs £3.4m net profit is reasonable; prior intangible impairments and share-based payment adjustments warrant some care.
Management quality 60 /100
Founder-led with proven delivery track record; mixed capital allocation history (SaaS write-down) offset by disciplined recent execution.
Cyclicality 25 /100
UK Government digital spending is structurally defensive and counter-cyclical in a fiscal squeeze.
Leverage 5 /100
£14.5m net cash, zero debt, modest lease liabilities — fortress balance sheet.
Value-trap signals · 4
  • Health & Life Sciences vertical in structural decline following DCH2 framework exclusion
  • £4.3m SaaS intangible impairment in FY24 reflects prior misallocated growth capex
  • Top-4 customer concentration at ~57% of revenue
  • Share-based payment dilution ~4% annually

Made Tech Group PLC (MTEC) — Research Note

Executive summary

Made Tech is a UK-public-sector-focused digital, data and technology services provider that modernises legacy government IT, builds citizen-facing digital services, and increasingly embeds AI into public-service delivery. Across the covered period the business transformed from a loss-making post-IPO growth story (FY22-23) into a profitable, scaling operator — FY26 revenue up 27% to £58.9m, adjusted EBITDA up 69% to £5.9m, net cash £14.5m, and a post-year-end backlog of ~£115m underpinning upgraded FY27 guidance of £63-66m revenue and £6.3-6.6m EBITDA 2026-09-29 final results. The single most important point for valuation today: the shares trade on roughly 20x FY26 adjusted EPS and ~0.9x EV/FY27 sales, which is fair-to-cheap for a debt-free, founder-led, 27%-growing, AI-adjacent IT services specialist with highly visible contracted revenue.

Fair value estimate

  • Fair value range: 50p – 65p per share (implied market cap £73m – £95m)
  • Methodology: Blended EV/forward-EBITDA (10-12x FY27 guidance mid ≈ £6.45m) cross-checked with P/E (16-20x adjusted EPS trending to ~3.0p in FY27 from 2.38p in FY26).
  • Key assumptions: FY27 delivers in-line with upgraded guidance; EBITDA margin continues to expand toward low-teens; net cash of ~£15m preserved; dilution from LTIP/SAYE ~4-5% annually.
  • Current mcap: £70.2m. Midpoint fair value mcap: ~£84m. Upside to midpoint: ~17%.

Sector context

Technology / IT services. The quality / growth / leverage profile sits above typical UK small-cap IT services peers: 27% organic revenue growth, net cash balance sheet, UK-sovereign public-sector positioning that is structurally advantaged post-Horizon and under current procurement reform. Closest listed peer is Kainos (KNOS) — public-sector-heavy UK digital services, trades on richer multiples (~15-20x PE at larger scale). Other reference points: Softcat (SCT) (public-sector reseller, different model), Netcall (NET) (vertical SaaS/local government). On a per-pound-of-revenue basis, MTEC is materially cheaper than Kainos, reflecting scale, AIM listing, and historical delivery wobbles.

Investment thesis

  • Structural tailwind the company is clearly capturing: UK Government is explicitly moving procurement toward mid-market UK-sovereign suppliers, and the £40m consortium award post-year-end (largest in Made Tech's history) is direct evidence that the Group is being favoured as the "Big IT" names (Capita/Fujitsu post-Horizon) lose share 2026-09-29 final results.
  • Operating leverage is now visible, not promised: FY26 revenue +27% drove adjusted EBITDA +69% and margin from 7.5%→10.0% while admin expenses grew just 5.5%, indicating meaningful fixed-cost absorption as contractor mix fell and billable utilisation rose. CFO explicitly says further utilisation and overhead-control gains are available 2026-09-29 final results.
  • AI exposure is monetised, not aspirational: Made Tech built DfE's first production AI service, is Strategic IT and Security Delivery Partner to Government Digital Service under a £19m contract, and the new "Autonomous Public Services" business line directly captures AI implementation revenue. Public-sector AI needs an implementation partner, and this is one of the few UK-sovereign scaled options 2026-09-29 final results.

Key risks

  • Customer concentration: Four customers = 57% of FY26 revenue (Customer A alone 22%, up from 19%). Loss of a single central-government relationship would be material 2026-09-29 final results, note 5.
  • Health & Life Sciences in decline: Failure to secure a place on NHS Digital Capability for Health 2 framework has caused the H&LS vertical to shrink, and management guides to "a materially lower contribution from Health & Life Sciences" in FY27 — a structural, not cyclical, problem 2026-09-29 final results.
  • People-business margin fragility: Gross margin fell 160bps to 30.4% in FY26 due to "competitive market conditions and investments in specialist talent"; wage inflation, contractor ratios, and public-sector day-rate pressure can quickly compress a 10% EBITDA margin 2026-09-29 final results.

Operating leverage

Made Tech is a services business with partial but not pure operating leverage. Cost base is dominated by delivery headcount (£36.7m staff costs on £58.9m revenue, i.e. ~62% of revenue is people) which scales with billable hours. The leverage comes from: (i) overhead/admin costs (£12.0m in FY26, grew only 5.5% vs revenue +27%) that behave as fixed cost; (ii) utilisation (billed days / available days) which has recovered from 70% in FY23 to above 80% currently; and (iii) contractor-to-permanent mix shift that reduces unit cost of delivery as permanent headcount scales. The company explicitly quantifies: FY26 revenue +27% → EBITDA +69% → operating profit +162%. Extrapolating conservatively, a 10-20% revenue beat on FY27 (£70-80m vs £64.5m guided) at current unit economics would plausibly deliver EBITDA of £8-10m vs £6.45m guided, i.e. a 10-20% revenue surprise could translate to 25-55% additional EBITDA. This is meaningful but not "multiples of profit" software-style leverage — it is a scaled consultancy benefiting from utilisation and overhead absorption, scoring in the 55-65 range on the user's 0-100 scale rather than 80+.

Value-trap signals

  • H&LS vertical in structural decline (framework exclusion, not cyclical)
  • £4.3m intangible impairment in FY24 on failed SaaS products (Technology Platforms + Academy) — prior strategic capital allocation history is mixed
  • Sales bookings volatile: £81.3m (FY25) → £50.7m (FY26) — lumpy quarter-to-quarter government procurement
  • Customer concentration (top 4 = 57% of revenue)
  • Share-based payment dilution: ~6m options exercised/granted annually vs 149m shares — ~4% annual dilution

None are individually fatal; collectively they justify a conviction haircut rather than a value-trap flag.

Earnings vs. expectations

The last ~24 months show a consistent beat-and-raise pattern. Entering FY26, consensus was £50.1m revenue / £3.9m EBITDA; by December 2025 trading update, management guided "significantly ahead" with FY26 revenue c.10% higher 2025-12-10 trading statement. By February 2026 H1 release, consensus had already moved to £55.1m / £4.8m and management said FY26 "materially ahead" 2026-02-26 interim. June 2026 trading update: £58.9m / £5.9m — ahead of recently-upgraded market expectations 2026-06-30. Post FY26 year-end, FY27 guidance upgraded again in August 2026 following the £40m contract win. The FY22-FY24 period was less clean — FY23 missed revenue (May 2023 warning on client rephasing) and FY24 revenue declined, so the 5-year pattern is "pattern of misses in FY23-24, consistent material beats FY25-26."

Conviction

Conviction: 3 (moderate).

Anchors: (i) FY27 is heavily underpinned by £115m contracted backlog so near-term EBITDA has high visibility; (ii) company-provided FY27 guidance brackets the forecast tightly (£63-66m revenue, £6.3-6.6m EBITDA); (iii) a founder-led, debt-free, cash-generative public-sector pure-play is a relatively narrow asset to value — multiple comparable peers exist.

Caveats: (i) FY22-24 earnings quality was uneven (SaaS impairments, exceptional items, operating losses) making longer-term through-cycle margin assumptions harder to anchor; (ii) small-cap AIM listing with ~146m shares outstanding plus ~6m options means ownership overhang and liquidity constraints could structurally cap the multiple.

Filings consulted · 32

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

  1. 2026-10-08Notice OF Agm Amp Posting OF Annual Report2026-10-08_9812284_notice-of-agm-amp-posting-of-annual-report.md0.95
  2. 2026-09-29Final Results2026-09-29_9795224_final-results.md1.00
  3. 2026-06-30Fy26 Full Year Trading Update2026-06-30_9642947_fy26-full-year-trading-update.md0.85
  4. 2026-02-26Interim Results2026-02-26_9447660_interim-results.md0.77
  5. 2025-12-10Trading Statement2025-12-10_9286456_trading-statement.md0.72
  6. 2025-11-11Result OF Agm2025-11-11_9226652_result-of-agm.md0.26
  7. 2025-10-16Notice OF Agm2025-10-16_9174182_notice-of-agm.md0.26
  8. 2025-09-24Final Results2025-09-24_9127402_final-results.md0.65
  9. 2025-06-26Fy25 Trading Update2025-06-26_8948537_fy25-trading-update.md0.55
  10. 2025-02-05Half Year Results2025-02-05_8721935_half-year-results.md0.58
  11. 2025-01-23Notice OF Half Year Results2025-01-23_8701936_notice-of-half-year-results.md0.58
  12. 2024-11-20Result OF Agm2024-11-20_8562436_result-of-agm.md0.20
  13. 2024-11-20Agm Statement2024-11-20_8560457_agm-statement.md0.26
  14. 2024-10-21Notice OF Agm Amp Posting OF Annual Report2024-10-21_8497385_notice-of-agm-amp-posting-of-annual-report.md0.62
  15. 2024-09-30Audited Final Results 20242024-09-30_8448101_audited-final-results-2024.md0.45
  16. 2024-06-27Full Year Trading Update2024-06-27_8280738_full-year-trading-update.md0.38
  17. 2024-02-26Half Year Results2024-02-26_8055994_half-year-results.md0.41
  18. 2024-02-26Half Year Results2024-02-26_8054784_half-year-results.md0.41
  19. 2024-02-01Trading Update And Notice OF Results2024-02-01_8016258_trading-update-and-notice-of-results.md0.38
  20. 2023-10-26Result OF Agm2023-10-26_7841749_result-of-agm.md0.14
  21. 2023-09-20Notice OF Agm And Posting OF Annual Report 20232023-09-20_7767782_notice-of-agm-and-posting-of-annual-report-2023.md0.24
  22. 2023-09-13Audited Final Results 20232023-09-13_7751744_audited-final-results-2023.md0.25
  23. 2023-05-02Trading Update2023-05-02_7507502_trading-update.md0.21
  24. 2023-02-23Half Year Results2023-02-23_7504996_half-year-results.md0.23
  25. 2023-02-01Trading Update And Notice OF Results2023-02-01_7290819_trading-update-and-notice-of-results.md0.21
  26. 2022-10-19Result OF Agm Deferred Shares Amp Issue OF Equity2022-10-19_7384966_result-of-agm-deferred-shares-amp-issue-of-equity.md0.07
  27. 2022-09-23Notice OF Agm And Posting OF Annual Report 20222022-09-23_7120496_notice-of-agm-and-posting-of-annual-report-2022.md0.24
  28. 2022-09-12Audited Final Results2022-09-12_7273840_audited-final-results.md0.25
  29. 2022-08-26Notice OF Final Results And Online Presentations2022-08-26_7102607_notice-of-final-results-and-online-presentations.md0.25
  30. 2022-08-19Trading Update2022-08-19_7131647_trading-update.md0.21
  31. 2022-02-28Made Tech Group Interim Results2022-02-28_6959948_made-tech-group-interim-results.md0.23
  32. 2021-12-15Trading Update And Notice OF Interim Results2021-12-15_6831880_trading-update-and-notice-of-interim-results.md0.23

This research note was authored by a large language model after reading 29 regulatory filings published between 2021-12-15 and 2026-10-08. 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.