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№ 258 27 filings · 2021-12-15 → 2026-06-30

MADE TECH GROUP PLC

MTEC
Technology Share price 43.60p Market cap £65m Overall fit 570 /1000

Partial fit: genuinely cheap on FY26 numbers (~7x EV/EBITDA) with fortress balance sheet and accelerating momentum, but AI exposure is indirect (implementer, not tooling vendor) and operating leverage is services-industry moderate rather than software-industry high.

Fair value range 48p–68p Mid case · £87m
Absolute upside +34% vs current market cap
Conviction 4/5 confidence in undervalued call
Supports the call
  • Clean disclosure and reconciliation of adjusted vs statutory numbers
  • Contracted backlog gives genuine revenue visibility
  • FY26 delivered beat with margin expansion — thesis is demonstrating in prints
Limits the call
  • FY27 EBITDA is forecast not delivered
  • Software/M&A optionality hard to value; political-cycle risk to gov procurement timing
Methodology

Forward EV/EBITDA on services multiple, cross-checked to backlog coverage

In one line · bull case

Cheap (~7x EV/EBITDA) UK public-sector digital-transformation services business with net cash, accelerating revenue and margins, and multi-year backlog visibility from the June 2025 Spending Review.

In one line · biggest risk

Political-cycle and procurement-timing risk: sales bookings are lumpy (H1 FY26 -68% yoy) and a repeat of the FY23 profit warning is possible if large contract awards slip.

Drivers
AI beneficiary 55 /100
Delivery partner for UK gov AI/data programmes — genuine picks-and-shovels exposure but not proprietary AI IP.
Operating leverage 60 /100
Demonstrated ~2.5x leverage: FY26 revenue +27% drove EBITDA +69% via fixed admin base and utilisation gains.
Earnings vs expectations 75 /100
Three consecutive beats and multiple consensus upgrades in FY25-FY26 following the FY23 profit warning.
Growth momentum 78 /100
Accelerating: revenue growth 20%→27% FY25 to FY26, £19m GDS contract, backlog +52% yoy at FY25.
Moat 35 /100
Framework panel positions and incumbent relationships help, but competitive market with no structural moat.
Earnings quality 60 /100
Positive and improving cash conversion; £4.3m FY24 IP impairment is a modest quality concern.
Management quality 60 /100
Founder-CEO delivered growth and adapted after FY23 setback; capital allocation on IP has been mixed.
Cyclicality 30 /100
UK public sector spending is defensive; some political-cycle sensitivity around elections and spending reviews.
Leverage 5 /100
£14.5m net cash on £57m market cap, debt-free, IFRS16 lease liabilities only.

MADE TECH GROUP PLC (MTEC) — Investment Research Note

Executive summary

Made Tech is a UK public-sector-focused digital, data and technology services provider (AIM-listed), delivering embedded consultancy, managed services and — increasingly — vertical SaaS to central government, health and local government clients. After a wobble in FY23/FY24 (contractor mix ballooned to 19%, gross margin compressed, profit warning issued May 2023), operating momentum has re-accelerated sharply: FY26 revenue +27% to £58.9m with adjusted EBITDA +69% to £5.9m (margin 10.0% vs 6.2% in FY24) 2026-06-30 FY26 trading update. The single most important point today is that the market cap of £57m sits against £14.5m net cash and an EBITDA run-rate now materially ahead of prior consensus — the shares screen cheap on both EV/EBITDA and against contracted backlog.

Fair value estimate

  • Fair value range: 48p – 68p per share, implying a market cap range of £72m – £102m.
  • Methodology: EV/EBITDA multiple on forward earnings, cross-checked with EV/Revenue. FY26 adjusted EBITDA £5.9m (actual); FY27 EBITDA plausibly £7–8m given contracted backlog, £19m GDS contract award, and operating-leverage flow-through. Applying 8–11x EV/EBITDA on £7m mid-case FY27 EBITDA yields EV of £56–77m; adding forecast FY27 net cash ~£17m gives equity of £73–94m. The upper band reflects re-rating potential if the operating-leverage flywheel continues.
  • Vs current £57.1m market cap: upside of ~26% to ~79%, midpoint ~55%.
  • Note: the EV of ~£42.6m against FY26 EBITDA of £5.9m = 7.2x EV/EBITDA — undemanding for a business growing revenue 27% with margin expansion.

Sector context

  • Sector: Technology / IT Services (ICB). Sub-segment: government IT services / digital transformation consultancy.
  • Quality/growth/leverage profile: above typical peers on growth momentum and balance sheet (net cash vs peers often carrying goodwill/debt); in line on margin (Kainos and Softcat run higher, generalist implementers similar); below on scale.
  • Listed peers: Kainos Group (KNOS) — much larger UK-listed digital transformation player also with UK gov exposure; Softcat (SCT) — IT reseller/services (broader); NIIT Learning or CGI as private/foreign comparators. TP ICAP-style pure play is scarce; closest AIM peer is now Made Tech itself post-Kainos-scale gap.

Investment thesis

  • Multi-year UK government digital-transformation tailwind now visible in bookings: the June 2025 Spending Review anchored departmental multi-year budgets to 2028-29 and a recently-awarded £19m GDS contract validates positioning 2026-06-30 FY26 trading update. Contracted backlog was £92.2m at FY25 year-end vs £60.6m prior year (+52%) 2025-09-24 Final Results.
  • Operating leverage now demonstrating in the numbers: contractor mix reduced from 19% peak (FY25) to 14% in H1 FY26 and targeted to trend lower, driving gross margin expansion. Adjusted EBITDA margin has moved from 6.2% (FY24) → 7.5% (FY25) → 10.0% (FY26), i.e. revenue up 52% since FY24 while EBITDA up ~146% 2026-06-30 FY26 trading update, 2025-09-24 Final Results.
  • Fortress balance sheet at a small-cap valuation: £14.5m net cash on £57.1m market cap = 25% of equity value in cash, debt-free, with cash generation funding both organic investment and M&A optionality. Sole customer concentration is UK government (near-zero credit risk) 2026-02-26 Interim Results.

Key risks

  • Government procurement lumpiness & political change risk: H1 FY26 sales bookings £13.4m vs £42.0m in H1 FY25 — a 68% drop reflecting timing of large awards 2026-02-26 Interim Results. A general election or spending-review reversal could delay awards materially, as happened in FY24.
  • Services business = people-cost concentration; wage inflation and utilisation risk: the FY23 profit warning was triggered by clients rephasing April/May 2023 work into FY24 while the fixed cost base sat oversized. Repeat episode possible if contract renewals slip 2023-05-02 Trading Update.
  • Software/IP strategy still unproven and has already been impaired: £4.3m Technology Platform IP impairment in FY24 as SaaS commercialisation took longer than expected. Board is exploring M&A to accelerate — execution risk on capital allocation 2024-09-30 Final Results, 2025-09-24 Final Results.

Operating leverage

Made Tech is a services business — the majority of cost of sales scales with revenue (consultant time). BUT: (1) administrative costs (£11.4m FY25) are largely fixed and grew only modestly (£6.3m H1 FY26 vs £6.0m H1 FY25) while revenue grew 28%; and (2) sub-scale gross-margin drivers — billable utilisation and the employee-vs-contractor mix — create meaningful upside when volume arrives, because employee delivery carries much better margin than contractor pass-through. Empirically, FY26 revenue growth of 27% translated into EBITDA growth of 69% — an operating leverage ratio of ~2.5x, and the incremental EBITDA margin on the ~£12.5m revenue uplift was roughly 20% (£2.4m EBITDA increment / £12.5m revenue increment). If FY27 revenue over-delivers by 10–20% (i.e. £66–71m vs £60.3m consensus), incremental EBITDA drop-through of 20-25% would add £1.2–2.1m to profit — a further ~20–35% profit uplift. This is genuine but moderate leverage — not the 3–5x multiplier of a pure software business. Cite: H1 FY26 vs H1 FY25 P&L and CFO commentary that "improved operational gearing" continues 2026-02-26 Interim Results, 2025-09-24 Final Results.

Value-trap signals

None material identified. Historic concerns (FY23 profit warning, £4.3m IP impairment in FY24, contractor mix issue) have since inflected. Debtor days improving (46 in H1 FY26 vs 53 H1 FY25). Cash conversion positive. No dividend cut (never paid a dividend). Customer concentration is high (top 4 = ~54% of FY25 revenue) but the customer is the UK government via multiple departments — low credit risk though political-cycle risk remains.

Earnings vs expectations

  • H1 FY26 (Feb 2026): Consensus revenue £55.1m / EBITDA £4.8m for FY26 → guided "materially ahead" and Dec 2025 trading update flagged trading "significantly ahead" — BEAT 2025-12-10 Trading Statement.
  • FY26 (Jun 2026): Revenue £58.9m vs (upgraded) consensus £57.5m; EBITDA £5.9m vs consensus £5.6m — BEAT 2026-06-30.
  • FY25 (Sep 2025): Revenue £46.4m vs Jun 2025 consensus £43.0m; EBITDA £3.4m vs £3.0m — BEAT 2025-06-26 FY25 Trading Update.
  • H1 FY25 (Feb 2025): Revenue £21.8m vs recent consensus £38.0m for FY25 (H1 tracking ahead); FY25 subsequently upgraded — BEAT.
  • FY24 (Sep 2024): Revenue £38.5m broadly in line, EBITDA £2.4m slightly ahead — MEET/SLIGHT BEAT post prior downgrade 2024-06-27 FYTrading Update.
  • FY23 (May 2023 profit warning): Revenue guidance cut from prior consensus to £40m; EBITDA cut to "at least £1.5m" — MISS 2023-05-02.

Pattern: one clear miss in FY23 (industry-wide UK gov procurement slowdown pre-election), followed by three consecutive periods of beats and upgrades. Recent trend firmly positive.

Conviction

4 — high.

Anchors: (i) clean, well-disclosed financials with consistent reconciliation between adjusted and statutory numbers; (ii) simple business model (services + emerging SaaS) with a single customer type (UK Gov) makes revenue visibility genuinely readable via disclosed contracted backlog (£74–92m); (iii) valuation methodology (forward EV/EBITDA on a services business) is standard and unambiguous. Limits: (i) FY27 EBITDA is a management/analyst forecast, not delivered — momentum could pause on election/spending-review timing; (ii) software strategy adds embedded optionality that is hard to value.

Driver scoring (0-100)

  • ai_beneficiary: 55 — Made Tech is a delivery partner into UK public-sector AI programmes (implementation of AI/data platforms at MoJ, DfE, DHSC, DBT etc.). This is genuine picks-and-shovels IT-services exposure, but the customer captures most of the productivity gain and Made Tech is one of many suppliers on framework contracts. Not a proprietary-data or AI-IP business. Medium beneficiary.
  • operating_leverage: 60 — Empirically demonstrated: FY26 revenue +27% delivered EBITDA +69%. Fixed admin cost base and improving utilisation/contractor mix create real operating leverage, but it is services-industry moderate, not software-industry high.
  • earnings_surprise_trend: 75 — Multiple consecutive beats and upgrades through FY25-FY26 following the FY23 miss; management has been conservative on consensus. Strong recent pattern.
  • cyclicality: 30 — UK public sector spending is defensive vs corporate IT; some political-cycle sensitivity (election, spending review) but core demand is non-discretionary digital transformation of essential public services.
  • moat: 35 — Framework panel positions (DALAS, DIPs, FCA Digital), deep incumbent client relationships, delivery track record. But a competitive market with big consultancies (Accenture, Capgemini) and other AIM-listed peers (Kainos). No structural moat.
  • leverage: 5 — Net cash £14.5m, debt-free, small IFRS16 lease liabilities only. Fortress balance sheet for this scale.
  • earnings_quality: 60 — Cash generation positive and improving (£3.1m FY25 operating cash flow). Historic capitalisation and impairment of Technology Platform IP (£4.3m FY24) is a modest quality issue. Adjusted vs statutory gap is real (£0.9m share-based payments in FY25) but disclosed. Decent quality.
  • management_quality: 60 — Founder-CEO Rory MacDonald has delivered strong growth. Track record of adapting (right-sizing headcount post-FY23, IP strategy pivot). Some capital-allocation misses (Technology Platform impairment, Academy IP write-down). New CFO joining March 2026 is unproven. Competent, not exceptional.
  • growth_momentum: 78 — Accelerating: revenue growth 20% → 27% between FY25 and FY26, backlog and bookings both up materially, £19m GDS contract announced. Strongest momentum in the company's listed history.

overall_score: 570

Rationale: Made Tech is a partial fit for this investor. AI-receiver exposure is genuine but indirect (IT-services implementer, not proprietary data/tooling). Operating leverage is real but moderate (services-industry ~2.5x, not software-industry 5x+). Valuation is genuinely attractive at ~7x EV/EBITDA against 20-25% forward EBITDA growth, and balance-sheet risk is negligible. The combination of "right idea, fair price, real momentum, fortress balance sheet" earns a solid mid-range score, held back from higher bands by the modest operating-leverage ceiling and only indirect AI beneficiary status.

Filings consulted · 30

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

  1. 2026-06-30Fy26 Full Year Trading Update2026-06-30_9642947_fy26-full-year-trading-update.md0.85
  2. 2026-02-26Interim Results2026-02-26_9447660_interim-results.md0.90
  3. 2025-12-10Trading Statement2025-12-10_9286456_trading-statement.md0.72
  4. 2025-11-11Result OF Agm2025-11-11_9226652_result-of-agm.md0.26
  5. 2025-10-16Notice OF Agm2025-10-16_9174182_notice-of-agm.md0.26
  6. 2025-09-24Final Results2025-09-24_9127402_final-results.md0.85
  7. 2025-06-26Fy25 Trading Update2025-06-26_8948537_fy25-trading-update.md0.55
  8. 2025-02-05Half Year Results2025-02-05_8721935_half-year-results.md0.58
  9. 2025-01-23Notice OF Half Year Results2025-01-23_8701936_notice-of-half-year-results.md0.58
  10. 2024-11-20Result OF Agm2024-11-20_8562436_result-of-agm.md0.20
  11. 2024-11-20Agm Statement2024-11-20_8560457_agm-statement.md0.26
  12. 2024-10-21Notice OF Agm Amp Posting OF Annual Report2024-10-21_8497385_notice-of-agm-amp-posting-of-annual-report.md0.62
  13. 2024-09-30Audited Final Results 20242024-09-30_8448101_audited-final-results-2024.md0.65
  14. 2024-06-27Full Year Trading Update2024-06-27_8280738_full-year-trading-update.md0.38
  15. 2024-02-26Half Year Results2024-02-26_8055994_half-year-results.md0.41
  16. 2024-02-26Half Year Results2024-02-26_8054784_half-year-results.md0.41
  17. 2024-02-01Trading Update And Notice OF Results2024-02-01_8016258_trading-update-and-notice-of-results.md0.38
  18. 2023-10-26Result OF Agm2023-10-26_7841749_result-of-agm.md0.14
  19. 2023-09-20Notice OF Agm And Posting OF Annual Report 20232023-09-20_7767782_notice-of-agm-and-posting-of-annual-report-2023.md0.43
  20. 2023-09-13Audited Final Results 20232023-09-13_7751744_audited-final-results-2023.md0.45
  21. 2023-05-02Trading Update2023-05-02_7507502_trading-update.md0.21
  22. 2023-02-23Half Year Results2023-02-23_7504996_half-year-results.md0.23
  23. 2023-02-01Trading Update And Notice OF Results2023-02-01_7290819_trading-update-and-notice-of-results.md0.21
  24. 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
  25. 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
  26. 2022-09-12Audited Final Results2022-09-12_7273840_audited-final-results.md0.25
  27. 2022-08-26Notice OF Final Results And Online Presentations2022-08-26_7102607_notice-of-final-results-and-online-presentations.md0.25
  28. 2022-08-19Trading Update2022-08-19_7131647_trading-update.md0.21
  29. 2022-02-28Made Tech Group Interim Results2022-02-28_6959948_made-tech-group-interim-results.md0.23
  30. 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 27 regulatory filings published between 2021-12-15 and 2026-06-30. 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.