A robot pours a drink during the consumer electronics show in Las Vegas last year. Shareholders in robotic software maker Blue Prism may be pouring one for themselves too  © Bloomberg

It doesn’t take much to make a robot fall over. Viral videos from Boston Dynamics and The Robot World Cup play on this vulnerability for entertainment, whereas trading updates from Blue Prism can have the opposite effect.

Thursday was pretty tough for the maker of intelligent robotic process automation systems (or software, in other words). Its full-year results came with a warning that revenue in its current financial year would be shy of market expectations as well as a restatement of historic figures. The Aim-quoted shares fell by a quarter in response, erasing around £500m of market value for their worst day on record.

Harsh? Perhaps. Blue Prism had already announced headlines for the 12 months ended October and its 2021 sales guidance seemed designed to add caution to the most enthusiastic of market forecasts, which had not adjusted for slipped deals and slower corporate decision making. Revenue targets were about 10 per cent below consensus at the midpoint yet an ambition of reaching cash break-even this year remained in place.

Neither were the restatements too dramatic, with only a few million pounds of upfront contract revenue disappearing from the 2019 revenue line. Short sellers had been swarming last year following the sudden exit of co-founder Alastair Bathgate, chief executive for 18 years, and a switch of auditor just three months after shareholders had approved the status quo. The fear was of something much worse.

What the numbers did make plain was the size of Blue Prism’s challenge. It’s a lightweight player in a highly demanding market.

Automating back-office tasks has become a gold rush for software makers. Privately owned specialists UiPath and Automation Anywhere have been outspending Blue Prism to land customers while Microsoft and SAP threaten to commoditise the simpler end of market by adding me-too functions. Blue Prism responded last year by more than doubling its research and development spend yet the R&D budget of £17.7m is still less than a fifth of its sales and marketing costs. It’s hard to know for sure whether 2020’s flat order intake and slowing customer additions are Covid-related or the long-term price of under-investment.

The shares had been responding well last year to a clean-up operation led by Jason Kingdon, CEO since spring and chairman since 2008, though the bears were never silenced. While IHS Markit data show shares on loan to short sellers fell from around 10 per cent of the free float in July to 4 per cent by the end of the year, hedge funds including Hong Kong tech specialist Sylebra Capital have still been betting aggressively that they will fall.

Having grown tired of the harsh treatment, Blue Prism has been looking at a secondary listing in the US, where valuations for lossmaking companies in faddish sectors can be more generous. Any more days like Thursday, however, and it might not get much of a welcome there either.

Boxing clever

Tritax Big Box’s Dartford development encapsulates the changing nature of Britain’s economy, writes Andrew Whiffin.

On the site of an old oil-fired power plant the UK real estate fund is building Europe’s largest distribution centre, one that Amazon will call home. Demand from these sort of tenants is boosting property prices and investor enthusiasm for the sector. Tritax said on Thursday that the like-for-like value of its portfolio has grown by 8 per cent since last June.

As online shopping booms, demand for delivery sites has outpaced supply and rents are being squeezed higher. The appeal for investors is clear: owners of logistics sites are collecting full rents while retail and office tenants struggle during lockdowns. Tritax specialises in the biggest sites that are hubs for regional logistics operations. Blue-chip tenants offer security yet the shares have lagged behind racier peers. Future development of Tritax’s extensive land bank should help close that gap.

Since the group bought peer DB Symmetry at the start of 2019 the shares have risen 24 per cent. Those in Segro, which specialises in smaller, more urban industrial properties, have risen by twice that amount. The latter’s stock also attracts a sizeable premium to the value of the underlying assets — about 10 per cent according to Green Street Research’s latest estimates. 

Enthusiasm for Segro is reflected in net asset value growth of 43 per cent over the same period, compared to just 16 per cent at Tritax. Capital gains at the former come from a combination of rising prices and the ability to create value at new developments. Tritax has plenty of scope to play catch-up, with the DB Symmetry deal adding a potential 38.2m square feet to its estate. The Dartford project for Amazon, at 2.3m square feet, puts the size of that land bank into context. 

That Tritax shares have traded at a persistent discount to NAV in recent years may reflect its externally managed fund structure. Nevertheless, any fears that management might prioritise asset growth and fees over shareholder returns have not materialised. Larger sized developments mean almost all have tenants in place before risky development work begins. And the small number of speculative builds it undertakes have been a success.

The expectation of further capital gains pushed shares into a small premium on Thursday. Expect that trend to continue as the market catches up with shoppers flexing their credit cards online during the pandemic.

City Bulletin

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Blue Prism: bryce.elder@ft.com
Tritax: andrew.whiffin@ft.com

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