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Most people think of Amazon as a big online store, selling everything you could need and more. But the company is also the world’s largest provider of “cloud services”, giving businesses access to the best software and IT technologies in exchange for a monthly or annual subscription.
The cloud is big business. Amazon made $90bn (£70bn) in this space last year, Microsoft and Google between them generated revenues of around $100bn and global sales are soaring.
Beeks Group, based in Glasgow, is a local pioneer in this sector, providing specialist cloud services to financial firms and stock exchanges. The company is growing at a rapid pace, major opportunities are emerging and the stock, at £1.73, should respond.
Beeks was founded in 2011 by Gordon McArthur, a former IBMer with a long-time passion for digital DIY.
From the beginning, McArthur focused its business on financial markets, working with small currency traders and hedge funds and gradually moving up the food chain, supplying more products to larger clients around the world.
Clear vision: Beeks focused on financial markets as cloud services became huge
Although the services vary, the basic principle is the same, allowing businesses to use sophisticated technology developed by Beeks.
This has many advantages. Until recently, financial companies wanting to trade stocks, currencies, commodities or any other type of asset had to create the hardware and software themselves.
Costs can run into the hundreds of millions of euros, requiring companies to employ engineers and IT experts to make sure everything runs smoothly. Beeks eliminates this hassle by providing state-of-the-art kit and handling upkeep and maintenance in exchange for a monthly subscription.
Cloud services are all the rage, from big banks to small investment managers. Renting newer equipment tends to be a better option than owning everything, and Beeks has earned a reputation for brain power and reliability.
The group floated on the stock market in 2017, and since then revenues have increased tenfold, from £3m to an expected £30m for the year to June.
The increase in sales reflects the growing demand for Beeks’ services from financial companies who are constantly looking for ways to increase the speed and efficiency of every transaction they make.
Now, McArthur offers its products to the exchanges themselves. Most exchanges have their own data centers, but make extra money by selling on-site space to customers. Traditionally, companies fill this space with their own kit. The process can be costly and time-consuming, especially when exchanges are located in developing markets, with complex laws and logistics.
Beeks has developed technology that allows exchanges to offer fully equipped sections in their data centers – and the initial responses have been enthusiastic. The Johannesburg Stock Exchange became a client last fall and has already expanded its contract.
Further growth is expected. Banks and large institutions wishing to trade South African stocks are better able to do so if they have space in the local stock exchange data center. But many are put off by the hassle and expense of setting up and managing their own equipment. Beeks’ technology allows Johannesburg to deliver the whole kit and kaboodle in a way that makes everyone happy.
McArthur gains a lucrative long-term customer, the exchange receives juicy fees from the companies that rent its space and they can trade easily in the South African market.
Other agreements are in progress. McArthur speaks with 18 of the world’s 20 largest stock exchanges. Transactions may start small but, if Johannesburg is anything to go by, they can quickly grow, especially since no other company offers the same service as Beeks.
Unlike many small tech companies, Beeks is profitable, with low borrowings and a healthy bank balance. Analysts expect an 80% increase in pre-tax profits, to £4.1m this year, and £6m in 2025. Sales are expected to rise from £30m in 2024 to at least £40 million next year and, although the company does not. pay a dividend. Founder McArthur owns 37 percent of the shares and employees own a larger share, so they are highly motivated to succeed.
Midas Verdict: Tech companies are often associated with Silicon Valley, but the UK is also at the forefront and Beeks is an example. At £1.73, the shares are a buy.
Exchanged on: Aim Teleprinter: BKS Contact: beeksgroup.com or 01505 800779