Public sector digital technology company Made Tech (MTEC:AIM) has the potential to be a big part of Government plans to get public services online in future.

Set-up by founder and chief executive Rory MacDonald in 2008, it quickly developed a reputation for getting the job done, cutting its teeth on projects with the Home Office, DVLA, HMRC, Department for Education, Department for International Trade and the Ministry of Justice.

Soaring wage inflation for technical staff has been its big challenge this year, heightened by a need to use costly contract staff to meet its bulging £38.2 million order backlog. Investors didn’t like the sound of that earlier this year, and the share price tanked from 120p.

The reality has been far better managed than the market’s bleak predictions, with the company seeing growth accelerate. Made Tech saw revenue soar 120% last year (to May 2022) thanks to significant contract wins across healthcare, central, and local government organisations.

The reported £29.3 million was more than double the £13.3 million the year before, while adjusted underlying EBITDA (earnings before interest, tax, depreciation and amortisation) was £2.6 million. The company made a £500,000 EBITDA loss in the previous 12 months.

This year has got off to a great start too. Sales bookings jumped 115% to £51.1 million and the contracted backlog grew 133%. It also launched its own in-house training academy during the year, which should help ease hiring and wage issues down the line.

The company won new clients across central and local government, health and devolved administrations during the year, including a major two-year contract with NHS Digital, worth approximately £19 million. The company also flagged a Met Office contract, worth at least £7 million over two years, that was announced at the start of July.

Made Tech is typically right at the heart of these digital projects which makes revenue sticky, providing good visibility into the future.A limited stock market track record and the extreme stock volatility are reasons to be cautious. But there does appear to be substantial scope for share price re-rating as analysts, fund managers and ordinary investors become increasingly familiar with the ebbs and flows of the business.

Based on consensus data, Made Tech is expected to grow revenues by 60% and 55% this year and next, with EBITDA forecasts to more than double. That implies a 2024 price to earnings multiple of 5.5.

That tells us that Made Tech’s potential has slipped past the wider market, creating a huge opportunity for ordinary investors to earn outsized returns if the company continues to execute as it has been.

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