Legal & General has taken a 10% stake in hosted desktop cloud computing services provider Nasstar.
Nasstar raised £880,000 at 11p a share at the beginning of December and Legal & general was one of the investors in that placing. There was net cash of £365,000 at the end of September 2012 but cash continues to flow out of the business as it is being built up so Nasstar will remain well funded. Nasstar has raised £5.4m since 2005.
Nasstar can make all the different software packages an organisation uses available to users via the cloud. This can reduce costs, improve flexibility and increase productivity. Awareness of cloud computing among small companies is still growing. The largest customer has licences for 120 users.
Nasstar continues to grow higher margin business to replace the lower margin hosted email revenues that are in decline. In the year to September 2012, revenues improved from £2.26m to £2.39m, while the contribution from the Hosted Exchange email business fell from £740,000 to £240,000. Core revenues grew by 25%. The loss increased from £140,000 to £383,000. The services are now hosted across two data centres.
More sales are coming through partners and this slightly reduces overall gross margin while widening the geographic spread of the business.
At the end of the period, Nasstar lost a contract with Allied Healthcare because it was acquired by Saga. Even so, Nasstar is still on course to achieve its target of 4,000 subscribers by next September which should move it into monthly profitability.
The business should start to generate cash by the end of the current financial year. Nasstar is investing in a new version of its main product.
At 10.5p a share, Nasstar is valued at £6.48m.
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