1Spatial has sold 80.1% of its holding in Enables IT Group as it sees the division potentially making a loss in 2018. The division contributed £0.5m to adjusted EBITDA in 2017. The core geospatial business has shown a better year than management expectations with higher revenues, margins and adjusted EBITDA, and the Board has great confidence in both the short- and long-term prospects for the company.
1Spatial has sold 80.1% of its holding in Enables IT Group to the original founder and managing director. Enables generated £6.9m of revenue, £1.4m of gross profit and £0.5m of adjusted EBITDA in 2017, but as its single major customer has decided to insource currently provided services, the division will potentially become cash consuming and loss-making during the year ending 31 January 2019. The sale is for an initial £1 with a total contribution to working capital of £150,000 by end of May 2018 and the provision of an £85,000 loan to Enables, repayable by 2020. The purchaser has the option to acquire the remaining share capital for consideration of £100,000 within two years.
Claire Milverton, CEO of 1Spatial commented: ” The Board is extremely pleased to report that Adjusted EBITDA profits for the full year are expected to be in line with market expectations. The disposal of Enables represents an important step forward for the 1Spatial Group allowing the Board and management team to focus on the core Global Geospatial business which has a high potential for growth.”
In his note Edison’s Dan Ridsdale stated that “1Spatial’s trading update flags that group performance is expected to be in line with expectations. The core GIS business traded better than expected at both the revenue and EBITDA levels, but a deterioration in prospects for the non-core Enables business has prompted a disposal of 80.1% of this business to management for a £1. While the low consideration is underwhelming, our investment case has always been predicated on the growth and recovery prospects for GIS. It is encouraging that GIS performance is tracking ahead and greater focus on this business should support both prospects and the investment case.”