Expanded integration into Esri

1Spatial 7 July 2016 Update

1Spatial

Expanded integration into Esri

New product launch

Software & comp services

 

7 July 2016

Price

4.25p

Market cap

£31m

Net cash (£m) at end January 2016

5.0

Shares in issue

735.0m

Free float

83%

Code

SPA

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(10.5)

(19.1)

(27.7)

Rel (local)

(11.2)

(21.1)

(25.6)

52-week high/low

7.13p

4.00p

Business description

1Spatial’s core technology validates, rectifies and enhances customers’ geospatial data. The combination of its software and advisory services reduces the need for costly manual checking and correcting data.

Next event

Interim results

November 2016

Analyst

Dan Ridsdale

+44 (0)20 3077 5729

1Spatial is a research client of Edison Investment Research Limited

1Spatial has announced that its 1Integrate product is being integrated into Esri’s field worker solution, Collector for ArcGIS. This significantly expands the company’s addressable user base within Esri and marks a further step forward in the company’s open technology strategy.

Year end

Revenue (£m)

PBT* (£m)

EPS* (p)

DPS

(p)

EV/EBIT (x)

P/E (x)

01/15

19.6

1.8

0.27

0.0

12.2

15.7

01/16

20.7

2.5

0.29

0.0

10.4

14.7

01/17e

27.4

1.9

0.23

0.0

15.3

18.5

01/18e

28.1

2.3

0.28

0.0

11.9

15.2

Note: *PBT and EPS are normalised, excluding acquired intangible amortisation, exceptional items and share-based payments. EPS is fully diluted.

Integration into Esri’s field worker mobile product

In a further expansion of its relationship with Esri, 1Spatial has announced that its 1Integrate product is now being integrated into Esri’s field worker solution, Collector for ArcGIS solution. Collector for ArcGIS is installed in mobile devices (eg tablets, specialist surveying terminals) enabling field workers (eg surveyors) to collect and update information to their spatial database while working in the field. The integration of 1Integrate enables the newly surveyed data to be validated and accurately consolidated with the existing geographical database in the field. The benefits of this include improving the efficiency and accuracy of collecting new data and also enabling field workers to make better informed decisions while in the field.

Enlarging addressable market in Esri

Through expanding its reach to field workers the integration significantly enlarges 1Spatial’s addressable market within Esri’s customer base although the annual subscription for 1Integrate in Collector is likely to be lower than the £1,500 per year per seat charge for 1Integrate in the ArcGIS product.

Valuation: Potential to scale not priced in

As detailed in our initiation report In a position to scale, our forecasts reflect the fact that investment in transforming the business model is negatively affecting FY17e EPS by at least 35%. However, adjusting for this, we believe 1Spatial’s valuation is substantially underpinned by the established businesses and the company is establishing a strong platform to scale. Our DCF analysis suggests that penetrating a mere 0.22% of the global GIS user base would justify a 10p share price. The latest development expands the ability to reach further into this addressable market. While the timing and rate of uptake via partners remains difficult to gauge at this early stage, we believe positive newsflow regarding GIS partner customer uptake or new enterprise database partners should be key catalysts for upside.

Exhibit 1: Financial summary

£'000s

2015

2016

2017e

2018e

31-January

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

19,598

20,738

27,357

28,089

Delivery costs

(8,804)

(8,960)

(12,732)

(12,045)

Gross Profit

10,794

11,778

14,625

16,044

EBITDA

 

 

3,052

3,677

3,897

4,685

Operating Profit (before amort. and except.)

1,857

2,485

1,797

2,264

Acquired Intangible Amortisation

(255)

(709)

(900)

(900)

Exceptionals

(2,345)

(1,140)

(500)

0

Share based payments

(723)

(1,398)

(1,177)

(1,177)

Operating Profit

(1,466)

(762)

(780)

187

Net Interest

(56)

(31)

74

50

Profit Before Tax (norm)

 

 

1,801

2,454

1,871

2,314

Profit Before Tax (FRS 3)

 

 

(1,522)

(793)

(706)

237

Tax

5

805

141

(47)

Profit After Tax (norm)

1,801

2,033

1,671

2,067

Profit After Tax (FRS 3)

(1,517)

12

(565)

190

Average Number of Shares Outstanding (m)

650.4

691.3

725.2

734.6

EPS - normalised (p)

 

 

0.28

0.29

0.23

0.28

EPS - normalised fully diluted (p)

 

 

0.27

0.29

0.23

0.28

EPS - (IFRS) (p)

 

 

(0.23)

0.00

(0.08)

0.03

Dividend per share (p)

0.0

0.0

0.0

0.0

Gross Margin (%)

55.1

56.8

53.5

57.1

EBITDA Margin (%)

15.6

17.7

14.2

16.7

Operating Margin (before GW and except.) (%)

9.5

12.0

6.6

8.1

BALANCE SHEET

Fixed Assets

 

 

15,781

22,074

24,503

25,034

Intangible Assets

14,729

18,859

21,488

23,796

Tangible Assets

552

1,638

1,438

1,238

Investments

500

1,577

1,577

0

Current Assets

 

 

16,831

16,202

14,604

14,463

Stocks

0

0

0

0

Debtors

7,453

10,815

10,815

10,500

Cash

8,250

4,996

3,398

3,572

Other

1,128

391

391

391

Current Liabilities

 

 

(9,716)

(11,030)

(10,144)

(10,544)

Creditors

(9,474)

(11,030)

(10,144)

(10,544)

Short term borrowings

(242)

0

0

0

Long Term Liabilities

 

 

(1,888)

(1,579)

(1,579)

(1,579)

Long term borrowings

(191)

0

0

0

Other long term liabilities

(1,697)

(1,579)

(1,579)

(1,579)

Net Assets

 

 

21,008

25,667

27,385

27,374

CASH FLOW

Operating Cash Flow

 

 

353

(771)

1,811

4,700

Net Interest

(56)

179

74

50

Tax

5

(105)

141

(47)

Capex

(2,621)

(3,800)

(3,601)

(3,601)

Acquisitions/disposals

(500)

(1,498)

(928)

(928)

Financing

(209)

3,092

905

0

Dividends

0

0

0

0

Net Cash Flow

(3,028)

(2,903)

(1,598)

174

Opening net debt/(cash)

 

 

(10,845)

(7,817)

(4,996)

(3,398)

HP finance leases initiated

0

0

0

0

Other

0

82

(0)

0

Closing net debt/(cash)

 

 

(7,817)

(4,996)

(3,398)

(3,572)

Source: Edison Investment Research, company data

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