1Spatial — 1Spatial wins strategic UK government contract

1Spatial (AIM: SPA)

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Research: TMT

1Spatial — 1Spatial wins strategic UK government contract

1Spatial announced the signing of a new multi-year contract with Atkins to support delivery of the National Underground Asset Register (NUAR) project, with a total potential value of £6.5m over 37 months. The win followed a competitive tender process, and as a key supplier to the UK government’s Geospatial Commission, 1Spatial will be leading the development of the project’s multi-year data transformation and data ingestion programme. We make a slight upgrade to our FY22 and FY23 forecasts to reflect the £0.5m committed portion, while if all goes to plan, the £6.0m optional component would fall in future years. We are encouraged by 1Spatial’s continued contract momentum and see scope for an acceleration given current execution and structural trends.

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1Spatial

1Spatial wins strategic UK government contract

Contract win

Software & comp services

13 September 2021

Price

38.5p

Market cap

£43m

Net debt (£m) as of end FY21

4.3

Shares in issue

110.5m

Free float

93%

Code

SPA

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

4.1

(9.4)

24.2

Rel (local)

5.4

(9.7)

2.7

52-week high/low

52p

25p

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 of data.

Next events

H122 results

29 September 2021

Analysts

Dan Ridsdale

+44 (0)20 3077 5729

Ken Mestemacher

+44 (0)20 3077 5700

1Spatial is a research client of Edison Investment Research Limited

1Spatial announced the signing of a new multi-year contract with Atkins to support delivery of the National Underground Asset Register (NUAR) project, with a total potential value of £6.5m over 37 months. The win followed a competitive tender process, and as a key supplier to the UK government’s Geospatial Commission, 1Spatial will be leading the development of the project’s multi-year data transformation and data ingestion programme. We make a slight upgrade to our FY22 and FY23 forecasts to reflect the £0.5m committed portion, while if all goes to plan, the £6.0m optional component would fall in future years. We are encouraged by 1Spatial’s continued contract momentum and see scope for an acceleration given current execution and structural trends.

Year end

Revenue (£m)

EBITDA*
(£m)

EBIT*
(£m)

EPS
(p)

EV/sales
(x)

EV/EBIT
(x)

P/E

(x)

01/20

23.4

3.2

1.0

0.6

1.6

38.3

66.0

01/21

24.6

3.6

0.4

0.2

1.6

86.8

217.6

01/22e

25.8

3.8

0.6

0.3

1.5

61.1

120.8

01/23e

27.5

4.3

1.1

0.6

1.4

36.2

60.9

Note: *EBITDA, EBIT and EPS exclude amortisation of acquired intangibles, exceptional items and share-based payments.

Multi-year contract with Atkins to support NUAR

The latest phase of the government’s NUAR project involves building a digital map of the UK’s underground pipes and cables. 1Spatial will lead the development of the multi-year data transformation and data ingestion programme for Atkins. This platform will utilise 1Spatial’s patented 1Integrate and 1Data Gateway software to assist in uploading and transforming the asset data from many providers.

Contract adds £0.5m revenue over FY22 and FY23

1Spatial’s portion of the project is slated for a three-year period, with an initial commitment for seven months and c £0.5m revenue. The initial stage is then followed by two option periods spanning 30 months for c £6.0m in spatial technology licences and services. We are adding £0.2m to FY22’s top line and c £0.3m to FY23 to reflect the committed portion of the deal.

Valuation: Scope for further upside

Trading at 38.5p (10 September closing price), 1Spatial’s share price is up 35% in the year-to-date. The FY22e P/E of 121x reflects modest margins at present while the company’s EV/sales at below 2x is well below most software and services companies. We see scope for growth to accelerate and margins to expand, driving further upside in the share price.

Encouraging win leads to updated forecasts

The NUAR digital mapping project for the UK’s underground pipes and cables forms part of the UK government’s ‘Build back better and greener’ initiative. The project is designed to assist in speeding up the delivery of housing and infrastructure projects and enabling critical and local services to be more efficiently maintained and delivered to customers. Atkins, a subsidiary of SNC Lavalin (SNC, TSX), is a global design, engineering and project management consultancy and is the prime contractor for the NUAR project. 1Spatial will be leading the development of the ‘data transformation and data ingestion platform that will allow many hundreds of Asset Owners to upload and automatically transform their underground asset datasets from their source representation to a target data model.’

The Atkins win is encouraging for 1Spatial, as it supports recent contract momentum in the UK (Defra, National Energy System Map) and the US (‘Next generation 911’ win, an extension with the US Federal Highways Administration, and contracts with Google and the California Office of Emergency Services).

Forecasts updated for committed portion of contract

We make a slight tweak to our forecasts for the committed £0.5m, now assuming revenues of £25.8m in FY22 and £27.5m in FY23. The remaining £6.0m from the contract is optional and while we did not add it to our forecasts, if exercised, it would materially benefit future years.

Valuation: Further contract wins should drive upside

At 38.5p (10 September closing price), 1Spatial is up 35% year-to-date and 29% over the last 12 months. 1Spatial’s FY22e P/E multiple of 121x and FY23e P/E multiple of 61x reflect modest margins, while the sub 2x EV/sales is well below most software and services companies. We see scope for revenue growth to accelerate and margins to expand driving further upside in the share price. Further contract wins in the UK and United States and continued execution should justify multiple expansion. 1Spatial will report interim results for H122 (the six months ending 31 July 2021) on 29 September 2021.


Exhibit 1: Financial summary

£'000s

2018

2019e

2020

2021

2022e

2023e

Year end 31 January

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

16,938

17,624

23,385

24,600

25,844

27,482

Delivery costs

(7,994)

(8,449)

(11,123)

(11,451)

(11,888)

(12,367)

Gross Profit

8,944

9,175

12,262

13,149

13,955

15,115

Adjusted EBITDA

 

 

403

1,188

3,226

3,637

3,840

4,315

Operating Profit (before amort. and except.)

(967)

(306)

1,000

441

641

1,056

Acquired Intangible Amortisation

(335)

(432)

(972)

(917)

(950)

(1,000)

Exceptionals

(1,041)

(672)

(1,167)

(497)

0

0

Share based payments

538

(218)

(398)

(272)

(360)

(360)

Operating Profit

(1,805)

(1,628)

(1,537)

(1,245)

(684)

(304)

Net Interest

(151)

(191)

(195)

(187)

(170)

(151)

Other

0

0

0

0

0

0

Profit Before Tax (norm)

 

 

(1,118)

(497)

804

253

455

904

Profit Before Tax (FRS 3)

 

 

(1,956)

(1,819)

(1,733)

(1,433)

(855)

(456)

Tax

753

389

248

308

20

20

Profit After Tax (norm)

(1,118)

(497)

643

202

364

723

Profit After Tax (FRS 3)

(1,203)

(1,430)

(1,485)

(1,125)

(835)

(436)

Average Number of Shares Outstanding (m)

63.3

87.4

110.2

114.4

114.4

114.4

EPS - normalised (p)

 

 

(1.77)

(0.57)

0.58

0.18

0.32

0.63

EPS - normalised fully diluted (p)

 

 

(1.77)

(0.57)

0.58

0.18

0.32

0.63

EPS - (IFRS) (p)

 

 

(1.90)

(1.64)

(1.35)

(0.98)

(0.73)

(0.38)

Dividend per share (p)

0.0

0.0

0.0

0.0

0.0

0.0

Gross Margin (%)

52.8

52.1

52.4

53.5

54.0

55.0

EBITDA Margin (%)

2.4

6.7

13.8

14.8

14.9

15.7

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

(5.7)

(1.7)

4.3

1.8

2.5

3.8

BALANCE SHEET

Fixed Assets

 

 

10,873

10,479

19,206

18,273

18,578

18,978

Intangible Assets

10,540

10,194

15,560

15,187

15,492

15,892

Tangible Assets

333

285

374

392

392

392

Investments

0

0

3,272

2,694

2,694

2,694

Current Assets

 

 

7,050

11,481

14,985

18,332

19,088

20,244

Stocks

0

0

0

0

0

0

Debtors

5,510

4,998

9,644

10,890

10,020

9,880

Cash

1,319

6,358

5,108

7,278

8,760

10,364

Other

221

125

233

164

308

0

Current Liabilities

 

 

(10,234)

(8,578)

(12,844)

(14,813)

(15,227)

(15,615)

Creditors & other

(9,183)

(8,578)

(12,709)

(14,343)

(14,757)

(15,145)

Short term borrowings

(1,051)

0

(135)

(470)

(470)

(470)

Long Term Liabilities

 

 

(899)

(192)

(5,892)

(7,057)

(8,539)

(10,143)

Long term borrowings

0

0

(1,086)

(2,542)

(2,542)

(2,542)

Other long term liabilities

(899)

(192)

(4,806)

(4,515)

(5,997)

(7,601)

Net Assets

 

 

6,790

13,190

15,455

14,735

13,900

13,464

CASH FLOW

Operating Cash Flow

 

 

245

(749)

572

3,983

5,142

5,355

Net Interest

(167)

(175)

(144)

(179)

(170)

(151)

Tax

751

410

313

484

20

20

Capex

(1,035)

(1,394)

(2,320)

(2,312)

(2,410)

(2,520)

Acquisitions/disposals

115

0

(2,151)

(585)

0

0

Financing

0

7,996

2,805

0

0

0

Dividends

0

0

0

0

0

0

Other

0

0

(254)

(1,069)

(1,100)

(1,100)

Net Cash Flow

(91)

6,088

(1,179)

322

1,482

1,604

Opening net debt/(cash)

 

 

(604)

(268)

(6,358)

(3,886)

(4,266)

(5,748)

HP finance leases initiated

0

0

(1,221)

0

0

0

Other

(245)

2

(72)

58

0

0

Closing net debt/(cash)

 

 

(268)

(6,358)

(3,886)

(4,266)

(5,748)

(7,352)

Source: Company accounts, Edison Investment Research


General disclaimer and copyright

This report has been commissioned by 1Spatial and prepared and issued by Edison, in consideration of a fee payable by 1Spatial, Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by 1Spatial and prepared and issued by Edison, in consideration of a fee payable by 1Spatial, Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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