Adjusted EBITDA jumps by 32%

StatPro Group 24 January 2019 Update
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StatPro Group

Adjusted EBITDA jumps by 32%

Trading update

Software & comp services

 

24 January 2019

Price

119p

Market cap

£78m

Net debt (£m) at 31 December 2018

24.6

Shares in issue

65.6m

Free float

82%

Code

SOG

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

7.2

(4.4)

(19.9)

Rel (local)

4.5

(3.3)

(9.7)

52-week high/low

186.5p

105.0p

Business description

StatPro Group provides cloud-based portfolio analytics solutions to the global investment community.

Next events

Final results

March 2019

AGM

May 2019

Trading update

July 2019

Interim results

August 2019

Analysts

Richard Jeans

+44 (0)20 3077 5700

Dan Ridsdale

+44 (0)20 3077 5729

StatPro Group is a research client of Edison Investment Research Limited

StatPro’s FY18 EBITDA was slightly ahead of our expectations, while revenues came in lower than expected. The resulting margin gain reflects management’s determination to improve profitability levels. As we have pointed out previously, margins stand to benefit from the group’s increasing scale and costs dropping out as the group’s software platforms are streamlined over the next few years. In our view, the shares continue to look attractive, given the group’s c £56m recurring revenue book and the declining rating (c 15x FY19e), especially in light of the active M&A backdrop in the financial software sector.

Year end

Revenue (£m)

PBT* (£m)

EPS* (p)

DPS (p)

P/E (x)

Yield (%)

12/16

37.5

2.7

3.3

2.9

35.5

2.4

12/17

49.3

3.3

5.8

2.9

20.5

2.4

12/18e

54.7

5.2

7.3

2.9

16.2

2.4

12/19e

58.0

6.2

8.0

2.9

14.9

2.4

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Trading update: Recurring revenue book rose 4%

Group revenue grew by 11% to c £54.7m (we forecast £56.8m) while adjusted EBITDA increased by 32% to c £9.0m (£8.7m) as the EBITDA margin rose by c 260bp to c 16.5%. Year-end net debt stood at £24.6m, above our forecast of £22.3m, which partly reflects the weakness of sterling in late 2018. Annualised recurring revenue grew by 4% over the 12 months at constant currencies to stand at £55.7m and StatPro Revolution’s ARR grew by 17% organically. The group’s ARR renewal rate improved to 92% from 91% in H1, but still stands below the long-term average of 93–94%.

Management says Q4 sales were robust and the group signed 20 clients in eight different countries for contracts greater than $100k per annum in FY18, including seven banner deals. While organic growth remains close to flat, the Revolution platform continues to mature and provides a stronger foundation for growth to accelerate. For instance, a large US asset service provider (acting as a reseller of Revolution) recently added a client to Revolution at short notice for a minimum three-year contract value of $1.5m. Further impetus for Revolution is expected in 2019 as additional functionality is added. Additional drivers include the new managed services arm and a focus on commercialising the group’s data assets.

Forecast changes: Sales eased, EBITDA maintained

We have eased our revenue forecasts while maintaining EBITDA. The changes are outlined on page 2.

Valuation: Highly scalable cloud computing upside

StatPro’s stock trades on c 16x our increased FY18e EPS, which falls to c 15x in FY19e and to c 13x in FY20e. Alternatively, the shares trade on c 1.8x FY19 EV/sales, around a third of the level of StatPro’s larger US financial software peers and a quarter of the level of US-based pure software-as-a-service companies

Forecast changes: FY19 and FY20 profits maintained

We have adjusted our FY18 numbers in line with the trading update. We have reduced our revenue forecasts 3% in FY19 and 2% in FY20. We have maintained our FY19 and FY20 EBITDA and EPS forecasts. We now forecast the group to end FY19 with net debt of £22.6m (previously £20.3m) falling to £20.4m a year later (previously £18.2m).

Exhibit 1: Forecast changes

Revenues (£m)

EBITDA (£m)

EPS (p)

Old

New

% chg.

Old

New

% chg.

Old

New

% chg.

2018e

56.8

54.7

(4)

8.7

9.0

3

7.0

7.3

4

2019e

59.5

58.0

(3)

9.5

9.5

0

8.0

8.1

0

2020e

62.1

61.0

(2)

10.5

10.5

0

9.1

9.1

0

Source: Edison Investment Research

 

Exhibit 2: Financial summary

£000s

2015

2016

2017

2018e

2019e

2020e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

30,187

37,545

49,260

54,700

58,011

61,005

Cost of Sales

0

0

0

0

0

0

Gross Profit

30,187

37,545

49,260

54,700

58,011

61,005

EBITDA

 

 

4,044

5,104

6,838

9,000

9,500

10,500

Adjusted Operating Profit

 

 

2,852

3,461

4,917

7,075

7,631

8,688

Amortisation of acquired intangibles

(32)

(1,060)

(2,243)

(3,243)

(3,243)

(3,243)

Exceptionals

0

(11,378)

(3,934)

0

0

0

Share based payments

(121)

(361)

(626)

(650)

(675)

(700)

Operating Profit

2,699

(9,338)

(1,886)

3,182

3,713

4,745

Net Interest

(290)

(786)

(1,585)

(1,839)

(1,414)

(1,214)

Profit Before Tax (norm)

 

 

2,562

2,675

3,332

5,237

6,218

7,474

Profit Before Tax (FRS 3)

 

 

2,409

(10,124)

(3,471)

1,344

2,300

3,531

Tax

(788)

(489)

563

(372)

(933)

(1,413)

Profit After Tax (norm)

1,774

2,843

4,505

4,865

5,285

6,061

Profit After Tax (FRS 3)

1,621

(10,613)

(2,908)

972

1,367

2,118

Minority interests

0

(94)

(131)

(40)

0

0

Net income (norm)

1,774

2,186

3,764

4,825

5,285

6,061

Net income (statutory)

1,621

(10,707)

(3,039)

932

1,367

2,118

Average Number of Shares Outstanding (m)

67.6

65.3

64.8

65.7

66.0

66.3

EPS - normalised (p)

 

 

2.6

3.3

5.8

7.3

8.0

9.1

EPS - FRS 3 (p)

 

 

2.4

(16.4)

(4.7)

1.4

2.1

3.2

Dividend per share (p)

2.90

2.90

2.90

2.90

2.90

2.90

Gross Margin (%)

100.0

100.0

100.0

100.0

100.0

100.0

EBITDA Margin (%)

13.4

13.6

13.9

16.5

16.4

17.2

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

9.4

9.2

10.0

12.9

13.2

14.2

BALANCE SHEET

Fixed Assets

 

 

51,857

59,088

70,864

68,669

66,653

64,738

Intangible Assets

48,613

55,696

64,793

63,046

61,158

59,226

Tangible Assets

2,233

2,742

3,303

2,855

2,726

2,744

Other assets

1,011

650

2,768

2,768

2,768

2,768

Current Assets

 

 

10,665

19,081

20,912

17,662

20,124

22,619

Stocks

0

0

0

0

0

0

Debtors

8,462

14,725

16,601

18,434

19,550

20,559

Cash

2,203

4,356

4,311

(772)

574

2,060

Current Liabilities

 

 

(19,778)

(35,686)

(38,171)

(38,594)

(40,967)

(43,279)

Creditors

(19,660)

(27,227)

(30,720)

(31,143)

(33,516)

(35,828)

Short term borrowings

(118)

(8,459)

(7,451)

(7,451)

(7,451)

(7,451)

Long Term Liabilities

 

 

(1,227)

(9,897)

(22,989)

(22,290)

(19,363)

(16,437)

Long term borrowings

(801)

(5,961)

(17,076)

(16,377)

(15,677)

(14,978)

Other long term liabilities

(426)

(3,936)

(5,913)

(5,913)

(3,686)

(1,459)

Net Assets

 

 

41,517

32,586

30,616

25,448

26,446

27,641

CASH FLOW

Operating Cash Flow

 

 

6,548

7,454

10,676

12,932

15,616

16,996

Net Interest

(84)

(500)

(1,227)

(1,839)

(1,414)

(1,214)

Tax

(832)

(1,294)

(144)

(1,227)

(319)

(870)

Capex

(4,999)

(6,445)

(7,213)

(7,753)

(8,127)

(8,538)

Acquisitions/disposals

0

(4,786)

(10,269)

(3,663)

(1,803)

(2,274)

Equity financing

64

(2,079)

926

0

0

0

Dividends

(1,960)

(1,877)

(2,012)

(1,879)

(1,907)

(1,915)

Net Cash Flow

(1,263)

(9,527)

(9,263)

(3,429)

2,045

2,185

Opening net debt/(cash)

 

 

(2,680)

(1,283)

10,065

20,217

24,600

22,555

Other

(134)

(1,821)

(889)

(954)

0

()

Closing net debt/(cash)

 

 

(1,283)

10,065

20,217

24,600

22,555

20,370

Source: StatPro accounts, Edison Investment Research

General disclaimer and copyright

This report has been commissioned by StatPro Group and prepared and issued by Edison, in consideration of a fee payable by StatPro Group. 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 Edison analyst 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 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd who holds an Australian Financial Services Licence (Number: 427484). 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

Neither this document and associated email (together, the "Communication") constitutes or form part of any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities, nor shall it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. Any decision to purchase shares in the Company in the proposed placing should be made solely on the basis of the information to be contained in the admission document to be published in connection therewith.

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 (nor will such persons be able to purchase shares in the placing).

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

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. 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

295 Madison Avenue, 18th Floor

10017, New York

US

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

295 Madison Avenue, 18th Floor

10017, New York

US

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 StatPro Group and prepared and issued by Edison, in consideration of a fee payable by StatPro Group. 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 Edison analyst 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 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd who holds an Australian Financial Services Licence (Number: 427484). 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

Neither this document and associated email (together, the "Communication") constitutes or form part of any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities, nor shall it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. Any decision to purchase shares in the Company in the proposed placing should be made solely on the basis of the information to be contained in the admission document to be published in connection therewith.

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 (nor will such persons be able to purchase shares in the placing).

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

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. 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

295 Madison Avenue, 18th Floor

10017, New York

US

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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

 

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