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Ahead on all metrics

1Spatial 1 March 2021 Update
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1Spatial

Ahead on all metrics

Trading statement

Software & comp services

1 March 2021

Price

33.5p

Market cap

£38.0m

Net cash (£m) at end FY21

4.3

Diluted shares in issue

113m

Free float

93%

Code

SPA

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

19.6

24.1

15.5

Rel (local)

21.6

20.3

22.6

52-week high/low

33.5p

13.5p

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

FY21 results

28 April 2021

Analysts

Dan Gardiner

+44 (0) 20 3077 5700

Dan Ridsdale

+44 (0) 20 3077 5729

1Spatial is a research client of Edison Investment Research Limited

1Spatial’s trading statement suggests the resilience we highlighted in H1 continued into H2. The company expects FY21 sales and EBITDA ‘in excess of’ £24m and £3.2m respectively and net cash of £4.3m – ahead of our estimates on all metrics. Comments on the outlook for FY22 are positive but understandably generic at this stage. In our view the recent slew of contract wins is encouraging. As wider economic concerns ease, 1Spatial looks to be converting its growing pipeline. We raise our FY21 numbers but make no change to FY22 at this point.

Year end

Revenue (£m)

EBITDA* (£m)

EBIT*
(£m)

EPS*
(p)

EV/sales
(x)

EV/EBIT*
(x)

P/E*
(x)

01/19

17.6

1.2

(0.3)

(0.6)

2.0

N/A

N/A

01/20

23.4

3.2

1.0

0.6

1.5

34.5

57.4

01/21e

24.0

3.2

0.1

0.0

1.4

236.2

N/M

01/22e

25.1

3.6

0.4

0.2

1.4

84.8

N/M

Note: * excludes amortisation of acquired intangibles, exceptionals, share-based payments.

FY21: A solid performance in context

Amid the unprecedented turmoil caused by COVID-19, 1Spatial performed robustly in FY21. Sales and EBITDA in excess of £24m and £3.2m respectively are largely flat year-on-year, but above our prior estimates (£23.4m and £2.8m respectively). Even more impressive was cash flow. Net cash of £4.3m implies cash flow of £1.0m. excluding the £0.6m deferred consideration for GIS. Sustainable cash flow was the final ‘to-do’ item of the three-year turnaround instigated by Claire Milverton (CEO) in 2017. The company has delivered despite the challenging circumstances.

Encouraging outlook for FY21

1Spatial is understandably providing limited detail on the outlook for FY22 at this stage. Nevertheless, the momentum in the business looks encouraging in our view. The recent swathe of contract wins (ENA, NGN and CalOES) suggest good momentum in both the UK and the US and highlight the potential of the location master data management (LMDM) market (as detailed in Spatial awareness and Mapping a future path). A more detailed outlook is likely with the FY21 results.

Raising FY21, FY22 unchanged

We raise our FY21 estimates in line with expected results (as above). The EBITDA uplift means 1Spatial should be very close to underlying profitability in FY21. We leave our FY22 forecasts unchanged at this point, but they now look conservative. Our previous FY22 sales forecast implied 7% y-o-y growth, which now falls to 4%.

Valuation: Execution on LMDM should deliver upside

At 33.5p, 1Spatial’s share price is up 30% since January 2020 (ie pre-COVID-19). The company has delivered on its turnaround, despite a severe economic downturn. The focus is now on executing on the LMDM growth opportunity. It is hard to argue that the shares are undervalued on current FY22 profit metrics. Nevertheless, we see scope for upside to our forecasts (assuming current momentum continues) and expect growth to result in lower multiples in outer years. A £1m beat to FY22e free cash flow (FCF) would put the stock on a 7% FCF yield.

Raising FY21, FY22 unchanged

EBITDA in excess of £3.2m in FY21 implies at least a 14% increase to our underlying profit forecasts. Assuming this flows through to the bottom line (ie no changes elsewhere) implies 1Spatial was very close to underlying (ie excluding exceptionals, amortisation of acquired goodwill profitability in FY21.

Revenue grew 2.6% y-o-y in FY21 on a headline basis, but fell 5% organically (excluding the extra three months of GIS in FY21). However, most of the decline reflected the impact of COVID-19 and was concentrated in H1 (organic revenue fell 8% y-o-y in H1). Therefore, arguably 1Spatial’s performance in H2 provides a more useful guide to the future. Revenue in H2 was up (at least) £0.5m sequentially and year-on-year growth was (at worst) -2%; the implied EBITDA margin was 13%.

Exhibit 1: Changes to headline FY21 forecasts, FY22 unchanged

£m

FY20

FY21e

Change

FY22e

 

Old

New

Abs

%

 

Revenue

23.4

23.4

24.0

0.6

2.5

25.1

Implied growth (%)

32.7

0.1

2.6

4.4

EBITDA

3.2

2.8

3.2

0.4

14.2

3.6

EBITDA margin (%)

13.8

12.0

13.4

14.3

Adjusted diluted EPS (p)*

0.6

(0.4)

0.0

0.3

N/M

0.2

Reported diluted EPS (p)

(1.3)

(1.6)

(1.2)

(1.0)

Movement in net cash

(2.5)

0.3

0.4

1.4

Acquisitions, equity

0.7

(0.6)

(0.6)

0.0

Underlying FCF

(3.1)

0.9

1.0

1.4

Year end net cash balance

3.9

4.2

4.3

5.7

Source: 1Spatial, Edison Investment Research forecasts. Note: *Adjusted EPS excludes share-based payments, impairments of intangibles, amortisation of acquired intangibles and exceptionals.


Exhibit 2: Financial summary

£000s

2018

2019

2020

2021e

2022e

Year end 31 January

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

16,938

17,624

23,385

24,000

25,060

Delivery costs

(7,994)

(8,449)

(11,123)

(11,880)

(12,280)

Gross Profit

8,944

9,175

12,262

12,120

12,781

Adjusted EBITDA

 

 

403

1,188

3,226

3,220

3,581

Operating Profit (before amort. and except.)

 

 

(967)

(306)

1,000

146

407

Acquired Intangible Amortisation

(335)

(432)

(972)

(1,100)

(1,100)

Exceptionals

(1,041)

(672)

(1,167)

(125)

0

Share based payments

538

(218)

(398)

(350)

(360)

Operating Profit

(1,805)

(1,628)

(1,537)

(1,429)

(1,053)

Net Interest

(151)

(191)

(195)

(144)

(99)

Other

0

0

0

0

0

Profit Before Tax (norm)

 

 

(1,118)

(497)

804

1

307

Profit Before Tax (FRS 3)

 

 

(1,956)

(1,819)

(1,732)

(1,573)

(1,152)

Tax

753

389

248

250

10

Profit After Tax (norm)

(1,118)

(497)

643

1

246

Profit After Tax (FRS 3)

(1,203)

(1,430)

(1,484)

(1,323)

(1,142)

Average Number of Shares Outstanding (m)

63.3

87.4

110.2

113.5

113.5

EPS - normalised (p)

 

 

(1.77)

(0.57)

0.58

0.00

0.22

EPS - normalised fully diluted (p)

 

 

(1.77)

(0.57)

0.58

0.00

0.22

EPS - (IFRS) (p)

 

 

(1.90)

(1.64)

(1.35)

(1.17)

(1.01)

Dividend per share (p)

0.0

0.0

0.0

0.0

0.0

Gross Margin (%)

52.8

52.1

52.4

50.5

51.0

EBITDA Margin (%)

2.4

6.7

13.8

13.4

14.3

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

(5.7)

(1.7)

4.3

0.6

1.6

BALANCE SHEET

Fixed Assets

 

 

10,873

10,479

19,206

19,556

19,690

Intangible Assets

10,540

10,194

15,560

15,910

16,010

Tangible Assets

333

285

374

374

415

Investments

0

0

3,272

3,272

3,265

Current Assets

 

 

7,050

11,481

14,985

15,968

16,935

Stocks

0

0

0

0

0

Debtors

5,510

4,998

9,644

8,300

7,800

Cash

1,319

6,358

5,108

7,435

8,827

Other

221

125

233

233

308

Current Liabilities

 

 

(10,234)

(8,578)

(12,844)

(14,718)

(16,936)

Creditors & other

(9,183)

(8,578)

(12,709)

(13,451)

(15,669)

Short term borrowings

(1,051)

0

(135)

(1,267)

(1,267)

Long Term Liabilities

 

 

(899)

(192)

(5,892)

(6,675)

(6,701)

Long term borrowings

0

0

(1,086)

(1,869)

(1,869)

Other long-term liabilities

(899)

(192)

(4,806)

(4,806)

(4,832)

Net Assets

 

 

6,790

13,190

15,455

14,131

12,988

CASH FLOW

Operating Cash Flow

 

 

245

(749)

572

4,314

4,781

Net Interest

(167)

(175)

(144)

(144)

(99)

Tax

751

410

313

45

10

Capex

(1,035)

(1,394)

(2,320)

(2,400)

(2,200)

Acquisitions/disposals

115

0

(2,151)

(585)

0

Financing

0

7,996

2,805

0

0

Dividends

0

0

0

0

0

Net Cash Flow

(91)

6,088

(1,179)

130

1,392

Opening net debt/(cash)

 

 

(604)

(268)

(6,358)

(3,886)

(4,299)

HP finance leases initiated

0

0

(1,221)

0

0

Other

(245)

2

(72)

283

0

Closing net debt/(cash)

 

 

(268)

(6,358)

(3,886)

(4,299)

(5,691)

Source: Company data, 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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