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Research: TMT
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.
Written by
1Spatial |
Ahead on all metrics |
Trading statement |
Software & comp services |
1 March 2021 |
Share price performance
Business description
Next events
Analysts
1Spatial is a research client of Edison Investment Research Limited |
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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* |
EPS* |
EV/sales |
EV/EBIT* |
P/E* |
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.
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