1Spatial |
Building a platform for sustainable growth |
Interim results |
Software & comp services |
23 October 2018 |
Share price performance
Business description
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Analyst
1Spatial is a research client of Edison Investment Research Limited |
H1 results showed good progress and financial discipline, significantly expanding EBITDA and reducing operating losses. A strong pipeline should support a return to growth in H2 and our estimates are unchanged. There is still work to do on the transformation, but by focusing on delivering repeatable spatial solutions based around the company’s core 1Integrate IP, we believe that the company is laying the foundations to deliver sustainable growth and margin expansion.
Year end |
Revenue (£m) |
EBITDA (£m) |
PBT* |
EPS* |
DPS |
EV/sales |
P/E |
01/17** |
15.1 |
(0.9) |
(12.8) |
(1.75) |
0.0 |
2.5 |
N/A |
01/18** |
16.9 |
0.4 |
(1.5) |
(2.30) |
0.0 |
2.2 |
N/A |
01/19e |
17.8 |
1.0 |
(1.0) |
(1.15) |
0.0 |
2.1 |
N/A |
01/20e |
18.8 |
1.7 |
0.5 |
0.44 |
0.0 |
1.6 |
88 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. **Continuing businesses only.
Financials paint an improving picture
Revenues were broadly flat y-o-y at £8.8m, with 23% growth in the core Spatial Solutions business (69% H1 sales), offset by a dip in GIS (31% H1 sales), which reflected high one-time licensing income in the comparative period. These sales were delivered on a lower cost base, meaning that EBITDA improved to £0.6m from £0.05k last year and operating loss reduced to £0.7m from £1.6m. Net debt was £1.5m vs £0.25m cash at the year-end, but with a stronger working capital cycle in H2 and the £8m August placing we expect cash to expand to £8.4m by year end.
Building blocks for profitable growth
While the transformation has some way to go, we believe that the company is laying the foundations to deliver sustainable profitable growth. Good progress is being made in growing the core Spatial Solutions business, where the company’s 1Integrate IP is a key differentiator and its geospatial expertise supports a “land and expand” strategy. This has been demonstrated by the company’s engagement with Northern Gas Networks, which signed up for one project in September 2017 and has now expanded to six. Other major wins in Europe include a UK infrastructure provider (in excess of £2m orders to date) and Land and Property Services UK (£1.6m). In the US, the Michigan State Data Infrastructure implementation is expected to go live in November 2018 and should become a good reference for implementation. Deals signed post-period-end include NOAA, Caltrans, East Bay Municipal Utility District and Google. The GIS business is more challenging, but its drag on growth will wane as Spatial Solutions scales up, and the company is exploring partnerships or acquisitions to help its operations in France and Belgium.
Valuation: 2.0x FY20e sales readily justifiable
Our near-term forecasts appear well underpinned. New contract wins could prompt upgrades, while the company’s strong IP base and value proposition should support a healthy, long-term growth trajectory. We believe that an FY20e EV/sales multiple of 2.0x is justifiable (vs 1.6x currently), implying a value of c 48p per share, with plenty of scope for further growth from there.
Exhibit 1: Financial summary
£000s |
2016 |
2017 |
2018 |
2019e |
2020e |
||
31-January |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
|||||||
Revenue |
|
|
18,300 |
15,133 |
16,938 |
17,800 |
18,793 |
Delivery costs |
(7,715) |
(6,868) |
(7,994) |
(8,090) |
(8,179) |
||
Gross Profit |
10,585 |
8,265 |
8,944 |
9,710 |
10,614 |
||
EBITDA |
|
|
2,902 |
(874) |
403 |
985 |
1,661 |
Operating Profit (before amort. and except.) |
1,584 |
(12,494) |
(1,302) |
(846) |
319 |
||
Acquired Intangible Amortisation |
(200) |
0 |
0 |
0 |
0 |
||
Exceptionals |
(1,081) |
(2,590) |
(1,041) |
(300) |
0 |
||
Share based payments |
(976) |
(566) |
538 |
(250) |
(250) |
||
Operating Profit |
(673) |
(15,650) |
(1,805) |
(1,396) |
69 |
||
Net Interest |
(27) |
(25) |
(151) |
(161) |
163 |
||
Other |
(421) |
(266) |
0 |
0 |
0 |
||
Profit Before Tax (norm) |
|
|
1,136 |
(12,785) |
(1,453) |
(1,007) |
482 |
Profit Before Tax (FRS 3) |
|
|
(1,121) |
(15,941) |
(1,956) |
(1,557) |
233 |
Tax |
503 |
1,081 |
753 |
405 |
(46) |
||
Profit After Tax (norm) |
1,136 |
(12,785) |
(1,453) |
(1,007) |
482 |
||
Profit After Tax (FRS 3) |
(618) |
(14,860) |
(1,203) |
(1,152) |
186 |
||
Average Number of Shares Outstanding (m) |
691.3 |
728.9 |
63.3 |
87.4 |
98.7 |
||
EPS - normalised (p) |
|
|
0.16 |
(1.75) |
(2.30) |
(1.15) |
0.44 |
EPS - normalised fully diluted (p) |
|
|
0.16 |
(1.75) |
(2.30) |
(1.15) |
0.44 |
EPS - (IFRS) (p) |
|
|
(0.09) |
(2.04) |
(1.90) |
(1.32) |
0.19 |
Dividend per share (p) |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Gross Margin (%) |
57.8 |
54.6 |
52.8 |
54.6 |
56.5 |
||
EBITDA Margin (%) |
15.9 |
N/A |
2.4 |
5.5 |
8.8 |
||
Operating Margin (before GW and except.) (%) |
8.7 |
N/A |
N/A |
N/A |
1.7 |
||
BALANCE SHEET |
|||||||
Fixed Assets |
|
|
22,115 |
13,025 |
10,873 |
10,130 |
10,121 |
Intangible Assets |
18,900 |
11,968 |
10,540 |
10,011 |
10,002 |
||
Tangible Assets |
1,638 |
1,057 |
333 |
119 |
119 |
||
Investments |
1,577 |
0 |
0 |
0 |
0 |
||
Current Assets |
|
|
16,202 |
10,761 |
7,050 |
14,434 |
15,788 |
Stocks |
0 |
0 |
0 |
0 |
0 |
||
Debtors |
10,815 |
8,929 |
5,510 |
5,790 |
6,113 |
||
Cash |
4,996 |
1,285 |
1,319 |
8,423 |
9,453 |
||
Other |
391 |
547 |
221 |
221 |
221 |
||
Current Liabilities |
|
|
(11,071) |
(13,029) |
(10,234) |
(9,777) |
(10,310) |
Creditors & other |
(11,071) |
(12,348) |
(9,183) |
(9,726) |
(10,259) |
||
Short term borrowings |
0 |
(681) |
(1,051) |
(51) |
(51) |
||
Long Term Liabilities |
|
|
(1,579) |
(1,535) |
(899) |
(899) |
(899) |
Long term borrowings |
0 |
0 |
0 |
0 |
0 |
||
Other long term liabilities |
(1,579) |
(1,535) |
(899) |
(899) |
(899) |
||
Net Assets |
|
|
25,667 |
9,222 |
6,790 |
13,888 |
14,700 |
CASH FLOW |
|||||||
Operating Cash Flow |
|
|
(722) |
(1,061) |
245 |
948 |
2,033 |
Net Interest |
(31) |
(166) |
(167) |
(161) |
163 |
||
Tax |
55 |
425 |
751 |
405 |
(46) |
||
Capex |
(3,800) |
(4,042) |
(1,035) |
(1,088) |
(1,120) |
||
Acquisitions/disposals |
(1,033) |
(900) |
115 |
0 |
0 |
||
Financing |
1,940 |
896 |
0 |
8,000 |
0 |
||
Dividends |
0 |
0 |
0 |
0 |
0 |
||
Net Cash Flow |
(3,342) |
(4,848) |
(91) |
8,104 |
1,030 |
||
Opening net debt/(cash) |
|
|
(8,250) |
(4,996) |
(604) |
(268) |
(8,372) |
HP finance leases initiated |
0 |
0 |
0 |
0 |
0 |
||
Other |
88 |
456 |
(245) |
0 |
0 |
||
Closing net debt/(cash) |
|
|
(4,996) |
(604) |
(268) |
(8,372) |
(9,402) |
Source: 1Spatial, Edison Investment Research
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