Building a platform for sustainable growth

1Spatial 23 October 2018 Update
Download PDF

1Spatial

Building a platform for sustainable growth

Interim results

Software & comp services

23 October 2018

Price

39p

Market cap

£38m

Net cash (£m) January 2019e

8.4

Shares in issue

98.7m

Free float

80%

Code

SPA

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(3.5)

5.0

12.0

Rel (local)

(2.6)

5.9

8.1

52-week high/low

4.2p

2.8p

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 event

Trading update

March 2019

Analyst

Dan Ridsdale

+44 (0)20 3077 5729

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*
(£m)

EPS*
(p)

DPS
(p)

EV/sales
(x)

P/E
(x)

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

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by 1Spatial and prepared and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and 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 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. This document is provided 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.
Edison has a restrictive policy relating to personal dealing. 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. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. 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. 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 (ie 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. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2018. “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.

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

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by 1Spatial and prepared and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and 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 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. This document is provided 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.
Edison has a restrictive policy relating to personal dealing. 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. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. 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. 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 (ie 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. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2018. “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.

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

Share this with friends and colleagues

You may be interested in