Cloud services rises to 39% of revenue book

StatPro Group 19 October 2016 Update

StatPro Group

Cloud services rises to 39% of revenue book

Q3 trading update

Software & comp services

19 October 2016

Price

111p

Market cap

£72m

Net debt (£m) at 30 June 2016

9.14

Shares in issue

64.7m

Free float

82%

Code

SOG

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

3.3

22.0

45.1

Rel (local)

(0.4)

16.2

32.9

52-week high/low

113.0p

70.0p

Business description

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

Next events

Trading update

January 2017

Final results

March 2017

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

In a brief trading update, StatPro says that its annualised recurring revenue (ARR) for StatPro Revolution, the cloud-based portfolio analysis service, grew by 81% on a constant currency basis to £14.7m over 12 months. This includes Investor Analytics, which was acquired in January 2016. StatPro launched its Revolution Performance module in September and one of its beta clients, National Australia Bank, has already gone live with eight of its clients on the platform. We are maintaining our forecasts, but given the recent contract momentum and weak sterling, we continue to see upside risk to our forecasts. With StatPro’s US-based financial software peers and SaaS companies trading on lofty multiples, we continue to believe there is significant upside in the shares.

Year
end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

12/14

32.0

2.6

2.7

2.9

41.4

2.6

12/15

30.2

2.6

2.6

2.9

42.3

2.6

12/16e

35.5

2.8

2.7

2.9

41.3

2.6

12/17e

37.6

3.7

3.7

2.9

30.4

2.6

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

Q3 trading update

In the 12 months to 30 September 2016, the ARR for StatPro Revolution grew by 81% to £14.7m (September 2015: £8.2m at constant currency). Additionally StatPro has benefited from the fall in sterling as c 85% of its revenues are from outside of the UK, while disproportionate costs are in sterling. We note than Investor Analytics generated c $5m revenues in CY15, of which c 96% was recurring, but StatPro does not break out the figures, as Investor Analytics has been fully integrated. StatPro Revolution as a percentage of group ARR increased to 39%, up from 38% in 30 June and 25% on a constant currency basis as at 30 September 2015.

Revolution Performance launched in September

In September, StatPro launched its new cloud-based performance measurement and data management solution, Revolution Performance. This transaction-based system runs off Amazon cloud and represents the transition of the core component of StatPro’s traditional software platform to the cloud. It enables customers to draw on immense computing power to process data over the cloud, which is a substantial competitive advantage over traditional mainframe systems that rely on fixed processing power. Earlier this year the group announced two new significant contract wins that both included Revolution Performance – one is worth at least £1.2m over five years, with a global American financial institution and the other is a £2.3m three-year contract win with a major Australian financial institution.

Valuation: Highly scalable cloud computing upside

StatPro’s stock trades on c 41x our maintained FY16e EPS, which falls to c 30x in FY17e. Alternatively, the shares trade on c 2.1x FY17e EV/sales, one-third of the level of StatPro’s larger US peers, which mostly trade above 5x EV/sales, while US-based pure SaaS companies typically trade in the region of 4.3-7.0x EV/sales.

Exhibit 1: Financial summary

£'000s

2012

2013

2014

2015

2016e

2017e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

32,001

32,486

32,018

30,187

35,496

37,645

Cost of Sales

0

0

0

0

0

0

Gross Profit

32,001

32,486

32,018

30,187

35,496

37,645

EBITDA

 

 

6,728

5,463

4,359

4,044

4,715

5,679

Adjusted Operating Profit

 

 

5,534

4,327

2,875

2,852

3,299

4,150

Amortisation of acquired intangibles

(440)

(402)

(188)

(32)

(1,100)

(1,100)

Exceptionals

(693)

(347)

0

0

(894)

0

Share based payments

159

(192)

(26)

(121)

(200)

(213)

Operating Profit

4,560

3,386

2,661

2,699

1,106

2,838

Net Interest

(493)

(273)

(291)

(290)

(535)

(470)

Profit Before Tax (norm)

 

 

5,041

4,054

2,584

2,562

2,765

3,680

Profit Before Tax (FRS 3)

 

 

4,067

3,113

2,370

2,409

571

2,368

Tax

(1,387)

(1,030)

(774)

(788)

(774)

(1,030)

Profit After Tax (norm)

3,654

3,024

1,810

1,774

1,991

2,650

Profit After Tax (FRS 3)

2,680

2,083

1,596

1,621

(203)

1,337

Minority interests

0

0

0

0

(213)

(271)

Net income (norm)

3,654

3,024

1,810

1,774

1,778

2,379

Net income (statutory)

2,680

2,083

1,596

1,621

(416)

1,066

Average Number of Shares Outstanding (m)

62.2

67.5

67.5

67.6

66.2

65.1

EPS - normalised (p)

 

 

5.9

4.5

2.7

2.6

2.7

3.7

EPS - FRS 3 (p)

 

 

4.3

3.1

2.4

2.4

(0.6)

1.6

Dividend per share (p)

2.70

2.80

2.90

2.90

2.90

2.90

Gross Margin (%)

100.0

100.0

100.0

100.0

100.0

100.0

EBITDA Margin (%)

21.0

16.8

13.6

13.4

13.3

15.1

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

17.3

13.3

9.0

9.4

9.3

11.0

BALANCE SHEET

Fixed Assets

 

 

60,272

55,992

56,113

51,857

58,054

56,995

Intangible Assets

57,683

53,524

52,546

48,613

54,876

54,029

Tangible Assets

1,974

1,883

2,470

2,233

2,167

1,955

Other assets

615

585

1,097

1,011

1,011

1,011

Current Assets

 

 

10,675

10,312

10,441

10,665

2,223

2,588

Stocks

0

0

0

0

0

0

Debtors

6,962

6,167

7,722

8,462

9,950

10,553

Cash

3,681

4,014

2,692

2,203

(7,727)

(7,965)

Current Liabilities

 

 

(19,927)

(18,514)

(20,271)

(19,778)

(21,638)

(22,507)

Creditors

(19,913)

(18,502)

(20,259)

(19,660)

(21,520)

(22,389)

Short term borrowings

(14)

(12)

(12)

(118)

(118)

(118)

Long Term Liabilities

 

 

(1,400)

(882)

(598)

(1,227)

(3,325)

(1,926)

Long term borrowings

0

0

0

(801)

(801)

(801)

Other long term liabilities

(1,400)

(882)

(598)

(426)

(2,524)

(1,125)

Net Assets

 

 

49,620

46,908

45,685

41,517

35,313

35,149

CASH FLOW

Operating Cash Flow

 

 

9,233

9,403

7,705

6,548

7,489

9,709

Net Interest

(306)

(98)

(10)

(84)

(535)

(470)

Tax

(1,261)

(1,616)

(1,173)

(832)

(1,600)

(747)

Capex

(4,187)

(4,412)

(5,904)

(4,999)

(5,209)

(5,411)

Acquisitions/disposals

0

(990)

0

0

(5,536)

(1,399)

Equity financing

5,689

0

2

64

(2,079)

0

Dividends

(1,627)

(1,856)

(1,889)

(1,960)

(1,959)

(1,920)

Net Cash Flow

7,541

431

(1,269)

(1,263)

(9,429)

(238)

Opening net debt/(cash)

 

 

3,399

(3,667)

(4,002)

(2,680)

(1,283)

8,646

Other

(475)

(96)

(53)

(134)

(500)

()

Closing net debt/(cash)

 

 

(3,667)

(4,002)

(2,680)

(1,283)

8,646

8,884

Source: StatPro Group accounts, Edison Investment Research estimates


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Germany

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United Kingdom

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New Zealand

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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

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