Core GIS business robust/disposal of Enables

1Spatial 15 March 2018 Update
Download PDF

1Spatial

Core GIS business robust/disposal of Enables

Trading update/disposal

Software & comp services

15 March 2018

Price

3.55p

Market cap

£27m

Net cash (£m) as at end January 2018

0.3 (continued operations)

Shares in issue

760.5m

Free float

83%

Code

SPA

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(2.7)

(13.9)

49.5

Rel (local)

(2.2)

(10.8)

51.7

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 events

Investor day

18 April 2018

Analysts

Dan Ridsdale

+44 (0)20 3077 5729

Alastair Young

+44 (0)20 3077 5758

1Spatial is a research client of Edison Investment Research Limited

1Spatial’s trading update flags that group performance is expected to be in line with expectations. The core GIS business traded better than expected at both the revenue and EBITDA levels, but a deterioration in prospects for the non-core Enables business has prompted a disposal of 80.1% of this business to management for a £1. While the low consideration is underwhelming, our investment case has always been predicated on the growth and recovery prospects for GIS. It is encouraging that GIS performance is tracking ahead and greater focus on this business should support both prospects and the investment case.

Year end

Revenue (£m)

EBITDA*
(£m)

PBT
(£m)

EPS*
(p)

DPS
(x)

EV/Sales
(%)

01/16

18.3

2.9

1.1

0.16

0.0

1.4

01/17

22.1

(0.4)

(2.4)

(0.33)

0.0

1.2

01/18e

23.8

0.7

(0.6)

(0.08)

0.0

1.1

01/19e

25.6

1.2

(0.2)

(0.03)

0.0

1.0

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

Core GIS business outperforming expectations

The underlying positive news is that the core GIS business traded better than expected at both the revenue (Edison £16.5m +9% y-o-y) and EBITDA level (Edison £1.8m +24% y-o-y, excl central costs). Previous newsflow has indicated the business has been making good progress on a number of fronts, particularly in Europe within the utilities market, and now in the key US market with government agencies, supported by the ESRI partnership.

Deteriorating prospects at Enables prompts disposal

Enables IT also performed reasonably well with EBITDA of £0.5m (Edison £0.4m), but a major customer recently decided to insource these services. Weighing up the increased risk to revenues/cashflows, the decision has been made to dispose of all but a 19.9% stake to management for £1 supplemented with a £150k contribution and £85k interest free loan to support Enables’ working capital.

Focused business and investment case

We are not changing our estimates at this stage, pending more information. By a process of elimination, the EBITDA gains in GIS/Enables were offset by higher central operating costs but we do not believe this is recurring. If robust trading in GIS continues, we believe there is a good chance it can significantly offset the £430k FY19 EBITDA contribution we had forecast from Enables.

Valuation: Greater focus enhances upside potential

While the consideration for Enables is underwhelming, we believe that both prospects and the investment case should be enhanced by focusing on GIS. The GIS technology market is large (est $9bn) and growing at a double-digit rate. In our view, 1Spatial has the customer base, technology and expertise to generate robust sustainable growth and margins. With the recovery tracking ahead, we believe an FY19 2x EV/Sales multiple of 2.0x (vs 1.5x for GIS on current forecasts) is easily justifiable for this business, which would imply a value of at least 4.7p per share.

Exhibit 1: Financial summary

£'000s

2016

2017

2018e

2019e

31-January

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

18,300

22,065

23,812

25,577

Delivery costs

(7,715)

(12,386)

(13,461)

(14,376)

Gross Profit

10,585

9,679

10,351

11,201

EBITDA

 

 

2,902

(407)

720

1,160

Operating Profit (before amort. and except.)

1,584

(2,071)

(542)

(78)

Acquired Intangible Amortisation

(200)

(825)

(400)

(400)

Exceptionals

(1,081)

(11,988)

0

0

Share based payments

(976)

(566)

(750)

(750)

Operating Profit

(673)

(15,450)

(1,692)

(1,228)

Net Interest

(27)

(32)

(42)

(161)

Other

(421)

(266)

0

0

Profit Before Tax (norm)

 

 

1,136

(2,369)

(585)

(240)

Profit Before Tax (FRS 3)

 

 

(1,121)

(15,748)

(1,735)

(1,390)

Tax

503

988

347

278

Profit After Tax (norm)

1,136

(2,369)

(585)

(240)

Profit After Tax (FRS 3)

(618)

(14,760)

(1,388)

(1,112)

Average Number of Shares Outstanding (m)

691.3

728.9

747.7

760.5

EPS - normalised (p)

 

 

0.16

(0.33)

(0.08)

(0.03)

EPS - normalised fully diluted (p)

 

 

0.16

(0.33)

(0.08)

(0.03)

EPS - (IFRS) (p)

 

 

(0.09)

(2.02)

(0.19)

(0.15)

Dividend per share (p)

0.0

0.0

0.0

0.0

Gross Margin (%)

57.8

43.9

43.5

43.8

EBITDA Margin (%)

15.9

N/A

3.0

4.5

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

8.7

N/A

N/A

N/A

BALANCE SHEET

Fixed Assets

 

 

22,115

13,025

12,413

11,980

Intangible Assets

18,900

11,968

11,558

11,308

Tangible Assets

1,638

1,057

855

672

Investments

1,577

0

0

0

Current Assets

 

 

16,202

10,761

12,254

12,591

Stocks

0

0

0

0

Debtors

10,815

8,929

8,870

9,527

Cash

4,996

1,285

2,837

2,516

Other

391

547

547

547

Current Liabilities

 

 

(11,071)

(13,029)

(14,147)

(14,013)

Creditors & other

(11,071)

(12,348)

(11,966)

(12,832)

Short term borrowings

0

(681)

(2,181)

(1,181)

Long Term Liabilities

 

 

(1,579)

(1,535)

(1,088)

(1,088)

Long term borrowings

0

0

0

0

Other long term liabilities

(1,579)

(1,535)

(1,088)

(1,088)

Net Assets

 

 

25,667

9,222

9,431

9,469

CASH FLOW

Operating Cash Flow

 

 

(722)

(1,061)

397

1,369

Net Interest

(31)

(166)

(42)

(161)

Tax

55

425

347

278

Capex

(3,800)

(4,042)

(750)

(806)

Acquisitions/disposals

(1,033)

(900)

100

0

Financing

1,940

896

0

0

Dividends

0

0

0

0

Net Cash Flow

(3,342)

(4,848)

52

680

Opening net debt/(cash)

 

 

(8,250)

(4,996)

(604)

(656)

HP finance leases initiated

0

0

0

0

Other

88

456

0

0

Closing net debt/(cash)

 

 

(4,996)

(604)

(656)

(1,335)

Source: 1Spatial reports, Edison Investment Research. Note: Net losses on discontinued businesses in FY17 of £3.5m are not shown in the exhibit above. Forecasts do not take into account the proposed disposal of Enables.

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 Pty 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 Pty 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