Deal boosts cloud revenue run rate to 35%

StatPro Group 25 January 2016 Update

StatPro Group

Deal boosts cloud revenue run rate to 35%

Acquisition

Software & comp services

25 January 2016

Price

73.5p

Market cap

£50m

1.43$//£

Net cash (£m) as at 30 June 2015

2.03

Shares in issue

67.6m

Free float

63.8

Code

SOG

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(3.9)

(5.2)

(0.7)

Rel (local)

(0.3)

2.1

11.7

52-week high/low

86.5p

69.2p

Business description

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

Next events

Trading update

29 January 2016

Final results

March 2016

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

StatPro has acquired Investor Analytics (IA), a US-based provider of cloud-based risk analytics solutions to hedge funds and asset managers, for up to $16m. IA’s Risk Factor and Monte Carlo models will enable StatPro to provide a broader set of risk models to its customers. The deal boosts the group’s cloud-based annualised recurring revenue run rate to 35% of the total revenue book, up from 27%, and strengthens the group presence in the important North American market (IA’s HQ is in New York). We continue to believe there is significant upside in the shares, given the lofty multiples of StatPro’s US-based financial software peers and SaaS companies.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

12/13

32.5

4.1

4.5

2.8

16.3

3.8

12/14

32.0

2.6

2.7

2.9

27.2

3.9

12/15e

31.3

2.3

2.4

2.9

30.6

3.9

12/16e

32.7

2.6

2.8

2.9

26.3

3.9

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

Acquisition of Investor Analytics

StatPro is paying an initial $7m in cash, with a further $3m in deferred payments. This represents 2.0x FY15e revenues, which in our view looks attractive in relation to both the asset management software sector and SaaS business model valuations. In the 12 months to December 2015 IA generated $5m of revenues, of which 94% are recurring in nature. A further $6m is payable after one year, dependent on securing a number of new contract wins. We understand that IA’s small size was limiting its ability to expand the business, and becoming part of StatPro should resolve this issue. IA will be integrated into the StatPro Revolution platform, and StatPro anticipates that its existing equity focused asset management clients will wish to subscribe for the additional functionality. Further, we believe that IAs existing 53 clients, which are all new clients for StatPro, could be interested in Revolution’s Performance and Attribution features. IA generated an EBITDA loss of c $0.3m in FY15. However, StatPro believes it can achieve annualised cost synergies (including data feeds and administration services) of c £0.7m, and is therefore targeting EBITDA or £0.35-0.5m in the first 12 months after the acquisition. Exceptional cash charges of £0.7-1.0m are expected to be made, covering transaction fees and other one-off costs. StatPro has a small net cash position and so the transaction is being financed through its debt facility with Wells Fargo, which has been increased to c £24.5m, £17.0m of which is committed.

Valuation: Highly scalable cloud computing upside

We will incorporate the acquisition into our financial forecasts after the forthcoming trading update. StatPro’s stock trades on c 31x our FY15e EPS, which falls to c 26x in FY16e (pre-deal). Alternatively, the shares trade on an c 1.6x FY16e EV/sales (we estimate c 1.7x on post-acquisition basis), one-third of the level of its larger US peers, which typically trade above 4.8x EV/sales, while US-based pure SaaS companies typically trade in the region of 4.0-6.4x EV/sales.

Exhibit 1: Financial summary

£'000s

2011

2012

2013

2014

2015e

2016e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

31,715

32,001

32,486

32,018

31,315

32,743

Cost of Sales

0

0

0

0

0

0

Gross Profit

31,715

32,001

32,486

32,018

31,315

32,743

EBITDA

 

 

6,118

6,728

5,463

4,359

3,953

4,601

Adjusted Operating Profit

 

 

5,056

5,534

4,327

2,875

2,551

2,846

Amortisation of acquired intangibles

(447)

(440)

(402)

(188)

(32)

0

Exceptionals

0

(693)

(347)

0

0

0

Share based payments

(119)

159

(192)

(26)

(188)

(200)

Operating Profit

4,490

4,560

3,386

2,661

2,331

2,646

Net Interest

(627)

(493)

(273)

(291)

(300)

(200)

Profit Before Tax (norm)

 

 

4,429

5,041

4,054

2,584

2,251

2,646

Profit Before Tax (FRS 3)

 

 

3,863

4,067

3,113

2,370

2,031

2,446

Tax

(955)

(1,387)

(1,030)

(774)

(630)

(741)

Profit After Tax (norm)

3,474

3,654

3,024

1,810

1,621

1,905

Profit After Tax (FRS 3)

2,908

2,680

2,083

1,596

1,401

1,705

Average Number of Shares Outstanding (m)

60.8

62.2

67.5

67.5

67.6

67.9

EPS - normalised (p)

 

 

5.7

5.9

4.5

2.7

2.4

2.8

EPS - FRS 3 (p)

 

 

4.8

4.3

3.1

2.4

2.1

2.5

Dividend per share (p)

2.60

2.70

2.80

2.90

2.90

2.90

Gross Margin (%)

100.0

100.0

100.0

100.0

100.0

100.0

EBITDA Margin (%)

19.3

21.0

16.8

13.6

12.6

14.1

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

15.9

17.3

13.3

9.0

8.1

8.7

BALANCE SHEET

Fixed Assets

 

 

62,315

60,272

55,992

56,113

56,688

56,633

Intangible Assets

59,045

57,683

53,524

52,546

52,488

52,550

Tangible Assets

2,390

1,974

1,883

2,470

3,103

2,986

Other assets

880

615

585

1,097

1,097

1,097

Current Assets

 

 

8,794

10,675

10,312

10,441

8,884

9,688

Stocks

0

0

0

0

0

0

Debtors

6,173

6,962

6,167

7,722

7,553

7,897

Cash

2,447

3,681

4,014

2,692

1,304

1,764

Current Liabilities

 

 

(19,445)

(19,927)

(18,514)

(20,271)

(20,866)

(21,575)

Creditors

(19,434)

(19,913)

(18,502)

(20,259)

(20,854)

(21,563)

Short term borrowings

(11)

(14)

(12)

(12)

(12)

(12)

Long Term Liabilities

 

 

(7,834)

(1,400)

(882)

(598)

(598)

(598)

Long term borrowings

(5,835)

0

0

0

0

0

Other long term liabilities

(1,999)

(1,400)

(882)

(598)

(598)

(598)

Net Assets

 

 

43,830

49,620

46,908

45,685

44,107

44,148

CASH FLOW

Operating Cash Flow

 

 

9,925

9,233

9,403

7,705

8,168

8,426

Net Interest

(423)

(306)

(98)

(10)

(300)

(200)

Tax

(844)

(1,261)

(1,616)

(1,173)

(1,128)

(608)

Capex

(4,785)

(4,187)

(4,412)

(5,904)

(5,441)

(5,198)

Acquisitions/disposals

0

0

(990)

0

(730)

0

Equity financing

(12)

5,689

0

2

0

0

Dividends

(1,502)

(1,627)

(1,856)

(1,889)

(1,957)

(1,961)

Net Cash Flow

2,359

7,541

431

(1,269)

(1,388)

459

Opening net debt/(cash)

 

 

5,523

3,399

(3,667)

(4,002)

(2,680)

(1,292)

HP finance leases initiated

0

0

0

0

0

0

Other

(235)

(475)

(96)

(53)

0

0

Closing net debt/(cash)

 

 

3,399

(3,667)

(4,002)

(2,680)

(1,292)

(1,752)

Source: Company accounts, Edison Investment Research estimates.

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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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