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H122 results complement recent contract wins

1Spatial 29 September 2021 Update
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1Spatial

H122 results complement recent contract wins

H122 results

Software & comp services

29 September 2021

Price

44p

Market cap

£50m

Net cash (£m) at H122

2.8

Shares in issue (FD)

114.5m

Free float

84%

Code

SPA

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

18.9

6

41.9

Rel (local)

21.4

6

16.5

52-week high/low

51p

26p

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

H122 presentation for retail investors

30 September 2021

Analysts

Dan Ridsdale

+44 (0)20 3077 5729

Ken Mestemacher

+44 (0)20 3077 5700

1Spatial is a research client of Edison Investment Research Limited

Soon after reporting two large multiyear contract wins, 1Spatial’s H122 results did not disappoint. Headline revenue grew 8% y-o-y to £12.6m, with all global regions contributing, while adjusted EBITDA was up 10% to £1.8m, with relatively steady margins. We have raised our FY22 and FY23 revenue and earnings forecasts to reflect these recent contracts and trends from H122 performance. We remain encouraged by the long-term potential of the geospatial market, recent contract momentum and growth of recurring higher margin licence revenue, and see scope for further acceleration.

Year end

Revenue (£m)

EBITDA*
(£m)

EBIT*
(£m)

EPS
(p)

EV/sales
(x)

EV/EBIT
(x)

PE

(x)

01/20

23.4

3.2

1.0

0.6

2.0

47.6

75.4

01/21

24.6

3.6

0.4

0.2

1.9

109.2

253.7

01/22e

26.0

3.8

0.6

0.3

1.8

86.5

140.5

01/23e

28.5

4.5

1.1

0.8

1.7

43.1

55.3

Note: *EBITDA, EBIT and EPS exclude amortisation of acquired intangibles, exceptional items and share-based payments

H122: Growth across the globe

1Spatial has continued to execute its three-year growth plan, generating a 12% increase in total annualised recurring revenue (ARR), with term licence ARR rising 63% and the key US region increasing revenues 34%. 1Spatial’s ‘Land and expand’ strategy has generated growth from existing and new customers across the globe, including HM Land Registry in the UK, VINCI Highways in France and several in the US. Adjusted EBITDA margins were up slightly at 14.5%, despite ongoing by investments in sales and delivery to sustain growth and in R&D to support the release of 1Integrate’s 3D version.

Recent large contract wins potentially worth £14.5m

In the past few weeks, 1Spatial won what we believe are the two largest contracts in company history. In early September, it signed a contract with a total potential value of £6.5m (NUAR contract win) and earlier this week signed a £8m contract with a department of the UK government (UK contract win). The contracts are weighted towards higher margin licence revenue in the later years, which should boost margins in the medium term and continue the company’s transition to a SaaS company focused on recurring, high-margin licence revenue, rather than one primarily with a geospatial software and services model. Furthermore, a key part of 1Spatial’s growth strategy is collaborating with select partners in bidding on contracts like these, as both wins followed competitive tenders and portray the benefits of SPA’s approach.

Recurring revenue and margins should drive upside

Trading at 44p, 1Spatial’s share price has risen 51% in the year to date. The FY23e P/E of 55x reflects modest margins while the company’s EV/sales of c 1.7x is well below most software and services companies. We continue to see scope for growth to accelerate, especially in recurring revenue, and for margins to expand, potentially driving further upside in the share price.

Positive momentum, improving model

Estimate changes

We are upgrading our underlying estimates to reflect the recent £8m multiyear contract with an unnamed department of the UK government, which was announced on 27 September. As this deal was structured as a term licence after initial services work this year, the upside affects FY23 and FY24 (not yet forecast), then beyond with renewals.

The shift to a recurring model significantly improves visibility and means estimate changes tend to be progressive, but note this upgrade follows previous nudges upwards in March and September this year. Given 1Spatial’s improving execution and the robust structural drivers for both geospatial and master data management solutions (1Spatial operates at the intersection of both), we believe there is good potential for this momentum to continue.

While margins are low, profitability estimates are highly sensitive to adjustments to revenues and costs, we expect operational leverage to drive margin expansion, enabled by the shift towards a recurring, software business model.

Net cash at period-end was £2.8m versus £3.9m at H1 end last year, mainly due to investment in sales and delivery capacity and non-recurring items (eg, prior year restructuring costs). We have reflected this in our forecasts, but note cash generation typically improves in H2 and we expect the improving revenue model and margins to be reflected in positive cash flows.

Exhibit 1: Estimate changes

£m

FY20

FY21

FY22e

FY23e

Old

New

Change (%)

Old

New

Change (%)

Revenue

23.4

24.6

25.8

26.0

0.6

27.5

28.5

3.9

% growth

-

5.2%

5.1%

5.7%

0.6

6.3%

9.8%

9.2

Adjusted EBITDA

3.2

3.6

3.8

3.8

(1.8)

4.3

4.5

3.2

% margin

13.8%

14.8%

14.9%

14.5%

15.7%

15.6%

x

Normalised operating profit

1.00

0.44

0.6

0.5

(12.2)

1.0

1.1

4.6

% margin

4.3%

1.8%

2.4%

2.1%

N/A

3.8%

3.9%

N/A

Normalised profit before taxes

0.8

0.2

0.5

0.4

(21.1)

0.9

0.9

1.0

Reported profit before taxes

(1.7)

(1.4)

(0.9)

(0.9)

8.9

(0.5)

(0.4)

(6.4)

Normalised basic and diluted EPS (p)

0.58

0.17

0.32

0.31

(1.7)

0.63

0.80

25.8

Reported basic EPS (p)

(1.35)

(0.98)

(0.73)

(0.76)

4.0

(0.38)

(0.35)

(8.6)

Net cash/(debt)

3.9

4.3

5.7

4.6

(19.7)

7.3

5.5

(24.8)

Source: 1Spatial, Edison Investment Research

Exhibit 2: Financial summary

£'000s

2018

2019

2020

2021

2022e

2023e

31-January

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

16,938

17,624

23,385

24,600

25,997

28,545

Delivery costs

(7,994)

(8,449)

(11,123)

(11,451)

(12,218)

(13,131)

Gross Profit

8,944

9,175

12,262

13,149

13,778

15,415

Adjusted EBITDA

 

 

403

1,188

3,226

3,632

3,769

4,453

Operating Profit (before amort. and except.)

(967)

(306)

1,000

436

550

1,104

Acquired Intangible Amortisation

(335)

(432)

(972)

(917)

(970)

(1,020)

Exceptionals

(1,041)

(672)

(1,167)

(492)

0

0

Share based payments

538

(218)

(398)

(272)

(320)

(320)

Operating Profit

(1,805)

(1,628)

(1,537)

(1,245)

(740)

(236)

Net Interest

(151)

(191)

(195)

(187)

(190)

(190)

Other

0

0

0

0

0

0

Profit Before Tax (norm)

 

(1,118)

(497)

804

248

359

913

Profit Before Tax (FRS 3)

 

(1,956)

(1,819)

(1,733)

(1,433)

(931)

(427)

Tax

753

389

248

308

61

28

Profit After Tax (norm)

(1,118)

(497)

643

198

359

911

Profit After Tax (FRS 3)

(1,203)

(1,430)

(1,485)

(1,125)

(870)

(399)

Average Number of Shares Outstanding (m)

63.3

87.4

110.2

114.4

114.5

114.5

EPS - normalised (p)

 

 

(1.77)

(0.57)

0.58

0.17

0.31

0.80

EPS - normalised fully diluted (p)

(1.77)

(0.57)

0.58

0.17

0.31

0.80

EPS - (IFRS) (p)

 

 

(1.90)

(1.64)

(1.35)

(0.98)

(0.76)

(0.35)

Dividend per share (p)

0.0

0.0

0.0

0.0

0.0

0.0

Gross Margin (%)

52.8

52.1

52.4

53.5

53.0

54.0

EBITDA Margin (%)

2.4

6.7

13.8

14.8

14.5

15.6

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

(5.7)

(1.7)

4.3

1.8

2.1

3.9

BALANCE SHEET

Fixed Assets

 

 

10,873

10,479

19,206

18,273

18,543

18,893

Intangible Assets

10,540

10,194

15,560

15,187

15,467

15,847

Tangible Assets

333

285

374

392

382

352

Investments

0

0

3,272

2,694

2,694

2,694

Current Assets

 

 

7,050

11,481

14,985

18,332

18,996

20,787

Stocks

0

0

0

0

0

0

Debtors

5,510

4,998

9,644

10,890

11,199

12,072

Cash

1,319

6,358

5,108

7,278

7,632

8,550

Other

221

125

233

164

165

165

Current Liabilities

 

 

(10,234)

(8,578)

(12,844)

(14,813)

(16,263)

(17,885)

Creditors & other

(9,183)

(8,578)

(12,709)

(14,343)

(15,793)

(17,415)

Short term borrowings

(1,051)

0

(135)

(470)

(470)

(470)

Long Term Liabilities

 

 

(899)

(192)

(5,892)

(7,057)

(7,411)

(8,329)

Long term borrowings

0

0

(1,086)

(2,542)

(2,542)

(2,542)

Other long term liabilities

(899)

(192)

(4,806)

(4,515)

(4,869)

(5,787)

Net Assets

 

 

6,790

13,190

15,455

14,735

13,865

13,467

CASH FLOW

Operating Cash Flow

 

 

245

(749)

572

3,983

3,963

4,679

Net Interest

(167)

(175)

(144)

(179)

(190)

(190)

Tax

751

410

313

484

61

28

Capex

(1,035)

(1,394)

(2,320)

(2,312)

(2,380)

(2,500)

Acquisitions/disposals

115

0

(2,151)

(585)

0

0

Financing

0

7,996

2,805

0

0

0

Dividends

0

0

0

0

0

0

Other

0

0

(254)

(1,069)

(1,100)

(1,100)

Net Cash Flow

(91)

6,088

(1,179)

322

354

917

Opening net debt/(cash)

 

(604)

(268)

(6,358)

(3,886)

(4,266)

(4,620)

HP finance leases initiated

0

0

(1,221)

0

0

0

Other

(245)

2

(72)

58

0

0

Closing net debt/(cash)

 

(268)

(6,358)

(3,886)

(4,266)

(4,620)

(5,538)

Source: 1Spatial, Edison Investment Research


General disclaimer and copyright

This report has been commissioned by 1Spatial and prepared and issued by Edison, in consideration of a fee payable by 1Spatial, Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: 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 and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. 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.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, 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 securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. 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, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

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Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

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. 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 (i.e. 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.

United Kingdom

This document is prepared and provided by Edison 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.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison 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. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

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

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

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

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by 1Spatial and prepared and issued by Edison, in consideration of a fee payable by 1Spatial, Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: 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 and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. 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.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, 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 securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. 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, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

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. 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 (i.e. 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.

United Kingdom

This document is prepared and provided by Edison 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.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison 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. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

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

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

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

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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