In-line Q1 trading with “strong” pipeline

StatPro Group 19 May 2016 Update

StatPro Group

In-line Q1 trading with “strong” pipeline

AGM trading update

Software & comp services

19 May 2016

Price

73.5p

Market cap

£48m

Net cash (£m) at 31 December 2015

1.3

Shares in issue

64.7m

Free float

55%

Code

SOG

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(0.7)

1.4

(9.3)

Rel (local)

1.8

(2.1)

1.3

52-week high/low

86.5p

69.25p

Business description

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

Next events

H1 trading update

July 2016

Interim results

August 2016

Analysts

Richard Jeans

+44 (0)20 3077 5700

Dan Ridsdale

+44 (0)20 3077 5729

StatPro Group Group is a research client of Edison Investment Research Limited

StatPro says that Q1 trading was in line with expectations. New sales of StatPro Revolution, the cloud service, have progressed well and Revolution now represents c 36% of annualised contracted revenue. Management says the pipeline for the remainder of FY16 is “strong”, which is notably increasingly upbeat language. With StatPro continuing to advance to late-stage cloud transition, we highlight the increasing potential for positive earnings surprises. Hence, 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

27.4

3.9

12/15

30.2

2.6

2.6

2.9

28.0

3.9

12/16e

34.4

2.6

2.7

2.9

27.5

3.9

12/17e

36.4

3.4

3.6

2.9

20.3

3.9

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

Trading update: Cloud is now 36% of the run rate

StatPro says that Q1 trading is in line with expectations and the group has been signing new business from both new and existing clients (ie conversions and upsells). The group had a very busy Q1 with two acquisitions made and StatPro also bought back 4.25% of its shares. The recently acquired Investor Analytics is being integrated into the Revolution platform while InfoVest, which is being run as an autonomous operation, is making good progress. The company also announced the appointment of two non-executive directors. We are maintaining our forecasts.

Investment case: Risks increasingly on the upside

The group’s multi-tenanted cloud solutions enjoy significant advantages over traditional software. However, the transition from a traditional software business to the cloud is evolutionary – StatPro took its first steps towards the cloud transition back in 2008. Nevertheless, StatPro remains ahead of the pack, and we note that one of its key competitors recently abandoned a cloud transition project, apparently because of the challenges with transition. StatPro remains fervently on its path to becoming a pure cloud-based analytics service provider, with c 36% of annualised contracted revenue now coming from cloud services, up from c 20% a year earlier. The StatPro Revolution Performance module – the last major component in the group’s switch to the cloud from its traditional StatPro Seven software suite – will be launched commercially in September.

Valuation: Highly scalable cloud computing upside

StatPro’s stock trades on c 27x our maintained FY16e EPS, which falls to c 20x in FY17e. Alternatively, the shares trade on c 1.5x FY17e EV/sales, one-third of the level of StatPro’s larger US peers, which typically trade above 5x EV/sales, while US-based pure SaaS companies typically trade in the region of 3.3-5.7x 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

34,413

36,408

Cost of Sales

0

0

0

0

0

0

Gross Profit

32,001

32,486

32,018

30,187

34,413

36,408

EBITDA

 

 

6,728

5,463

4,359

4,044

4,339

5,202

Adjusted Operating Profit

 

 

5,534

4,327

2,875

2,852

2,924

3,721

Amortisation of acquired intangibles

(440)

(402)

(188)

(32)

0

0

Exceptionals

(693)

(347)

0

0

(700)

0

Share based payments

159

(192)

(26)

(121)

(200)

(213)

Operating Profit

4,560

3,386

2,661

2,699

2,024

3,509

Net Interest

(493)

(273)

(291)

(290)

(385)

(345)

Profit Before Tax (norm)

 

 

5,041

4,054

2,584

2,562

2,539

3,376

Profit Before Tax (FRS 3)

 

 

4,067

3,113

2,370

2,409

1,639

3,163

Tax

(1,387)

(1,030)

(774)

(788)

(711)

(945)

Profit After Tax (norm)

3,654

3,024

1,810

1,774

1,828

2,431

Profit After Tax (FRS 3)

2,680

2,083

1,596

1,621

928

2,218

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

3.6

EPS - FRS 3 (p)

 

 

4.3

3.1

2.4

2.4

1.3

3.3

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

12.6

14.3

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

17.3

13.3

9.0

9.4

8.5

10.2

BALANCE SHEET

Fixed Assets

 

 

60,272

55,992

56,113

51,857

58,692

58,642

Intangible Assets

57,683

53,524

52,546

48,613

55,659

55,816

Tangible Assets

1,974

1,883

2,470

2,233

2,022

1,816

Other assets

615

585

1,097

1,011

1,011

1,011

Current Assets

 

 

10,675

10,312

10,441

10,665

3,382

3,545

Stocks

0

0

0

0

0

0

Debtors

6,962

6,167

7,722

8,462

9,647

10,206

Cash

3,681

4,014

2,692

2,203

(6,264)

(6,661)

Current Liabilities

 

 

(19,927)

(18,514)

(20,271)

(19,778)

(21,289)

(22,103)

Creditors

(19,913)

(18,502)

(20,259)

(19,660)

(21,171)

(21,985)

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

37,460

38,158

CASH FLOW

Operating Cash Flow

 

 

9,233

9,403

7,705

6,548

7,501

9,187

Net Interest

(306)

(98)

(10)

(84)

(385)

(345)

Tax

(1,261)

(1,616)

(1,173)

(832)

(951)

(686)

Capex

(4,187)

(4,412)

(5,904)

(4,999)

(4,947)

(5,234)

Acquisitions/disposals

0

(990)

0

0

(5,625)

(1,399)

Equity financing

5,689

0

2

64

(2,100)

0

Dividends

(1,627)

(1,856)

(1,889)

(1,960)

(1,959)

(1,920)

Net Cash Flow

7,541

431

(1,269)

(1,263)

(8,466)

(396)

Opening net debt/(cash)

 

 

3,399

(3,667)

(4,002)

(2,680)

(1,283)

7,183

HP finance leases initiated

0

0

0

0

0

0

Other

(475)

(96)

(53)

(134)

0

()

Closing net debt/(cash)

 

 

(3,667)

(4,002)

(2,680)

(1,283)

7,183

7,580

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

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NSW 2000, Australia

Wellington +64 (0)48 948 555

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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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