StatPro Group |
In-line trading, underpinned by Infovest contract |
Q3 trading update |
Software & comp services |
25 October 2018 |
Share price performance
Business description
Next events
Analysts
StatPro Group is a research client of Edison Investment Research Limited |
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In an in-line Q3 trading update, StatPro says that its annualised recurring revenue (ARR) rose by 3% at constant currencies over the past 12 months to £54.8m. Additionally, earlier this week StatPro announced a c £1.0m five-year Infovest contract, which highlights the quality of the group’s Infovest data management solution. The main focus for growth remains the fund administrator channel and, in January, the group will operate a new structure with three divisions (Revolution for analytics, StatPro: Source for data, and Infovest for integration and data management) to drive the business. Following the recent de-rating, we believe the shares look increasing attractive on 15x our maintained FY19 earnings, especially in light of the active M&A backdrop in financial software and the scope for revenue acceleration and margin expansion.
Year |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/16 |
37.5 |
2.7 |
3.3 |
2.9 |
36.6 |
2.4 |
12/17 |
49.3 |
3.3 |
5.8 |
2.9 |
21.1 |
2.4 |
12/18e |
56.8 |
5.0 |
7.0 |
2.9 |
17.6 |
2.4 |
12/19e |
59.5 |
6.2 |
8.0 |
2.9 |
15.3 |
2.4 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Q3 trading: Underlying ARR grows 3% in 12 months
The group’s ARR rose by 3% to £54.8m over the 12 months to 30 September. This includes c £1.4m from the managed risk service of ODDO that was acquired in July. Importantly, StatPro Revolution’s underlying ARR growth (excluding the impact of acquired revenue and including conversions from StatPro Seven) was 16%. The migration of Delta is progressing well. While the underlying ARR number was broadly in line with the 30 June level, management remains confident that growth will accelerate, largely driven by the reseller (fund administrator/outsourcing) channel, outsourced managed services, the exploitation of under-utilised data assets and value-enhancing acquisitions. Further, profitability will be enhanced from disciplined management of costs. We have maintained all of our forecasts.
Sizeable c £1m Infovest contract in South Africa
StatPro has signed a ZAR19.5m (c £1.0m) Infovest contract with a large unnamed South African financial institution that is an existing StatPro customer. The customer will use Infostore to provide a consolidated view of all its positions in the market on a daily basis. In addition, the solution will enable business intelligence and analytics. This contract is among the largest Infovest contracts to date.
Valuation: Highly scalable cloud computing upside
StatPro’s stock trades on c 18x our maintained FY18 EPS, which falls to c 15x in FY19 and to c 13x in FY20. Alternatively, the shares trade on c 1.7x FY19 EV/sales, around half of the level of StatPro’s larger US peers and around one-third of US-based pure software-as-a-service companies. When incorporating 10-year organic revenue growth of c 3.6%, a terminal growth of 2%, a long-term margin target of 24.0% and a WACC of 9%, our DCF model values the shares at 222p, c 81% above the current share price.
Exhibit 1: Financial summary
£000s |
2015 |
2016 |
2017 |
2018e |
2019e |
2020e |
||
Year-end 31 December |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||||
Revenue |
|
|
30,187 |
37,545 |
49,260 |
56,751 |
59,501 |
62,123 |
Cost of Sales |
0 |
0 |
0 |
0 |
0 |
0 |
||
Gross Profit |
30,187 |
37,545 |
49,260 |
56,751 |
59,501 |
62,123 |
||
EBITDA |
|
|
4,044 |
5,104 |
6,838 |
8,743 |
9,511 |
10,455 |
Adjusted Operating Profit |
|
|
2,852 |
3,461 |
4,917 |
6,818 |
7,642 |
8,643 |
Amortisation of acquired intangibles |
(32) |
(1,060) |
(2,243) |
(3,243) |
(3,243) |
(3,243) |
||
Exceptionals |
0 |
(11,378) |
(3,934) |
0 |
0 |
0 |
||
Share based payments |
(121) |
(361) |
(626) |
(650) |
(675) |
(700) |
||
Operating Profit |
2,699 |
(9,338) |
(1,886) |
2,925 |
3,724 |
4,700 |
||
Net Interest |
(290) |
(786) |
(1,585) |
(1,839) |
(1,414) |
(1,214) |
||
Profit Before Tax (norm) |
|
|
2,562 |
2,675 |
3,332 |
4,980 |
6,228 |
7,429 |
Profit Before Tax (FRS 3) |
|
|
2,409 |
(10,124) |
(3,471) |
1,087 |
2,310 |
3,486 |
Tax |
(788) |
(489) |
563 |
(354) |
(934) |
(1,404) |
||
Profit After Tax (norm) |
1,774 |
2,843 |
4,505 |
4,626 |
5,294 |
6,025 |
||
Profit After Tax (FRS 3) |
1,621 |
(10,613) |
(2,908) |
733 |
1,376 |
2,082 |
||
Minority interests |
0 |
(94) |
(131) |
(40) |
0 |
0 |
||
Net income (norm) |
1,774 |
2,186 |
3,764 |
4,586 |
5,294 |
6,025 |
||
Net income (statutory) |
1,621 |
(10,707) |
(3,039) |
693 |
1,376 |
2,082 |
||
Average Number of Shares Outstanding (m) |
67.6 |
65.3 |
64.8 |
65.7 |
66.0 |
66.3 |
||
EPS - normalised (p) |
|
|
2.6 |
3.3 |
5.8 |
7.0 |
8.0 |
9.1 |
EPS - FRS 3 (p) |
|
|
2.4 |
(16.4) |
(4.7) |
1.1 |
2.1 |
3.1 |
Dividend per share (p) |
2.90 |
2.90 |
2.90 |
2.90 |
2.90 |
2.90 |
||
Gross Margin (%) |
100.0 |
100.0 |
100.0 |
100.0 |
100.0 |
100.0 |
||
EBITDA Margin (%) |
13.4 |
13.6 |
13.9 |
15.4 |
16.0 |
16.8 |
||
Operating Margin (before GW & except.) (%) |
9.4 |
9.2 |
10.0 |
12.0 |
12.8 |
13.9 |
||
BALANCE SHEET |
||||||||
Fixed Assets |
|
|
51,857 |
59,088 |
70,864 |
68,960 |
67,074 |
65,182 |
Intangible Assets |
48,613 |
55,696 |
64,793 |
63,282 |
61,479 |
59,536 |
||
Tangible Assets |
2,233 |
2,742 |
3,303 |
2,910 |
2,827 |
2,878 |
||
Other assets |
1,011 |
650 |
2,768 |
2,768 |
2,768 |
2,768 |
||
Current Assets |
|
|
10,665 |
19,081 |
20,912 |
20,684 |
22,861 |
25,167 |
Stocks |
0 |
0 |
0 |
0 |
0 |
0 |
||
Debtors |
8,462 |
14,725 |
16,601 |
19,125 |
20,052 |
20,936 |
||
Cash |
2,203 |
4,356 |
4,311 |
1,559 |
2,809 |
4,231 |
||
Current Liabilities |
|
|
(19,778) |
(35,686) |
(38,171) |
(41,296) |
(43,465) |
(45,635) |
Creditors |
(19,660) |
(27,227) |
(30,720) |
(33,845) |
(36,014) |
(38,184) |
||
Short term borrowings |
(118) |
(8,459) |
(7,451) |
(7,451) |
(7,451) |
(7,451) |
||
Long Term Liabilities |
|
|
(1,227) |
(9,897) |
(22,989) |
(22,290) |
(19,363) |
(16,437) |
Long term borrowings |
(801) |
(5,961) |
(17,076) |
(16,377) |
(15,677) |
(14,978) |
||
Other long term liabilities |
(426) |
(3,936) |
(5,913) |
(5,913) |
(3,686) |
(1,459) |
||
Net Assets |
|
|
41,517 |
32,586 |
30,616 |
26,058 |
27,106 |
28,277 |
CASH FLOW |
||||||||
Operating Cash Flow |
|
|
6,548 |
7,454 |
10,676 |
14,600 |
15,713 |
17,090 |
Net Interest |
(84) |
(500) |
(1,227) |
(1,839) |
(1,414) |
(1,214) |
||
Tax |
(832) |
(1,294) |
(144) |
(1,227) |
(304) |
(872) |
||
Capex |
(4,999) |
(6,445) |
(7,213) |
(8,043) |
(8,336) |
(8,694) |
||
Acquisitions/disposals |
0 |
(4,786) |
(10,269) |
(3,663) |
(1,803) |
(2,274) |
||
Equity financing |
64 |
(2,079) |
926 |
0 |
0 |
0 |
||
Dividends |
(1,960) |
(1,877) |
(2,012) |
(1,879) |
(1,907) |
(1,915) |
||
Net Cash Flow |
(1,263) |
(9,527) |
(9,263) |
(2,052) |
1,950 |
2,121 |
||
Opening net debt/(cash) |
|
|
(2,680) |
(1,283) |
10,065 |
20,217 |
22,269 |
20,319 |
Other |
(134) |
(1,821) |
(889) |
() |
0 |
0 |
||
Closing net debt/(cash) |
|
|
(1,283) |
10,065 |
20,217 |
22,269 |
20,319 |
18,198 |
Source: StatPro accounts, Edison Investment Research
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