New divisional structure sets path for growth

StatPro Group 30 November 2018 Update
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StatPro Group

New divisional structure sets path for growth

Capital markets day

Software & comp services

30 November 2018

Price

117.5p

Market cap

£77m

Net debt (£m) at 30 June 2018

23.2

Shares in issue

65.6m

Free float

82%

Code

SOG

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(0.8)

(17.3)

(21.4)

Rel (local)

(1.0)

(10.5)

(17.1)

52-week high/low

186.50p

114.00p

Business description

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

Next events

Trading update

January 2019

Final results

March 2019

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 took a decade to develop its cloud platform and all the key components, including a new divisional structure, are now in place for growth. The group’s broadened managed service offering is well placed to benefit from outsourcing trends in the asset management industry and we believe this offering will be a key component to growth. In addition, margins stand to benefit from the group’s increasing scale and costs dropping out as the group’s software platforms are streamlined. In our view, the shares look increasingly attractive, given the group’s £55m recurring revenue book and the much reduced rating (c 15x FY19e), especially in light of the active M&A backdrop in financial software.

Year
end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

12/16

37.5

2.7

3.3

2.9

35.1

2.5

12/17

49.3

3.3

5.8

2.9

20.2

2.5

12/18e

56.8

5.0

7.0

2.9

16.8

2.5

12/19e

59.5

6.2

8.0

2.9

14.7

2.5

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

Revolution: Cloud software and managed services

Full parity with the legacy Seven software suite is expected in FY19, which will provide impetus to convert customers to the Revolution cloud platform. The first version of StatPro Delta (front office fixed income analytics) is scheduled for 15 May 2020 and there have been significant improvements to the migration to make the transition seamless for new customers. A goal is to combine front office with middle office functionality to create the best risk offering on the market. Increasingly management is discovering customers who are excited at the prospect of outsourcing the operation of Revolution to StatPro’s new managed services unit.

Infovest: Complements the group’s cloud solutions

The South African unit, 100% owned by StatPro since March, specialises in data warehouse, ETL (Extract, Transform and Load) and reporting software. The aim is to use StatPro’s global sales team to target the international markets – initially Europe with North America to follow. The South African offices of Infovest and StatPro are merging into one office of 60–65 employees in FY19.

Source: StatPro – exploiting the group’s data assets

This new division was set up with the goal to exploit the group’s under-utilised data assets, which range from asset pricing/valuations and benchmarking to yield curves, complex asset pricing and indices. A data industry expert has been hired to lead this division. A useful analogy is stock exchanges, whose data assets are now proving more lucrative than their traditional capital markets activities.

Valuation: Highly scalable cloud computing upside

StatPro’s stock trades on c 17x our maintained FY18e EPS, which falls to c 15x in FY19e and to c 13x in FY20e. Alternatively, the shares trade on c 1.7x FY19 EV/Sales, around a third of the level of StatPro’s larger US financial software peers and well below one-third of US-based pure software-as-a-service companies.

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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This report has been commissioned by VolitionRx and prepared and issued by Edison, in consideration of a fee payable by VolitionRx. 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 Edison analyst 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.

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United Kingdom

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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 (nor will such persons be able to purchase shares in the placing).

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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

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

General disclaimer and copyright

This report has been commissioned by VolitionRx and prepared and issued by Edison, in consideration of a fee payable by VolitionRx. 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 Edison analyst 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 2018 Edison Investment Research Limited (Edison). All rights reserved 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.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd who holds an Australian Financial Services Licence (Number: 427484). 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

Neither this document and associated email (together, the "Communication") constitutes or form part of any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities, nor shall it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. Any decision to purchase shares in the Company in the proposed placing should be made solely on the basis of the information to be contained in the admission document to be published in connection therewith.

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 (nor will such persons be able to purchase shares in the placing).

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

Neither this Communication nor any copy (physical or electronic) of it may be (i) taken or transmitted into the United States of America, (ii) distributed, directly or indirectly, in the United States of America or to any US person (within the meaning of regulations Regulation S made under the US Securities Act 1933, as amended), (iii) taken or transmitted into or distributed in Canada, Australia, the Republic of Ireland or the Republic of South Africa or to any resident thereof, except in compliance with applicable securities laws, (iv) taken or transmitted into or distributed in Japan or to any resident thereof for the purpose of solicitation or subscription or offer for sale of any securities or in the context where the distribution thereof may be construed as such solicitation or offer, or (v) or taken or transmitted into any EEA state other than the United Kingdom. Any failure to comply with these restrictions may constitute a violation of the securities laws or the laws of any such jurisdiction. The distribution of this Communication in or into other jurisdictions may be restricted by law and the persons into whose possession this document comes should inform themselves about, and observe, any such restrictions.

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

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