Recurring revenue run rate jumps by 18%

StatPro Group 25 January 2017 Update

StatPro Group

Recurring revenue run rate jumps by 18%

Trading update

Software & comp services

25 January 2017

Price

100p

Market cap

£65m

Net debt (£m) at 31 December 2016

10.1

Shares in issue

64.7m

Free float

82%

Code

SOG

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(4.8)

(10.7)

36.1

Rel (local)

(5.9)

(12.7)

13.7

52-week high/low

113.0p

72.0p

Business description

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

Next events

Final results

7 March 2017

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

In an in-line trading update, StatPro says that its annualised recurring revenue (ARR) increased by 18% to £39.3m over the 12 months, which includes the two acquisitions made early last year. The ARR for StatPro Revolution, the cloud-based portfolio analysis service, increased by 68% to £15.0m, to represent 38% of the total, up from 27% a year earlier. We have maintained our FY16 P&L forecasts, which are likely to be slightly conservative due the weakness of the British pound, and have edged up our FY17 revenues, while broadly maintaining profits. 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

37.0

2.9

12/15

30.2

2.6

2.6

2.9

38.5

2.9

12/16e

35.5

2.8

2.7

2.9

37.0

2.9

12/17e

38.6

3.7

3.6

2.9

27.8

2.9

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

FY16 trading update

Management says FY16 revenue and profitability remained in line with expectations. The group ended the year with £10.1m of net debt, which was £1.6m ahead of our expectations, primarily due to the fall in the British pound. StatPro increased its provision on the InfoVest (acquired in February) minority interest by £0.6m to £2.5m (ZAR42m), reflecting a strong performance, along with the rise in the South African rand against the pound. This £0.6m will be recorded as a non-operating exceptional item. StatPro is taking a £10m charge against FRI, which was acquired in 2006, and represents legacy software, but this has no impact on cash flow or tax. The group’s primary focus is to transition existing clients from the traditional performance, risk and fixed income attribution modules (which represented c £7.5m of group revenues at 30 June 2016) to its modern cloud platform over the next two years. A premium will be charged on the switch, and we note the group announced a £1.5m contract win in January with an un-named existing client.

Forecasts: Upgrade to FY17 revenues

We have edged up FY17 revenues by £1.0m to £38.6m, while conservatively easing our FY17 EPS on a higher net interest charge. We note that profitability is underpinned by the £39.3m recurring revenues, along with some related professional services. End FY16 net debt of £10.1m was ahead of our forecast £8.6m and we have increased our FY17 estimated net debt to £11.2m (previously £8.9m), which is after Investor Analytics and SiSoft acquisition payments.

Valuation: Highly scalable cloud computing upside

StatPro’s stock trades on c 37x our maintained FY16e EPS, which falls to c 27x in FY17e. Alternatively, the shares trade on c 1.9x FY17e EV/sales, one-third of the level of StatPro’s larger US peers, which mostly trade above 5x EV/sales, while US-based pure SaaS companies typically trade in the region of 4.3-7.1x EV/sales.

Forecast changes

We have edged up FY17 revenues by £1.0m or 3% to £38.6m. We have conservatively maintained adjusted operating profit at £4.2m, but EBITDA edges up on capitalisation/amortisation impacts while FY17 EPS eases on an increased net interest charge. Forecasts are underpinned by year end recurring revenues of £39.3m, along with some related professional services, and there remain upside risks if the cable (British pound against US dollar) remains at current levels (c 1.26). End FY16 net debt of £10.1m was above our forecast £8.6m, in part due to the movement on exchange. Our forecast net debt rises to £11.2m (£8.9m) as at the end of FY17.

Exhibit 1: Forecast changes

Revenue (£m)

EBITDA (£m)

EPS (p)

Old

New

% chg.

Old

New

% chg.

Old

New

% chg.

2016e

35.5

35.5

0

4.7

4.8

2

2.7

2.7

0

2017e

37.6

38.6

3

5.7

5.8

2

3.7

3.6

(3)

Source: Edison Investment Research

Peer analysis

StatPro’s stock trades on c 37x our maintained FY16e EPS, which falls to c 27x in FY17e. Alternatively, the shares trade on c 1.9x FY17e EV/sales, one-third of the level of StatPro’s larger US peers, which mostly trade above 5x EV/sales, while US-based pure SaaS companies typically trade in the region of 4.3-7.1x EV/sales.

Exhibit 2: Peers

Price

Market cap

EV/sales (x)

EV/EBITDA (x)

P/E (x)

Local currency

Local currency

Year 1

Year 2

Year 1

Year 2

Year 1

Year 2

StatPro

100.00

65

2.1

1.9

15.4

12.7

36.9

27.5

1) US-quoted investment management software peers

MSCI

82.28

7745

7.3

7.2

14.6

14.3

28.0

24.0

FactSet

172.26

6816

5.7

5.4

16.3

15.4

23.8

21.5

SS&C

31.59

6407

5.4

5.3

13.3

12.8

19.5

16.4

DST Systems

112.90

3611

2.3

2.3

10.6

10.2

19.9

18.2

Envestnet

37.15

1599

2.8

2.7

15.3

14.3

41.0

28.6

Medians

5.4

5.3

14.6

14.3

23.8

21.5

2) Investment management software peers quoted in other countries

GBST

3.81

259

2.3

2.2

12.4

10.4

17.0

14.3

Iress

11.45

1946

5.4

4.8

17.7

15.6

24.6

21.3

Linedata

45.50

334

2.0

2.0

6.8

6.7

13.0

13.1

SimCorp

349.10

14488

N/A

6.2

N/A

25.7

37.3

34.1

Medians

2.3

3.5

12.4

13.0

20.8

17.8

3) UK-quoted financial software peers

Fidessa

2281.00

880

2.5

2.4

9.7

10.3

26.3

24.5

First Derivatives

2137.00

530

3.9

3.5

20.5

18.3

37.5

34.5

Microgen

184.50

109

2.7

2.7

11.1

10.5

17.7

16.6

Brady

81.50

68

2.0

1.9

13.8

12.2

25.5

22.6

Lombard Risk

8.63

35

0.9

0.7

N/A

4.3

N/A

21.6

Medians (excl Lombard)

2.6

2.5

12.4

11.4

25.9

23.6

4) US companies with SaaS business models

Callidus

18.25

1159

4.2

4.0

N/A

27.9

68.4

56.0

Cornerstone OnDemand

41.49

2331

5.0

4.8

59.1

47.6

648.3

154.2

Paycom Software

50.80

3054

7.6

7.1

27.6

26.0

62.0

48.9

Paylocity

32.85

1687

5.2

4.3

39.4

31.5

85.5

63.9

Salesforce

76.91

53583

5.5

5.3

26.3

24.7

78.6

59.9

Ultimate Software

198.66

5761

6.2

5.8

25.6

23.9

61.2

49.5

Workday

82.80

16643

8.1

7.6

78.5

85.8

2855.2

297.8

Medians

5.5

5.3

33.5

27.9

78.6

59.9

Source: Bloomberg, Edison Investment Research. Note: Prices as at 24 January 2017.

Exhibit 3: 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

35,496

38,604

Cost of Sales

0

0

0

0

0

0

Gross Profit

32,001

32,486

32,018

30,187

35,496

38,604

EBITDA

 

 

6,728

5,463

4,359

4,044

4,802

5,824

Adjusted Operating Profit

 

 

5,534

4,327

2,875

2,852

3,386

4,224

Amortisation of acquired intangibles

(440)

(402)

(188)

(32)

(1,100)

(1,100)

Exceptionals

(693)

(347)

0

0

(10,894)

0

Share based payments

159

(192)

(26)

(121)

(200)

(213)

Operating Profit

4,560

3,386

2,661

2,699

(8,807)

2,912

Net Interest

(493)

(273)

(291)

(290)

(625)

(550)

Profit Before Tax (norm)

 

 

5,041

4,054

2,584

2,562

2,762

3,674

Profit Before Tax (FRS 3)

 

 

4,067

3,113

2,370

2,409

(9,432)

2,362

Tax

(1,387)

(1,030)

(774)

(788)

(773)

(1,029)

Profit After Tax (norm)

3,654

3,024

1,810

1,774

1,988

2,645

Profit After Tax (FRS 3)

2,680

2,083

1,596

1,621

(10,205)

1,333

Minority interests

0

0

0

0

(213)

(278)

Net income (norm)

3,654

3,024

1,810

1,774

1,775

2,367

Net income (statutory)

2,680

2,083

1,596

1,621

(10,418)

1,055

Average Number of Shares Outstanding (m)

62.2

67.5

67.5

67.6

65.4

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

(15.9)

1.6

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

13.5

15.1

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

17.3

13.3

9.0

9.4

9.5

10.9

BALANCE SHEET

Fixed Assets

 

 

60,272

55,992

56,113

51,857

57,832

59,048

Intangible Assets

57,683

53,524

52,546

48,613

54,442

55,907

Tangible Assets

1,974

1,883

2,470

2,233

2,379

2,131

Other assets

615

585

1,097

1,011

1,011

1,011

Current Assets

 

 

10,675

10,312

10,441

10,665

12,346

13,524

Stocks

0

0

0

0

0

0

Debtors

6,962

6,167

7,722

8,462

9,950

10,822

Cash

3,681

4,014

2,692

2,203

2,396

2,702

Current Liabilities

 

 

(19,927)

(18,514)

(20,271)

(19,778)

(21,665)

(22,844)

Creditors

(19,913)

(18,502)

(20,259)

(19,660)

(21,165)

(22,344)

Short term borrowings

(14)

(12)

(12)

(118)

(500)

(500)

Long Term Liabilities

 

 

(1,400)

(882)

(598)

(1,227)

(18,026)

(19,425)

Long term borrowings

0

0

0

(801)

(12,000)

(13,399)

Other long term liabilities

(1,400)

(882)

(598)

(426)

(6,026)

(6,026)

Net Assets

 

 

49,620

46,908

45,685

41,517

30,487

30,303

CASH FLOW

Operating Cash Flow

 

 

9,233

9,403

7,705

6,548

7,221

9,888

Net Interest

(306)

(98)

(10)

(84)

(625)

(550)

Tax

(1,261)

(1,616)

(1,173)

(832)

(1,600)

(746)

Capex

(4,187)

(4,412)

(5,904)

(4,999)

(5,509)

(5,549)

Acquisitions/disposals

0

(990)

0

0

(5,536)

(2,237)

Equity financing

5,689

0

2

64

(2,079)

0

Dividends

(1,627)

(1,856)

(1,889)

(1,960)

(1,959)

(1,898)

Net Cash Flow

7,541

431

(1,269)

(1,263)

(10,087)

(1,092)

Opening net debt/(cash)

 

 

3,399

(3,667)

(4,002)

(2,680)

(1,283)

10,104

Other

(475)

(96)

(53)

(134)

(1,300)

0

Closing net debt/(cash)

 

 

(3,667)

(4,002)

(2,680)

(1,283)

10,104

11,196

Source: StatPro Group accounts, Edison Investment Research estimates

Edison, the investment intelligence firm, is the future of investor interaction with corporates. Our team of over 100 analysts and investment professionals work with leading companies, fund managers and investment banks worldwide to support their capital markets activity. We provide services to more than 400 retained corporate and investor clients from our offices in London, New York, Frankfurt and Sydney. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by StatPro Group and prepared and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and 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 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. This document is provided 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.
Edison has a restrictive policy relating to personal dealing. 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. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. 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. 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 (ie 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. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “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.

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

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

Edison, the investment intelligence firm, is the future of investor interaction with corporates. Our team of over 100 analysts and investment professionals work with leading companies, fund managers and investment banks worldwide to support their capital markets activity. We provide services to more than 400 retained corporate and investor clients from our offices in London, New York, Frankfurt and Sydney. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by StatPro Group and prepared and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and 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 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. This document is provided 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.
Edison has a restrictive policy relating to personal dealing. 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. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. 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. 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 (ie 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. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “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.

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

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

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