Returns to organic growth, cash flow jumps

StatPro Group 2 August 2017 Update
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StatPro Group

Returns to organic growth, cash flow jumps

Interim results

Software & comp services

2 August 2017

Price

137p

Market cap

£89m

Net debt (£m) at 30 June 2017

18.9

Shares in issue

64.7m

Free float

82%

Code

SOG

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

15.6

10.9

39.8

Rel (local)

14.4

8.0

24.8

52-week high/low

137.0p

86.0p

Business description

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

Next events

Q3 trading update

October 2017

FY17 trading update

January 2018

Final results

March 2018

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 reported healthy interims with revenue up 23%, including 2% organic growth. Annualised recurring revenue (ARR) rose by 47% to £53.2m as at 30 June, boosted by the acquisition of UBS Delta in April. Adjusted EBITDA jumped by 35% to £2.8m as the margin expanded by 120bp to 12.9%, reflecting the increased scale of the business. We are reviewing our forecasts. Management says that the integration of Delta is on track, and we continue to see strong upside potential, given the significant valuation disparity between StatPro and its US-listed financial software peers.

Year
end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

12/15

30.2

2.6

2.6

2.9

52.2

2.1

12/16

37.5

2.7

3.5

2.9

39.2

2.1

12/17e

48.9

4.2

5.0

2.9

27.6

2.1

12/18e

57.3

6.1

7.2

2.9

19.1

2.1

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

H117 results: ARR jumps 47% to £53.2m

ARR jumped 47% to £53.2m, including £14.5m from Delta. New contracted revenue rose by 4% to £5.5m while cancellations fell by 10% to £4.5m. Revenue represents a function of ARR at the start of a period, plus new revenue, less churn and plus professional services. StatPro is now substantially a cloud business with 82% of group software revenue coming from cloud services (the balance is traditional software rental revenue and all revenue, apart from professional services, is recurring in nature). The average revenue per cloud client jumped by 67% to £75.5k, reflecting a focus on larger contract values and the acquisition of Delta. H1 cash flow from operations more than trebled to £7.5m and free cash flow swelled to £3.5m. StatPro commented that the “group’s sales pipeline of larger prospects continues to grow” and H217 trading is in line with market expectations.

Acquisition of UBS Delta

In April, StatPro acquired UBS Delta, a portfolio analysis and risk management system, from UBS for c €13m. The acquisition significantly scaled up StatPro’s business, having boosted our FY18e revenues by c 33% and EBITDA by c 40%. While the deal looks very attractive at less than 0.8x revenues, compared with 7.3x sales that FactSet recently paid for BISAM, a key competitor of StatPro, UBS Delta’s technology needs to be refreshed and to achieve this, its functionality, along with the customer base, are being transitioned to StatPro Revolution.

Valuation: Highly scalable cloud computing upside

StatPro’s stock trades on c 28x our FY17e EPS, which falls to c 19x in FY18e. Alternatively, the shares trade on c 1.9x FY18e EV/sales, around one-third of the level of StatPro’s larger US peers and US-based pure SaaS companies. Our DCF model (prior to any forecast revisions), when incorporating 10-year organic revenue growth of 4.4%, a terminal growth of 2%, a long-term margin target of 24.5% and a WACC of 9%, values the shares at 217p, 58% above the current share price.

Exhibit 1: Financial summary

£000s

2013

2014

2015

2016

2017e

2018e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

32,486

32,018

30,187

37,545

48,948

57,304

Cost of Sales

0

0

0

0

0

0

Gross Profit

32,486

32,018

30,187

37,545

48,948

57,304

EBITDA

 

 

5,463

4,359

4,044

5,104

7,030

8,916

Adjusted Operating Profit

 

 

4,327

2,875

2,852

3,461

5,230

7,116

Amortisation of acquired intangibles

(402)

(188)

(32)

(1,060)

(1,060)

(1,060)

Exceptionals

(347)

0

0

(11,378)

0

0

Share based payments

(192)

(26)

(121)

(361)

(213)

(225)

Operating Profit

3,386

2,661

2,699

(9,338)

3,958

5,831

Net Interest

(273)

(291)

(290)

(786)

(998)

(1,021)

Profit Before Tax (norm)

 

 

4,054

2,584

2,562

2,675

4,232

6,095

Profit Before Tax (FRS 3)

 

 

3,113

2,370

2,409

(10,124)

2,960

4,810

Tax

(1,030)

(774)

(788)

(395)

(889)

(1,280)

Profit After Tax (norm)

3,024

1,810

1,774

2,843

3,344

4,815

Profit After Tax (FRS 3)

2,083

1,596

1,621

(10,519)

2,071

3,530

Minority interests

0

0

0

(94)

(121)

(129)

Net income (norm)

3,024

1,810

1,774

2,280

3,223

4,686

Net income (statutory)

2,083

1,596

1,621

(10,613)

1,950

3,401

Average Number of Shares Outstanding (m)

67.5

67.5

67.6

65.3

64.9

65.2

EPS - normalised (p)

 

 

4.5

2.7

2.6

3.5

5.0

7.2

EPS - FRS 3 (p)

 

 

3.1

2.4

2.4

(16.3)

3.0

5.2

Dividend per share (p)

2.80

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 (%)

16.8

13.6

13.4

13.6

14.4

15.6

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

13.3

9.0

9.4

9.2

10.7

12.4

BALANCE SHEET

Fixed Assets

 

 

55,992

56,113

51,857

59,088

71,757

72,285

Intangible Assets

53,524

52,546

48,613

55,696

68,452

68,774

Tangible Assets

1,883

2,470

2,233

2,742

2,655

2,861

Other assets

585

1,097

1,011

650

650

650

Current Assets

 

 

10,312

10,441

10,665

19,081

24,018

28,637

Stocks

0

0

0

0

0

0

Debtors

6,167

7,722

8,462

14,725

19,197

22,475

Cash

4,014

2,692

2,203

4,356

4,821

6,162

Current Liabilities

 

 

(18,514)

(20,271)

(19,778)

(35,686)

(42,727)

(47,207)

Creditors

(18,502)

(20,259)

(19,660)

(27,227)

(34,268)

(38,748)

Short term borrowings

(12)

(12)

(118)

(8,459)

(8,459)

(8,459)

Long Term Liabilities

 

 

(882)

(598)

(1,227)

(9,897)

(22,223)

(21,523)

Long term borrowings

0

0

(801)

(5,961)

(16,060)

(15,360)

Other long term liabilities

(882)

(598)

(426)

(3,936)

(6,163)

(6,163)

Net Assets

 

 

46,908

45,685

41,517

32,586

30,826

32,191

CASH FLOW

Operating Cash Flow

 

 

9,403

7,705

6,548

7,454

11,604

14,417

Net Interest

(98)

(10)

(84)

(500)

(998)

(1,021)

Tax

(1,616)

(1,173)

(832)

(1,294)

(1,000)

(846)

Capex

(4,412)

(5,904)

(4,999)

(6,445)

(6,486)

(7,808)

Acquisitions/disposals

(990)

0

0

(4,786)

(10,861)

(820)

Equity financing

0

2

64

(2,079)

0

0

Dividends

(1,856)

(1,889)

(1,960)

(1,877)

(1,893)

(1,881)

Net Cash Flow

431

(1,269)

(1,263)

(9,527)

(9,633)

2,041

Opening net debt/(cash)

 

 

(3,667)

(4,002)

(2,680)

(1,283)

10,065

19,698

Other

(96)

(53)

(134)

(1,821)

(0)

(0)

Closing net debt/(cash)

 

 

(4,002)

(2,680)

(1,283)

10,065

19,698

17,657

Source: StatPro Group accounts, Edison Investment Research estimates

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. 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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, 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 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. 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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, 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 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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