Significant cloud contract in America

StatPro Group 14 June 2016 Update

StatPro Group

Significant cloud contract in America

Contract win

Software & comp services

14 June 2016

Price

82.5p

Market cap

£53m

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

11.5

3.8

(1.2)

Rel (local)

13.0

5.1

10.0

52-week high/low

84.0p

69.2p

Business description

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

Next events

Trading update

Mid-July 2016

Interim results

Early-August 2016

Performance Module launch

28 September 2016

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 has won a significant new contract, worth at least £1.2m over five years, with a global American financial institution. This follows last week’s £2.3m three-year contract win with a major Australian financial institution. We estimate that the two contracts will boost the group’s annualised recurring revenue run rate by c 2.7%, with growth potential. The two new contracts highlight the increasing potential for positive newsflow, as the group moves to late-stage cloud transition. 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

30.6

3.5

12/15

30.2

2.6

2.6

2.9

31.7

3.5

12/16e

34.4

2.5

2.7

2.9

30.6

3.5

12/17e

36.4

3.4

3.6

2.9

22.9

3.5

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

Contract win with a global American institution

The latest deal with an un-named American financial institution uses StatPro’s latest cloud technology to replace its legacy systems, and includes a small amount of services as is typical with such deals. This and the deal announced last week both include the Performance Module – the group’s core transaction-based performance measurement module - that replaces the traditional StatPro Seven solution and is set to be commercially launched in September. This reflects the desires of some customers to move to the front of the queue to be up and running by the official launch date, as the installation process can be complex, involving data transfer and data set-up processes.

Financial impact and forecasts

We estimate the two new contracts will add c £850k, or c 2.7%, to the group’s annualised recurring revenue run rate, which was c £31.9m pro forma following the Investor Analytics acquisition. In our view, these deals underpin our forecasts and increase the risk to upgrades as the year progresses. StatPro prices its cloud solutions on the basis of the number of portfolios, and therefore there is the potential for the revenues from both clients to grow. Nevertheless, given the uncertainties over currency volatility and the imminent EU referendum and the reliance on additional new business through the year to meet our forecasts, we are conservatively maintaining our estimates.

Valuation: Highly scalable cloud computing upside

StatPro’s stock trades on c 31x our maintained FY16e EPS, which falls to c 23x in FY17e. Alternatively, the shares trade on c 1.7x 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 4-6x 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 & 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

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

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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