StatPro Revolution ARR rose 46% in FY15

StatPro Group 1 February 2016 Update

StatPro Group

StatPro Revolution ARR rose 46% in FY15

Trading update

Software & comp services

1 February 2016

Price

72p

Market cap

£49m

$1.43/£

Net cash (£m) at 31 December 2015

1.3

Shares in issue

67.6m

Free float

55%

Code

SOG

Primary exchange

AIM

Secondary exchange

LSE

Share price performance

%

1m

3m

12m

Abs

(3.9)

(5.2)

(0.7)

Rel (local)

2.0

2.5

12.3

52-week high/low

86.5p

69.25p

Business description

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

Next event

Final results

March 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 reported that FY15 adjusted EBITDA is expected to be in line with our expectations, while revenues were c 4% lower than our forecasts, which we understand was mainly due to the continued weakness in the C$, ZAR and euro against sterling. We have tweaked our FY15 forecasts and eased FY16 due to the currency moves. We have also incorporated Investor Analytics (IA), the cloud-based risk analytics solutions provider that StatPro acquired earlier this month, into our forecasts. We continue to believe there is significant upside in the shares, given the lofty multiples of StatPro’s US-based financial software peers and SaaS companies.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

12/13

32.5

4.1

4.5

2.8

16.0

3.9

12/14

32.0

2.6

2.7

2.9

26.7

4.0

12/15e

30.0

2.3

2.4

2.9

30.0

4.0

12/16e

34.2

2.8

2.9

2.9

24.8

4.0

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

Trading update: In-line FY15 EBITDA

StatPro Revolution’s annualised recurring revenue run rate (ARR) grew by 46% at constant currencies to £7.8m (c 27% of the total group ARR) as at 31 December, and by 8% in absolute terms in Q4. StatPro Seven’s recurring revenue was resilient with a net cancellation rate at constant currency, excluding the impact of conversions to Revolution, of c 3% (FY14: zero). Professional Services revenue was significantly lower, due to the absence of larger one-off projects. The launch of StatPro Revolution Performance module remains on track for the summer. FY15 adjusted EBITDA is expected to be c £4.0m, in line with our forecast, while FY15 revenue is expected to be c £30.0m (we forecast £31.3m). Net cash was £1.3m, in line with our forecasts, although we understand the SiSoft acquisition liability, which we had assumed would be settled in FY15, has not yet been paid. StatPro acquired Investor Analytics for up to $16m. This acquisition takes StatPro’s cloud-based ARR to c £11.1m, taking cloud-based ARR to c 35% of total pro forma group ARR total.

Forecasts: Incorporating Investor Analytics

We have reduced continuing revenue forecasts by £1.3m to £30.0m in FY15, and by £1.8m in FY16 to £31.0m. We have maintained our continuing profit forecasts for both FY15 and FY16. We have included 11 months of contributions from IA in FY16. In all, FY16 revenue rises by 4% to £34.2m, while PBT norm and EPS also rise by 4%, reflecting earnings accretion from the acquisition. We forecast the group to end FY16 with net debt of £4.7m (previously £1.8m net cash).

Valuation: Highly scalable cloud computing upside

StatPro’s stock trades on c 30x our FY15e EPS, which falls to c 25x in FY16e. Alternatively, the shares trade on c 1.6x FY16e EV/sales, one-third of the level of StatPro’s larger US peers, which typically trade above 4.9x EV/sales, while US-based pure SaaS companies typically trade in the region of 3.5-6.2x EV/sales.

Acquisition of Investor Analytics

On 22 January 2016, StatPro acquired IA for up to $16m. StatPro paid $7m in cash on closing and there are two deferred payments – $2m after one year and $1m after two years. Furthermore, there is an additional contingent payment – up to $6m after one year, dependent on securing a number of new contract wins. IA is expected to report FY15 revenue of $5.0m (of which c 94% was recurring) and an EBITDA loss of c $0.3m. Its ARR is currently c $4.85m.

StatPro is financing the transaction from increased debt facilities provided by the Technology Finance division of Wells Fargo Capital Finance. The debt facility has been increased to c £24.5m, of which £17.0m is committed. Hence, given its strong recurring revenues (c 94%), StatPro retains plenty of financial flexibility.

Cost synergies are expected to be c $1.0m pa (£0.7m) for data feeds, administrative services and other costs. StatPro is targeting a run rate adjusted EBITDA for IA of c $0.5-0.75m (£0.35-0.5m) in the first 12 months following its acquisition. It expects to report an exceptional cash charge of $1.0-1.5m (£0.7-1.0m) covering transaction fees and other one-off integration costs.

Forecasts: Incorporating Investor Analytics

We have reduced continuing revenues by £1.3m to £30.0m in FY15, in line with the trading update, and by £1.8m in FY16 to £31.0m. We have maintained our continuing profit forecasts for both FY15 and FY16, which reflects strong cost discipline. We have included 11 months of contributions from IA in FY16. In all, FY16 revenue rises by 4% to £34.2m, while PBT norm and EPS also rise by 4%, reflecting earnings accretion from the acquisition. We forecast the group to end FY16 with net debt of £4.7m (previously £1.8m net cash).

P&L

FY16 revenues for Traditional software rental and StatPro Revolution fall back due to the strength of sterling in relation to the C$, ZAR and the euro. However, we note the group now has an increased exposure to the strong US$ following the acquisition of IA. Data slips since this business area is being de-emphasised. We expect Professional Services to bounce in FY16, as FY15 was an abnormally quiet year, and the group should benefit from the launch of the StatPro Revolution Performance module over the summer.

We have included £1m of restructuring costs in FY16 (£0.7m net of tax).

Balance sheet and cash flow

We have shifted the anticipated SiSoft payment from FY15 to FY16, and added the IA $7m payment and $3m liabilities. However, we have ignored the contingent payment for now.

We have eased our FY15 operating cash flow forecast by £0.9m, to maintain the year-end net cash position at £1.3m, as indicated by the company. Capex has also eased as a function of the reduced FY15 revenues.

Exhibit 1: Forecasts

2015e

2016e

New

Old

Change (%)

New

Old

Change (%)

Revenues (£000s)

Traditional software rental

19,262

19,549

(1)

16,762

17,549

(4)

StatPro Revolution

5,676

5,845

(3)

8,910

9,154

(3)

Investor Analytics

 

 

 

3,205

 

 

Data

3,417

3,832

(11)

3,286

3,909

(16)

Professional services

1,650

2,089

(21)

2,000

2,131

(6)

Group revenue

30,006

31,315

(4)

34,163

32,743

4

Growth (%)

(6.3)

(2.2)

 

13.9

4.6

 

Gross Profit

30,006

31,315

(4)

34,163

32,743

4

Op expenses (before devt costs)

(27,286)

(28,738)

(5)

(31,342)

(29,959)

5

Capitalisation of dev costs (net)

(169)

(26)

538

265

63

321

Adjusted operating profit

2,551

2,551

(0)

3,086

2,846

8

Operating margin (%)

8.5

8.1

4

9.0

8.7

4

Growth (%)

(11.3)

(11.3)

0

21.0

11.6

81

Net interest

(300)

(300)

0

(335)

(200)

67

Profit before tax norm

2,251

2,251

(0)

2,751

2,646

4

Amortisation of acquired intangibles

(32)

(32)

0

0

0

 

Share based payments

(188)

(188)

0

(200)

(200)

0

Exceptional items (net of tax)

0

0

 

(700)

0

 

Profit before tax

2,031

2,031

(0)

1,851

2,446

(24)

Taxation

(630)

(630)

(0)

(770)

(741)

4

Net income

1,401

1,401

(0)

1,081

1,705

(37)

Adjusted EPS (p)

2.4

2.4

(0)

2.9

2.8

4

P/E - Adjusted EPS

30.7

 

 

25.2

 

 

Source: Edison Investment Research


Exhibit 2: Financial summary

£000s

2011

2012

2013

2014

2015e

2016e

Year-end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

31,715

32,001

32,486

32,018

30,006

34,163

Cost of Sales

0

0

0

0

0

0

Gross Profit

31,715

32,001

32,486

32,018

30,006

34,163

EBITDA

 

 

6,118

6,728

5,463

4,359

3,953

4,812

Adjusted Operating Profit

 

 

5,056

5,534

4,327

2,875

2,551

3,086

Amortisation of acquired intangibles

(447)

(440)

(402)

(188)

(32)

0

Exceptionals

0

(693)

(347)

0

0

(700)

Share based payments

(119)

159

(192)

(26)

(188)

(200)

Operating Profit

4,490

4,560

3,386

2,661

2,331

2,186

Net Interest

(627)

(493)

(273)

(291)

(300)

(335)

Profit Before Tax (norm)

 

 

4,429

5,041

4,054

2,584

2,251

2,751

Profit Before Tax (FRS 3)

 

 

3,863

4,067

3,113

2,370

2,031

1,851

Tax

(955)

(1,387)

(1,030)

(774)

(630)

(770)

Profit After Tax (norm)

3,474

3,654

3,024

1,810

1,621

1,981

Profit After Tax (FRS 3)

2,908

2,680

2,083

1,596

1,401

1,081

Average Number of Shares Outstanding (m)

60.8

62.2

67.5

67.5

67.6

67.9

EPS - normalised (p)

 

 

5.7

5.9

4.5

2.7

2.4

2.9

EPS - FRS 3 (p)

 

 

4.8

4.3

3.1

2.4

2.1

1.6

Dividend per share (p)

2.60

2.70

2.80

2.90

2.90

2.90

Gross Margin (%)

100.0

100.0

100.0

100.0

100.0

100.0

EBITDA Margin (%)

19.3

21.0

16.8

13.6

13.2

14.1

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

15.9

17.3

13.3

9.0

8.5

9.0

BALANCE SHEET

Fixed Assets

 

 

62,315

60,272

55,992

56,113

56,460

63,700

Intangible Assets

59,045

57,683

53,524

52,546

52,345

59,603

Tangible Assets

2,390

1,974

1,883

2,470

3,018

3,000

Other assets

880

615

585

1,097

1,097

1,097

Current Assets

 

 

8,794

10,675

10,312

10,441

8,597

3,552

Stocks

0

0

0

0

0

0

Debtors

6,173

6,962

6,167

7,722

7,237

8,239

Cash

2,447

3,681

4,014

2,692

1,334

(4,715)

Current Liabilities

 

 

(19,445)

(19,927)

(18,514)

(20,271)

(19,589)

(21,040)

Creditors

(19,434)

(19,913)

(18,502)

(20,259)

(19,577)

(21,028)

Short term borrowings

(11)

(14)

(12)

(12)

(12)

(12)

Long Term Liabilities

 

 

(7,834)

(1,400)

(882)

(598)

(598)

(2,696)

Long term borrowings

(5,835)

0

0

0

0

0

Other long term liabilities

(1,999)

(1,400)

(882)

(598)

(598)

(2,696)

Net Assets

 

 

43,830

49,620

46,908

45,685

44,871

43,516

CASH FLOW

Operating Cash Flow

 

 

9,925

9,233

9,403

7,705

7,240

7,904

Net Interest

(423)

(306)

(98)

(10)

(300)

(335)

Tax

(844)

(1,261)

(1,616)

(1,173)

(1,128)

(608)

Capex

(4,785)

(4,187)

(4,412)

(5,904)

(5,213)

(5,423)

Acquisitions/disposals

0

0

(990)

0

0

(5,625)

Equity financing

(12)

5,689

0

2

0

0

Dividends

(1,502)

(1,627)

(1,856)

(1,889)

(1,957)

(1,961)

Net Cash Flow

2,359

7,541

431

(1,269)

(1,358)

(6,048)

Opening net debt/(cash)

 

 

5,523

3,399

(3,667)

(4,002)

(2,680)

(1,322)

HP finance leases initiated

0

0

0

0

0

0

Other

(235)

(475)

(96)

(53)

0

0

Closing net debt/(cash)

 

 

3,399

(3,667)

(4,002)

(2,680)

(1,322)

4,727

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

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NSW 2000, Australia

Wellington +64 (0)48 948 555

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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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