StatPro Revolution ARR up 13% organically

StatPro Group 25 January 2018 Update
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StatPro Group

StatPro Revolution ARR up 13% organically

Trading update

Software & comp services

25 January 2018

Price

148.5p

Market cap

£97m

Net debt (£m) at 31 December 2017

20.2

Shares in issue

65.6m

Free float

55%

Code

SOG

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

4.2

(2.0)

48.5

Rel (local)

3.5

(3.6)

37.3

52-week high/low

165.5p

86.0p

Business description

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

Next events

Final results

Mid-March 2018

AGM

May 2018

H1 trading update

July 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 has released an in-line trading update for FY17. Annualised recurring revenue (ARR) for StatPro Revolution grew by 13% organically. Statutory revenues, EBITDA and cash were broadly in line with our forecasts and we are maintaining our FY18 forecasts. Given the busy M&A backdrop, which saw competitor BISAM sold for 7.3x sales earlier in the year, and the significant valuation disparity between StatPro and its US-listed financial software peers, we continue to see strong upside potential in the shares.

Year
end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

12/15

30.2

2.6

2.6

2.9

56.6

2.0

12/16

37.5

2.7

3.5

2.9

42.5

2.0

12/17e

48.9

4.2

5.0

2.9

30.0

2.0

12/18e

57.3

6.1

7.2

2.9

20.8

2.0

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

Year-end trading update: Sales, EBITDA are in line

FY17 revenue grew by 30% to c £49.0m (we forecast £48.9m) while EBITDA rose by 35% to £6.9m (we forecast £7.0m). Net debt finished the year at £20.2m, slightly above our £19.7m forecast. The annualised recurring revenue (ARR) for StatPro Revolution, the group’s cloud services analytics product, grew by 13% organically. The total cloud services ARR, which also includes Delta (acquired in May), jumped by 106%. The ARR for the group’s traditional Seven platform grew by 2%, after excluding the impact of conversions to the cloud platform. This reflects continued demand for the group’s composites product (for the aggregation of individual portfolios) and InfoVest (includes StatPro’s compliance solution).

Busy M&A backdrop

FY17 saw a number of transactions that make StatPro look cheap. Key competitor BISAM was acquired by FactSet for 7.3x sales. Separately, LSE acquired Yield Book (a key competitor of Delta) along with Citi Fixed Income Indices from Citi for 6.4x sales, although we understand that the $685m price largely related to the indices. Additionally, SS&C is acquiring DST Systems at c 2.4x 2018 sales.

Forecasts: Maintained

We have brought our end-FY17 net debt forecast in line with the update and this £0.5m increase impacts on subsequent years. Otherwise, we have maintained all our forecasts and will add FY19 forecasts after the results in mid-March.

Valuation: Highly scalable cloud computing upside

StatPro’s stock trades on c 30x our FY17e EPS, which falls to c 21x in FY18e. Alternatively, the shares trade on c 2.0x FY18e EV/sales, around one-third of the level of StatPro’s larger US peers and US-based pure SaaS companies. Our DCF model, when incorporating 10-year organic revenue growth of 4.4%, terminal growth of 2%, a long-term margin target of 24.5% and a WACC of 9%, would value the shares at 224p, 51% 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

65.2

65.7

EPS - normalised (p)

 

 

4.5

2.7

2.6

3.5

4.9

7.1

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 and 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

23,516

28,126

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

4,319

5,651

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

30,324

31,681

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)

(1,890)

Net Cash Flow

431

(1,269)

(1,263)

(9,527)

(9,633)

2,032

Opening net debt/(cash)

 

 

(3,667)

(4,002)

(2,680)

(1,283)

10,065

20,200

Other

(96)

(53)

(134)

(1,821)

(502)

()

Closing net debt/(cash)

 

 

(4,002)

(2,680)

(1,283)

10,065

20,200

18,168

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 Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 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 Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. 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 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.

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 Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 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 Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. 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 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.

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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