Traditional module transferred for a shareholding

StatPro Group 12 February 2016 Update

StatPro Group

Traditional module transferred for a shareholding

Acquisition

Software & comp services

12 February 2016

Price

72.5p

Market cap

£49m

Net cash (£m) at 31 December 2015

1.3

Shares in issue

67.6m

Free float

55%

Code

SOG

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(5.8)

(10.5)

1.4

Rel (local)

0.5

1.5

22.0

52-week high/low

86.5p

69.2p

Business description

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

Next event

Final results

9 March

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 is exchanging its existing StatPro Seven compliance module (SPC) licence contracts for a 51% stake in InfoVest Consulting. StatPro Seven is StatPro’s legacy traditional software platform. While most of StatPro Seven’s modules are migrating to the Revolution cloud platform, StatPro had no plans to upgrade SPC functionality to the cloud. Nevertheless, the SPC module has a distinct market niche, and given InfoVest's specialist skillset, it makes sense for StatPro to transfer the development, support and sale of the product to InfoVest. Further, InfoVest will have access to StatPro's global client base to help grow SPC's sales (we understand an ARR of c £500k). Additionally, InfoVest brings to StatPro standardised data solutions that will be particularly useful for the process of streamlining customer data in the implementation of cloud transition contracts.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

12/13

32.5

4.1

4.5

2.8

16.1

3.9

12/14

32.0

2.6

2.7

2.9

26.9

4.0

12/15e

30.0

2.3

2.4

2.9

30.2

4.0

12/16e

34.2

2.8

2.9

2.9

25.0

4.0

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

Background on InfoVest Consulting and StatPro SPC

InfoVest is a South Africa-based software provider, specialising in data warehouse, ETL (Extract, Transform and Load) and reporting software for the asset management industry. InfoVest has partnered with StatPro for more than two years, providing support for all StatPro’s outstanding StatPro Portfolio Control (SPC) contracts. SPC, which is StatPro’s compliance solution, ensures that customer’s portfolios are within predetermined parameters, such as the percentage that can be invested in specified asset classes. These parameters can relate to regulatory or in-house criteria and the solution is separate to StatPro’s risk solution. While SPC could transition to the cloud, this has not been on StatPro’s R&D roadmap. InfoVest generated revenues of c ZAR18m (c £0.76m) in the year to 28 February 2015, including £0.13m revenue from supporting SPC. The business is profitable, so we would expect it to modestly boost StatPro’s EPS.

Forecasts: Unchanged for now, will review with finals

StatPro will consolidate the entire revenues of InfoVest, which will mean a small boost to StatPro’s revenue and pre-tax profit lines, with a deduction from earnings through minority interests. Since the acquisition is small, we have not updated our forecasts at this stage, and will review them after the final results on 9 March.

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 4.4x EV/sales, while US-based pure SaaS companies typically trade at in the region of 2.4-4.6x EV/sales.

Exhibit 1: 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

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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