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Well positioned to cope with any downturn

1Spatial 15 June 2020 Update
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1Spatial

Well positioned to cope with any downturn

Full-year results

Software & comp services

15 June 2020

Price

26.5p

Market cap

£30m

Net cash (£m) at end FY20

3.9

Shares in issue (post equity raise)

111m

Free float

93%

Code

SPA

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

36

9.9

(2.9)

Rel (local)

39.5

26.2

(18.5)

52-week high/low

36.0p

13.5p

Business description

1Spatial’s core technology validates, rectifies and enhances customers’ geospatial data. The combination of its software and advisory services reduces the need for costly manual checking and correcting of data.

Next event

Interim results

November 2020

Analysts

Dan Gardiner

+44 (0) 20 3077 5700

Dan Ridsdale

+44 (0) 20 3077 5729

1Spatial is a research client of Edison Investment Research Limited

1Spatial’s FY20 results (to January) confirm reported revenue growth of 33% y-o-y and EBITDA rising 83% (pre IFRS16). The company generated positive underlying cashflow and EBIT in H2, has seen no impact on trading from COVID-19 so far and just secured a $2.6m contract win in the US. However it is prudently acknowledging that sales cycles are likely to lengthen in the current economic climate. As a precaution it has withdrawn forward guidance and stands ready to take action on costs if needed.

Year end

Revenue (£m)

EBITDA* (£m)

EBIT*
(£m)

EPS*
(p)

EV/sales
(x)

EV/EBIT*
(x)

P/E
(x)

01/18

16.9

0.4

(1.3)

(2.3)

1.5

N/A

N/A

01/19

17.6

1.2

(0.7)

(1.1)

1.5

N/A

N/A

01/20

23.4

3.2

0.1

(0.1)

1.1

184.0

N/A

Note: * EBITDA, EBIT and EPS exclude amortisation of acquired intangibles, exceptional items and share-based payments. Geomap-Imagis (GI) consolidated from May-19.

Profitability and cash generation in H2

1Spatial delivered revenue of £23.4m (up 33% y-o-y) and underlying EBITDA of £3.2m in FY20 (marginally ahead of the £23.0m and £3.1m indicated in the March trading statement). Organic growth was flat, with a 7% y-o-y rise in Spatial Solutions revenue offset by declines in GIS, but margins improved. Bolstered by a full period of GI, 1Spatial achieved both profitability (at the underlying EBIT level) and positive FCF in H2. Improving financials and the strategically significant GI deal (see Fixing France) demonstrate the progress the company made in FY20.

Trading in line, but reduced visibility

Much has changed around the world since January but management has seen no impact of COVID-19 on financial performance so far. Trading is in line with its expectations, new multi-year contracts have been signed with an HS2 supplier (UK), Seine Grands Lacs (France) and State of Michigan (US – see over). While the pipeline remains healthy the company is acknowledging that, in the current economic climate, sales cycles are likely to extend, and this is creating additional forecast uncertainty. In this context it is not providing any guidance and we have withdrawn our FY21 forecasts.

Well positioned to cope with any downturn

1Spatial enters this period of reduced visibility in good health. Assuming no organic growth, FY21 revenue would be £25.4m and recurring revenues account for 41% of sales. At the end of FY20 gross cash stood at £5.1m and it has since extended its credit facility by £1.8m. 1Spatial is cash generative and profitable on an underlying EBIT basis and stands ready to take ‘appropriate action’ on costs if needed.

Valuation: Excessive punishment?

1Spatial has executed well over the last three years, sharpening its strategic focus and raising margins. Visibility is not great but COVID-19 has had no material impact to date and we believe management has scope to mitigate the effect of a slowdown should the need arise. At 26.5p the shares have recovered much of the ground lost in 2020 but remain down 18% over the last year versus AIM, which is down 8%.

US$2.6m contract win with the US State of Michigan

Following the results 1Spatial announced it has signed a five year contract with US State of Michigan valued at $2.6m to upgrade to the enterprise 1Integrate platform. As an existing customer this win can be seen in the context of 1Spatial’s “land and expand” strategy and will also include access via 1Data Gateway, 1Spatial’s recently launched portal.

Of the $2.6m contract, c. $1.5m will be recognized within two years as service revenue and $1.1m will be recognized as software licence revenue spread over the five years. Against a broader backdrop of uncertainty this is a significant win and a meaningful boost to its US business (annual revenues of £2.3m in FY20) in particular. The company has a healthy pipeline and is aiming to sign further large deals but the timing of these wins is difficult to predict.


Exhibit 1: Financial summary

£000s

2016

2017

2018

2019

2020

Year end 31 January

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

18,300

15,133

16,938

17,624

23,385

Delivery costs

(7,715)

(6,868)

(7,994)

(8,449)

(11,123)

Gross Profit

10,585

8,265

8,944

9,175

12,262

Adjusted EBITDA

 

 

2,902

(874)

403

1,188

3,226

Operating Profit (before amort. and except.)

 

 

1,584

(12,494)

(1,302)

(738)

139

Acquired Intangible Amortisation

(200)

0

0

0

(111)

Exceptionals

(1,081)

(2,590)

(1,041)

(672)

(1,167)

Share based payments

(976)

(566)

538

(218)

(398)

Operating Profit

(673)

(15,650)

(1,805)

(1,628)

(1,537)

Net Interest

(27)

(25)

(151)

(191)

(195)

Other

(421)

(266)

0

0

0

Profit Before Tax (norm)

 

 

1,136

(12,785)

(1,453)

(929)

(57)

Profit Before Tax (FRS 3)

 

 

(1,121)

(15,941)

(1,956)

(1,819)

(1,732)

Tax

503

1,081

753

389

248

Profit After Tax (norm)

1,136

(12,785)

(1,453)

(929)

(57)

Profit After Tax (FRS 3)

(618)

(14,860)

(1,203)

(1,430)

(1,484)

Average Number of Shares Outstanding (m)

691.3

728.9

63.3

87.4

110.2

EPS - normalised (p)

 

 

0.16

(1.75)

(2.30)

(1.06)

(0.05)

EPS - normalised fully diluted (p)

 

 

0.16

(1.75)

(2.30)

(1.06)

(0.05)

EPS - (IFRS) (p)

 

 

(0.09)

(2.04)

(1.90)

(1.64)

(1.35)

Dividend per share (p)

0.0

0.0

0.0

0.0

0.0

Gross Margin (%)

57.8

54.6

52.8

52.1

52.4

EBITDA Margin (%)

15.9

N/A

2.4

6.7

13.8

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

8.7

N/A

N/A

N/A

0.6

BALANCE SHEET

Fixed Assets

 

 

22,115

13,025

10,873

10,479

19,206

Intangible Assets

18,900

11,968

10,540

10,194

15,560

Tangible Assets

1,638

1,057

333

285

374

Investments

1,577

0

0

0

3,272

Current Assets

 

 

16,202

11,442

7,050

11,481

14,985

Stocks

0

0

0

0

0

Debtors

10,815

8,929

5,510

4,998

9,644

Cash

4,996

1,966

1,319

6,358

5,108

Other

391

547

221

125

233

Current Liabilities

 

 

(11,071)

(13,029)

(10,234)

(8,578)

(12,844)

Creditors & other

(11,071)

(12,348)

(9,183)

(8,578)

(12,709)

Short term borrowings

0

(681)

(1,051)

0

(135)

Long Term Liabilities

 

 

(1,579)

(1,535)

(899)

(192)

(5,892)

Long term borrowings

0

0

0

0

(1,086)

Other long-term liabilities

(1,579)

(1,535)

(899)

(192)

(4,806)

Net Assets

 

 

25,667

9,903

6,790

13,190

15,455

CASH FLOW

Operating Cash Flow

 

 

(722)

(1,061)

245

(749)

572

Net Interest

(31)

(166)

(167)

(175)

(144)

Tax

55

425

751

410

314

Capex

(3,800)

(4,042)

(1,035)

(1,394)

(2,320)

Acquisitions/disposals

(1,033)

(900)

115

0

(2,151)

Financing

1,940

896

0

7,996

2,805

Dividends

0

0

0

0

0

Net Cash Flow

(3,342)

(4,848)

(91)

6,088

(1,178)

Opening net debt/(cash)

 

 

(8,250)

(4,996)

(604)

(268)

(6,358)

HP finance leases initiated

0

0

0

0

(1,221)

Other

88

456

(245)

2

(72)

Closing net debt/(cash)

 

 

(4,996)

(604)

(268)

(6,358)

(3,887)

Source: 1Spatial, Edison Investment Research

General disclaimer and copyright

This report has been commissioned by 1Spatial and prepared and issued by Edison, in consideration of a fee payable by 1Spatial. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: 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 and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. 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.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, 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 securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. 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, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

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. 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 (i.e. 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.

United Kingdom

This document is prepared and provided by Edison 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.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison 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. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

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

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, 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

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by 1Spatial and prepared and issued by Edison, in consideration of a fee payable by 1Spatial. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: 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 and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. 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.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, 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 securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. 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, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

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. 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 (i.e. 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.

United Kingdom

This document is prepared and provided by Edison 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.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison 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. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

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

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, 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

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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