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Research: TMT
1Spatial has announced the completion of a landmark deal for its key 1Streetworks application. Originally highlighted at the interims, the company has now revealed the client to be Surrey County Council. The deal is encouraging for two reasons. Firstly, the size of the deal (£1m over 12 months) indicates that the potential opportunity for this product is large. Secondly, the council’s plan to use the product as a collaboration tool with contractors and utility companies should help stimulate wider adoption within the industry.
1Spatial |
£1m 1Streetworks deal highlights the opportunity |
Contract win |
Software and |
21 October 2024 |
Share price performance
Business description
Next events
Analyst
1Spatial is a research client of Edison Investment Research Limited |
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1Spatial has announced the completion of a landmark deal for its key 1Streetworks application. Originally highlighted at the interims, the company has now revealed the client to be Surrey County Council. The deal is encouraging for two reasons. Firstly, the size of the deal (£1m over 12 months) indicates that the potential opportunity for this product is large. Secondly, the council’s plan to use the product as a collaboration tool with contractors and utility companies should help stimulate wider adoption within the industry.
Year end |
Revenue (£m) |
EBITDA* |
EBIT* |
EPS* |
EV/EBITDA |
P/E |
01/23 |
30.0 |
5.0 |
2.0 |
1.2 |
15.1 |
54.5 |
01/24 |
32.3 |
5.5 |
2.5 |
1.4 |
13.8 |
47.0 |
01/25e |
35.8 |
5.7 |
2.4 |
1.4 |
13.2 |
48.3 |
01/26e |
38.7 |
7.6 |
3.8 |
2.6 |
9.9 |
26.1 |
Note: *EBITDA, EBIT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Step forward for 1Streetworks
The size of the deal – £1m over one year, with a large UK county – provides a good indication that the market opportunity for 1Streetworks is large. This contract covers traffic-sensitive roads, so there is scope for further expansion within Surrey. There are 29 county councils in the England (and more in the rest of the UK), and while Surrey is a large one (sixth largest in terms of income), the potential customer base for the product also includes firms such as utility companies and contractors.
Potential network benefits from collaboration
Surrey County Council’s plan to use the software as a centralised hub to manage the execution of street works is also interesting. Until now, communication around the return on investment from 1Streetworks has focused on the significant time, efficiency and cost benefits of using the platform on a standalone basis. Most notably, 1Spatial’s lead customer UK Power Networks has reduced road closures by 40% as a result of using the software. The platform’s use by multiple organisations will certainly increase awareness of the solution across the industry. It also opens up the potential for further efficiency benefits – for example, the ability to coordinate roadworks across agencies – and suggests that adoption could be spurred by network effects driven by the benefits of collaboration on a common platform.
Valuation: Encouraging signs, success not priced in
Our estimates remain unchanged, but momentum in the US and with 1Streetworks is encouraging and a continuation could provide a foundation for operationally geared upgrades. 1Spatial trades at a discount to peers on an EV/sales basis but at a premium on EV/EBITDA and P/E, reflecting a growth-oriented cost base. Successful execution is not reflected in the valuation. Our DCF analysis suggests a share price of 100p is achievable if the company reaches half of its five-year £40m annual recurring revenue goal for 1Streetworks, with a fair value of 270p if fully achieved.
Exhibit 1: Financial summary
£'k |
2021 |
2022 |
2023 |
2024 |
2025e |
2026e |
||
Year end 31 January |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
INCOME STATEMENT |
||||||||
Revenue |
|
|
24,600 |
27,027 |
30,002 |
32,315 |
35,800 |
38,700 |
Cost of Sales |
(11,451) |
(13,078) |
(14,504) |
(14,389) |
(16,110) |
(16,641) |
||
Gross Profit |
13,149 |
13,949 |
15,498 |
17,926 |
19,690 |
22,059 |
||
EBITDA |
|
|
3,632 |
4,182 |
4,997 |
5,479 |
5,700 |
7,600 |
Normalised operating profit |
|
|
435 |
1,302 |
2,026 |
2,463 |
2,411 |
3,811 |
Amortisation of acquired intangibles |
(917) |
(561) |
(386) |
(391) |
(391) |
(391) |
||
Exceptionals |
(492) |
0 |
(194) |
(693) |
0 |
0 |
||
Share-based payments |
(272) |
(326) |
(192) |
33 |
33 |
33 |
||
Reported operating profit |
(1,246) |
415 |
1,254 |
1,412 |
2,053 |
3,453 |
||
Net Interest |
(187) |
(195) |
(210) |
(355) |
(355) |
0 |
||
Joint ventures & associates (post tax) |
0 |
0 |
0 |
0 |
0 |
0 |
||
Exceptionals |
0 |
0 |
0 |
0 |
0 |
0 |
||
Profit Before Tax (norm) |
|
|
248 |
1,107 |
1,816 |
2,108 |
2,056 |
3,811 |
Profit Before Tax (reported) |
|
|
(1,433) |
220 |
1,044 |
1,057 |
1,698 |
3,453 |
Reported tax |
308 |
163 |
14 |
123 |
(425) |
(863) |
||
Profit After Tax (norm) |
198 |
886 |
1,362 |
1,581 |
1,542 |
2,858 |
||
Profit After Tax (reported) |
(1,125) |
383 |
1,058 |
1,180 |
1,274 |
2,590 |
||
Minority interests |
0 |
0 |
0 |
0 |
0 |
0 |
||
Discontinued operations |
0 |
0 |
0 |
0 |
0 |
0 |
||
Net income (normalised) |
198 |
886 |
1,362 |
1,581 |
1,542 |
2,858 |
||
Net income (reported) |
(1,125) |
383 |
1,058 |
1,180 |
1,274 |
2,590 |
||
Basic average number of shares outstanding (m) |
112 |
111 |
111 |
111 |
111 |
111 |
||
EPS - basic normalised (p) |
|
|
0.18 |
0.80 |
1.23 |
1.43 |
1.39 |
2.57 |
EPS - diluted normalised (p) |
|
|
0.17 |
0.77 |
1.20 |
1.40 |
1.36 |
2.53 |
EPS - basic reported (p) |
|
|
(1.01) |
0.35 |
0.95 |
1.06 |
1.14 |
2.33 |
Dividend (p) |
0.00 |
0.00 |
0.00 |
0.00 |
0.00 |
0.00 |
||
Revenue growth (%) |
5.2 |
9.9 |
11.0 |
7.7 |
10.8 |
8.1 |
||
Gross Margin (%) |
53.5 |
51.6 |
51.7 |
55.5 |
55.0 |
57.0 |
||
EBITDA Margin (%) |
14.8 |
15.5 |
16.7 |
17.0 |
15.9 |
19.6 |
||
Normalised Operating Margin (%) |
1.8 |
4.8 |
6.8 |
7.6 |
6.7 |
9.8 |
||
BALANCE SHEET |
||||||||
Fixed Assets |
|
|
18,273 |
17,100 |
19,277 |
21,524 |
23,118 |
23,600 |
Intangible Assets |
15,187 |
15,003 |
17,408 |
19,951 |
22,058 |
23,053 |
||
Tangible Assets |
3,086 |
2,097 |
1,869 |
1,498 |
985 |
472 |
||
Investments & other |
0 |
0 |
0 |
75 |
75 |
75 |
||
Current Assets |
|
|
18,332 |
18,018 |
19,222 |
17,030 |
18,488 |
21,078 |
Stocks |
0 |
0 |
0 |
0 |
0 |
0 |
||
Debtors |
10,890 |
12,271 |
14,151 |
12,770 |
14,222 |
15,374 |
||
Cash & cash equivalents |
7,278 |
5,623 |
5,036 |
4,260 |
4,266 |
5,704 |
||
Other |
164 |
124 |
35 |
0 |
0 |
0 |
||
Current Liabilities |
|
|
14,813 |
14,903 |
17,093 |
15,334 |
16,834 |
17,349 |
Creditors |
13,418 |
13,284 |
15,797 |
14,004 |
15,504 |
16,019 |
||
Tax and social security |
0 |
0 |
0 |
99 |
99 |
99 |
||
Short term borrowings |
470 |
531 |
660 |
647 |
647 |
647 |
||
Other |
925 |
1,088 |
636 |
584 |
584 |
584 |
||
Long Term Liabilities |
|
|
7,057 |
5,110 |
4,097 |
4,913 |
4,913 |
4,913 |
Long term borrowings |
2,542 |
1,861 |
1,322 |
2,534 |
2,534 |
2,534 |
||
Other long term liabilities |
4,515 |
3,249 |
2,775 |
2,379 |
2,379 |
2,379 |
||
Net Assets |
|
|
14,735 |
15,105 |
17,309 |
18,307 |
19,860 |
22,416 |
Minority interests |
0 |
0 |
0 |
0 |
0 |
0 |
||
Shareholders' equity |
|
|
14,735 |
15,105 |
17,309 |
18,307 |
19,860 |
22,416 |
CASH FLOW |
||||||||
Op Cash Flow before WC and tax |
2,961 |
4,048 |
4,593 |
4,356 |
5,345 |
7,600 |
||
Working capital |
791 |
(1,578) |
537 |
(112) |
48 |
(637) |
||
Exceptional & other |
52 |
(107) |
12 |
0 |
0 |
0 |
||
Tax |
484 |
176 |
179 |
140 |
(425) |
(863) |
||
Net operating cash flow |
|
|
4,288 |
2,539 |
5,321 |
4,384 |
4,968 |
6,100 |
Capex |
(2,312) |
(2,613) |
(4,017) |
(5,362) |
(4,895) |
(4,595) |
||
Acquisitions/disposals |
(585) |
0 |
0 |
0 |
0 |
0 |
||
Net interest |
0 |
0 |
0 |
0 |
0 |
1 |
||
Equity financing |
0 |
0 |
14 |
19 |
0 |
0 |
||
Dividends |
0 |
0 |
0 |
0 |
0 |
0 |
||
Other |
585 |
(1,708) |
(1,994) |
357 |
(67) |
(67) |
||
Net Cash Flow |
1,976 |
(1,782) |
(676) |
(602) |
6 |
1,439 |
||
Opening net debt/(cash) |
|
|
(3,887) |
(4,403) |
(3,231) |
(3,054) |
(1,079) |
(1,085) |
FX |
194 |
127 |
89 |
(174) |
0 |
0 |
||
Other non-cash movements |
(1,654) |
483 |
410 |
(1,199) |
0 |
0 |
||
Closing net debt/(cash) |
|
|
(4,403) |
(3,231) |
(3,054) |
(1,079) |
(1,085) |
(2,524) |
Source: Company data, Edison Investment Research
|
|
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