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Research: TMT
Nanoco’s contract extension for work with its US customer fully underpins our FY19 estimates and gives the business a c £3m+ head start entering FY20. Our forecasts are unchanged, but progress with this major customer has shone a bright light on Nanoco’s IP and execution credentials. Discussions are now ongoing with a number of parties, which could drive upside to our near-term estimates.
Written by
StatPro Group |
Adjusted EBITDA jumps by 32% |
Trading update |
Software & comp services |
24 January 2019 |
Share price performance
Business description
Next events
Analysts
StatPro Group is a research client of Edison Investment Research Limited |
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StatPro’s FY18 EBITDA was slightly ahead of our expectations, while revenues came in lower than expected. The resulting margin gain reflects management’s determination to improve profitability levels. As we have pointed out previously, margins stand to benefit from the group’s increasing scale and costs dropping out as the group’s software platforms are streamlined over the next few years. In our view, the shares continue to look attractive, given the group’s c £56m recurring revenue book and the declining rating (c 15x FY19e), especially in light of the active M&A backdrop in the financial software sector.
Year |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/16 |
37.5 |
2.7 |
3.3 |
2.9 |
35.5 |
2.4 |
12/17 |
49.3 |
3.3 |
5.8 |
2.9 |
20.5 |
2.4 |
12/18e |
54.7 |
5.2 |
7.3 |
2.9 |
16.2 |
2.4 |
12/19e |
58.0 |
6.2 |
8.0 |
2.9 |
14.9 |
2.4 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Trading update: Recurring revenue book rose 4%
Group revenue grew by 11% to c £54.7m (we forecast £56.8m) while adjusted EBITDA increased by 32% to c £9.0m (£8.7m) as the EBITDA margin rose by c 260bp to c 16.5%. Year-end net debt stood at £24.6m, above our forecast of £22.3m, which partly reflects the weakness of sterling in late 2018. Annualised recurring revenue grew by 4% over the 12 months at constant currencies to stand at £55.7m and StatPro Revolution’s ARR grew by 17% organically. The group’s ARR renewal rate improved to 92% from 91% in H1, but still stands below the long-term average of 93–94%.
Management says Q4 sales were robust and the group signed 20 clients in eight different countries for contracts greater than $100k per annum in FY18, including seven banner deals. While organic growth remains close to flat, the Revolution platform continues to mature and provides a stronger foundation for growth to accelerate. For instance, a large US asset service provider (acting as a reseller of Revolution) recently added a client to Revolution at short notice for a minimum three-year contract value of $1.5m. Further impetus for Revolution is expected in 2019 as additional functionality is added. Additional drivers include the new managed services arm and a focus on commercialising the group’s data assets.
Forecast changes: Sales eased, EBITDA maintained
We have eased our revenue forecasts while maintaining EBITDA. The changes are outlined on page 2.
Valuation: Highly scalable cloud computing upside
StatPro’s stock trades on c 16x our increased FY18e EPS, which falls to c 15x in FY19e and to c 13x in FY20e. Alternatively, the shares trade on c 1.8x FY19 EV/sales, around a third of the level of StatPro’s larger US financial software peers and a quarter of the level of US-based pure software-as-a-service companies
Forecast changes: FY19 and FY20 profits maintained
We have adjusted our FY18 numbers in line with the trading update. We have reduced our revenue forecasts 3% in FY19 and 2% in FY20. We have maintained our FY19 and FY20 EBITDA and EPS forecasts. We now forecast the group to end FY19 with net debt of £22.6m (previously £20.3m) falling to £20.4m a year later (previously £18.2m).
Exhibit 1: Forecast changes
Revenues (£m) |
EBITDA (£m) |
EPS (p) |
|||||||
Old |
New |
% chg. |
Old |
New |
% chg. |
Old |
New |
% chg. |
|
2018e |
56.8 |
54.7 |
(4) |
8.7 |
9.0 |
3 |
7.0 |
7.3 |
4 |
2019e |
59.5 |
58.0 |
(3) |
9.5 |
9.5 |
0 |
8.0 |
8.1 |
0 |
2020e |
62.1 |
61.0 |
(2) |
10.5 |
10.5 |
0 |
9.1 |
9.1 |
0 |
Source: Edison Investment Research
Exhibit 2: Financial summary
£000s |
2015 |
2016 |
2017 |
2018e |
2019e |
2020e |
||
Year end 31 December |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||||
Revenue |
|
|
30,187 |
37,545 |
49,260 |
54,700 |
58,011 |
61,005 |
Cost of Sales |
0 |
0 |
0 |
0 |
0 |
0 |
||
Gross Profit |
30,187 |
37,545 |
49,260 |
54,700 |
58,011 |
61,005 |
||
EBITDA |
|
|
4,044 |
5,104 |
6,838 |
9,000 |
9,500 |
10,500 |
Adjusted Operating Profit |
|
|
2,852 |
3,461 |
4,917 |
7,075 |
7,631 |
8,688 |
Amortisation of acquired intangibles |
(32) |
(1,060) |
(2,243) |
(3,243) |
(3,243) |
(3,243) |
||
Exceptionals |
0 |
(11,378) |
(3,934) |
0 |
0 |
0 |
||
Share based payments |
(121) |
(361) |
(626) |
(650) |
(675) |
(700) |
||
Operating Profit |
2,699 |
(9,338) |
(1,886) |
3,182 |
3,713 |
4,745 |
||
Net Interest |
(290) |
(786) |
(1,585) |
(1,839) |
(1,414) |
(1,214) |
||
Profit Before Tax (norm) |
|
|
2,562 |
2,675 |
3,332 |
5,237 |
6,218 |
7,474 |
Profit Before Tax (FRS 3) |
|
|
2,409 |
(10,124) |
(3,471) |
1,344 |
2,300 |
3,531 |
Tax |
(788) |
(489) |
563 |
(372) |
(933) |
(1,413) |
||
Profit After Tax (norm) |
1,774 |
2,843 |
4,505 |
4,865 |
5,285 |
6,061 |
||
Profit After Tax (FRS 3) |
1,621 |
(10,613) |
(2,908) |
972 |
1,367 |
2,118 |
||
Minority interests |
0 |
(94) |
(131) |
(40) |
0 |
0 |
||
Net income (norm) |
1,774 |
2,186 |
3,764 |
4,825 |
5,285 |
6,061 |
||
Net income (statutory) |
1,621 |
(10,707) |
(3,039) |
932 |
1,367 |
2,118 |
||
Average Number of Shares Outstanding (m) |
67.6 |
65.3 |
64.8 |
65.7 |
66.0 |
66.3 |
||
EPS - normalised (p) |
|
|
2.6 |
3.3 |
5.8 |
7.3 |
8.0 |
9.1 |
EPS - FRS 3 (p) |
|
|
2.4 |
(16.4) |
(4.7) |
1.4 |
2.1 |
3.2 |
Dividend per share (p) |
2.90 |
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 (%) |
13.4 |
13.6 |
13.9 |
16.5 |
16.4 |
17.2 |
||
Operating Margin (before GW & except.) (%) |
9.4 |
9.2 |
10.0 |
12.9 |
13.2 |
14.2 |
||
BALANCE SHEET |
||||||||
Fixed Assets |
|
|
51,857 |
59,088 |
70,864 |
68,669 |
66,653 |
64,738 |
Intangible Assets |
48,613 |
55,696 |
64,793 |
63,046 |
61,158 |
59,226 |
||
Tangible Assets |
2,233 |
2,742 |
3,303 |
2,855 |
2,726 |
2,744 |
||
Other assets |
1,011 |
650 |
2,768 |
2,768 |
2,768 |
2,768 |
||
Current Assets |
|
|
10,665 |
19,081 |
20,912 |
17,662 |
20,124 |
22,619 |
Stocks |
0 |
0 |
0 |
0 |
0 |
0 |
||
Debtors |
8,462 |
14,725 |
16,601 |
18,434 |
19,550 |
20,559 |
||
Cash |
2,203 |
4,356 |
4,311 |
(772) |
574 |
2,060 |
||
Current Liabilities |
|
|
(19,778) |
(35,686) |
(38,171) |
(38,594) |
(40,967) |
(43,279) |
Creditors |
(19,660) |
(27,227) |
(30,720) |
(31,143) |
(33,516) |
(35,828) |
||
Short term borrowings |
(118) |
(8,459) |
(7,451) |
(7,451) |
(7,451) |
(7,451) |
||
Long Term Liabilities |
|
|
(1,227) |
(9,897) |
(22,989) |
(22,290) |
(19,363) |
(16,437) |
Long term borrowings |
(801) |
(5,961) |
(17,076) |
(16,377) |
(15,677) |
(14,978) |
||
Other long term liabilities |
(426) |
(3,936) |
(5,913) |
(5,913) |
(3,686) |
(1,459) |
||
Net Assets |
|
|
41,517 |
32,586 |
30,616 |
25,448 |
26,446 |
27,641 |
CASH FLOW |
||||||||
Operating Cash Flow |
|
|
6,548 |
7,454 |
10,676 |
12,932 |
15,616 |
16,996 |
Net Interest |
(84) |
(500) |
(1,227) |
(1,839) |
(1,414) |
(1,214) |
||
Tax |
(832) |
(1,294) |
(144) |
(1,227) |
(319) |
(870) |
||
Capex |
(4,999) |
(6,445) |
(7,213) |
(7,753) |
(8,127) |
(8,538) |
||
Acquisitions/disposals |
0 |
(4,786) |
(10,269) |
(3,663) |
(1,803) |
(2,274) |
||
Equity financing |
64 |
(2,079) |
926 |
0 |
0 |
0 |
||
Dividends |
(1,960) |
(1,877) |
(2,012) |
(1,879) |
(1,907) |
(1,915) |
||
Net Cash Flow |
(1,263) |
(9,527) |
(9,263) |
(3,429) |
2,045 |
2,185 |
||
Opening net debt/(cash) |
|
|
(2,680) |
(1,283) |
10,065 |
20,217 |
24,600 |
22,555 |
Other |
(134) |
(1,821) |
(889) |
(954) |
0 |
() |
||
Closing net debt/(cash) |
|
|
(1,283) |
10,065 |
20,217 |
24,600 |
22,555 |
20,370 |
Source: StatPro accounts, Edison Investment Research
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