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Research: TMT
1Spatial’s H1 results showed a continued improvement in the quality of revenues, while recent deal flow provides good support for our expectation of faster growth and margin expansion from H2. Most notably, with the results the company has announced a second win (subject to contract completion) for the key 1Streetworks SaaS product. The size of the deal – £1m over one year with a UK county council – provides a good indication that the market opportunity for this product is substantial, while the deployment should also lower the barriers for adoption of the product with other potential clients. We are leaving our estimates unchanged and believe continued strong deal flow into H2 could lay a foundation for upside in FY26.
1Spatial |
Contract momentum underpins growth prospects |
Interim results |
Software and computer services |
14 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’s H1 results showed a continued improvement in the quality of revenues, while recent deal flow provides good support for our expectation of faster growth and margin expansion from H2. Most notably, with the results the company has announced a second win (subject to contract completion) for the key 1Streetworks SaaS product. The size of the deal – £1m over one year with a UK county council – provides a good indication that the market opportunity for this product is substantial, while the deployment should also lower the barriers for adoption of the product with other potential clients. We are leaving our estimates unchanged and believe continued strong deal flow into H2 could lay a foundation for upside in FY26.
Year end |
Revenue (£m) |
EBITDA* |
EBIT* |
EPS* |
EV/EBITDA |
P/E |
01/23 |
30.0 |
5.0 |
2.0 |
1.2 |
14.5 |
52.5 |
01/24 |
32.3 |
5.5 |
2.5 |
1.4 |
13.3 |
45.2 |
01/25e |
35.8 |
5.7 |
2.4 |
1.4 |
12.7 |
46.5 |
01/26e |
38.7 |
7.6 |
3.8 |
2.6 |
9.6 |
25.1 |
Note: *EBITDA, EBIT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
H1 results: Improving mix, continued investment
H125 revenues grew by 5% y-o-y to £16.2m, while recurring revenues increased by 9% to £8.9m (55% of sales) driven by a 26% increase in term licence revenue over the period. Gross margin at 52% was marginally up year-on-year and EBITDA grew by 18% to £2.0m. Net borrowings were £0.9m, down from £1.1m net cash at end FY24, although positive cash flows are expected in H2, reflecting typical renewal seasonality and recent commercial momentum.
Recent deal flow across the US, EU and now SaaS
1Spatial’s recent deal flow has been encouraging, with wins across the US (Federal-level win in the US, Contract wins underpin US growth opportunity), and Europe and now for 1Streetworks in the UK. With these deals contributing in H2 and the UK market expected to improve somewhat following the election uncertainty, we expect a greater than usual increase in revenues and margins into the seasonally stronger H2. Consequently, we leave our estimates unchanged. A continuation of deal flow momentum through H2 could lay a foundation for upside in FY26.
Valuation: Major upside potential, encouraging signs
1Spatial trades at a discount to peers on an EV/sales basis, but at a premium on an EV/EBITDA and P/E basis, which highlights that the business has a cost base built for growth. We believe that, through its progress with 1Streetworks and in the US, the company is delivering more evidence that its growth initiatives are gaining traction. The upside from successful execution could be significant. Our DCF analysis indicates that a share price of 100p is readily achievable if the company gets halfway to its five-year £40m annual recurring revenue goal for 1Streetworks, and achieving it would justify a fair value of 270p.
Exhibit 1: Financial summary
£'k |
2021 |
2022 |
2023 |
2024e |
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
|
|
Research: Healthcare
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