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Research: TMT
1Spatial has announced a significant contract win with a leading electricity and gas distribution network operator in Belgium. The work is to support the client in building a digital twin of its distribution network and was won following a competitive tender, which included Tier 1 systems integrators, further highlighting 1Spatial’s strength in location master data management. 1Spatial will be the primary contractor on the €9m project, of which €4.1m of services will be delivered directly by 1Spatial, with the remaining €4.9m of the work to be delivered using offshore partners. With the full fiscal year end approaching and the budget cycle in full swing, we are leaving our estimates unchanged at this stage, but they continue to look better supported.
1Spatial |
€9m enterprise win with European utility |
Contract win |
TMT |
30 January 2024 |
Share price performance
Business description
Analysts
1Spatial is a research client of Edison Investment Research Limited |
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1Spatial has announced a significant contract win with a leading electricity and gas distribution network operator in Belgium. The work is to support the client in building a digital twin of its distribution network and was won following a competitive tender, which included Tier 1 systems integrators, further highlighting 1Spatial’s strength in location master data management. 1Spatial will be the primary contractor on the €9m project, of which €4.1m of services will be delivered directly by 1Spatial, with the remaining €4.9m of the work to be delivered using offshore partners. With the full fiscal year end approaching and the budget cycle in full swing, we are leaving our estimates unchanged at this stage, but they continue to look better supported.
Year end |
Revenue (£m) |
EBITDA |
EBIT* |
EPS* |
EV/EBITDA |
P/E |
01/22 |
27.0 |
4.2 |
1.3 |
0.8 |
15.0 |
71.1 |
01/23 |
30.0 |
5.0 |
2.0 |
1.2 |
12.5 |
46.4 |
01/24e |
32.1 |
5.5 |
2.6 |
1.6 |
11.3 |
35.5 |
01/25e |
35.2 |
6.5 |
3.6 |
2.3 |
9.6 |
25.0 |
Note: *EBIT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
This win is atypical for the company, in that 1Spatial is acting as the prime contractor, leading the engagement to enhance the quality and accuracy of the client’s geospatial data, to enable the creation of a digital twin of the network. The company will use outsourced, offshore partners to carry out manual, non-specialist work such as vectorising pictures (typically PDF). The 1Spatial team will use its expertise and 1Integrate (1Spatial’s patented rules engine) to correct, consolidate and integrate this data to convert it into a digital, structured, usable form. This core component of the contract is worth €4.1m over three years (including €0.3m of term licence revenue), and is likely to generate 50–60% gross margins, in our view. We expect the margin for the €4.9m outsourced component will be substantially lower.
With the fiscal year end approaching and the budget cycle in full swing, we are leaving our estimates unchanged at this stage, but we believe they continue to look better supported. This large contract follows on from the company’s announcement of three enterprise contract wins earlier in January (see Enterprise growth through key contract wins), indicating the company’s core enterprise business continues to generate growth. An expanding base of strategic partners and a growing US presence should support continued growth and possibly an acceleration. Meanwhile the company’s key SaaS applications, 1Streetworks and NG9-1-1, are still in the early customer adoption stage, but good uptake could generate very significant incremental recurring revenues. We believe that neither our estimates nor the company’s valuation factor in this scalable growth potential.
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Research: TMT
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