In a short trading update, StatPro has said that trading is in line with expectations. The group recently signed a major cloud conversion contract with a top 10 global fund administrator. Such deals require significant commitment from the client and, once live, have the potential to be scaled up if the client takes additional licences to extend to its own client base. Given the ongoing busy M&A backdrop in financial software and the significant valuation disparity between StatPro and its US-listed financial software peers, we continue to see strong upside potential in the shares.
Written by
StatPro Group |
On target |
AGM trading update |
Software & comp services |
24 May 2018 |
Share price performance
Business description
Next events
Analysts
StatPro Group is a research client of Edison Investment Research Limited |
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In a short trading update, StatPro has said that trading is in line with expectations. The group recently signed a major cloud conversion contract with a top 10 global fund administrator. Such deals require significant commitment from the client and, once live, have the potential to be scaled up if the client takes additional licences to extend to its own client base. Given the ongoing busy M&A backdrop in financial software and the significant valuation disparity between StatPro and its US-listed financial software peers, we continue to see strong upside potential in the shares.
Year |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/16 |
37.5 |
2.7 |
3.3 |
2.9 |
53.9 |
1.6 |
12/17 |
49.3 |
3.4 |
5.9 |
2.9 |
30.4 |
1.6 |
12/18e |
56.5 |
5.4 |
7.0 |
2.9 |
25.9 |
1.6 |
12/19e |
58.5 |
6.2 |
7.8 |
2.9 |
23.2 |
1.6 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Trading update
StatPro says FY18 trading is in line with its expectations. Sales of StatPro Revolution have progressed well, including sales to both new clients and conversions and upsells to existing clients. The StatPro Revolution fixed income module will be launched, as planned, in early Q318.
Revolution win with top 10 global fund administrator
StatPro has signed a multi-year cloud conversion and extension contract, worth at least $500k per year, with a top 10 global fund administrator, which has over $1.5tn funds under administration. The customer is converting from StatPro Seven to StatPro Revolution. As a fund administrator, the customer acts as a Revolution reseller by offering it to investors that subscribe to its administration services. By taking StatPro Performance, which is the cloud replacement for StatPro’s traditional Seven software core, the customer will be able to offer transaction-based calculations while leveraging the elastic cloud for speedy calculations.
CEO share sale
Last week Justin Wheatley, CEO, sold 665k shares, or c 1% of StatPro’s share capital. Mr Wheatley still retains just over 6.8m shares or 10.4%. We note that three non-executive directors, including the chairman, have all acquired shares.
Valuation: Highly scalable cloud computing upside
StatPro’s stock trades on c 26x our maintained FY18e EPS, which falls to c 23x in FY19e and to c 21x in FY20e. Alternatively, the shares trade on c 2.4x FY19e EV/sales, around a half of the level of StatPro’s larger US peers and, well below a half of US-based pure SaaS companies. Our DCF model, when incorporating 10-year organic revenue growth of c 3.8%, a terminal growth of 2%, a long-term margin target of 24.5% and a WACC of 9%, values the shares at 220p, c 22% above the current share price.
Exhibit 1: 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 |
49,337 |
56,500 |
58,480 |
61,100 |
Cost of Sales |
0 |
0 |
0 |
0 |
0 |
0 |
||
Gross Profit |
30,187 |
37,545 |
49,337 |
56,500 |
58,480 |
61,100 |
||
EBITDA |
|
|
4,044 |
5,104 |
6,951 |
8,666 |
9,255 |
10,149 |
Adjusted Operating Profit |
|
|
2,852 |
3,461 |
5,030 |
6,766 |
7,405 |
8,349 |
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) |
(1,773) |
2,873 |
3,487 |
4,406 |
||
Net Interest |
(290) |
(786) |
(1,585) |
(1,396) |
(1,221) |
(1,071) |
||
Profit Before Tax (norm) |
|
|
2,562 |
2,675 |
3,445 |
5,370 |
6,184 |
7,278 |
Profit Before Tax (FRS 3) |
|
|
2,409 |
(10,124) |
(3,358) |
1,477 |
2,266 |
3,335 |
Tax |
(788) |
(489) |
537 |
(752) |
(1,051) |
(1,456) |
||
Profit After Tax (norm) |
1,774 |
2,843 |
4,592 |
4,618 |
5,133 |
5,823 |
||
Profit After Tax (FRS 3) |
1,621 |
(10,613) |
(2,821) |
725 |
1,215 |
1,880 |
||
Minority interests |
0 |
(94) |
(131) |
(40) |
0 |
0 |
||
Net income (norm) |
1,774 |
2,186 |
3,851 |
4,578 |
5,133 |
5,823 |
||
Net income (statutory) |
1,621 |
(10,707) |
(2,952) |
685 |
1,215 |
1,880 |
||
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 |
5.9 |
7.0 |
7.8 |
8.8 |
EPS - FRS 3 (p) |
|
|
2.4 |
(16.4) |
(4.6) |
1.0 |
1.8 |
2.8 |
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 |
14.1 |
15.3 |
15.8 |
16.6 |
||
Operating Margin (before GW and except.) (%) |
9.4 |
9.2 |
10.2 |
12.0 |
12.7 |
13.7 |
||
BALANCE SHEET |
||||||||
Fixed Assets |
|
|
51,857 |
59,088 |
70,864 |
68,978 |
67,043 |
65,111 |
Intangible Assets |
48,613 |
55,696 |
64,793 |
63,282 |
61,442 |
59,477 |
||
Tangible Assets |
2,233 |
2,742 |
3,303 |
2,928 |
2,833 |
2,866 |
||
Other assets |
1,011 |
650 |
2,768 |
2,768 |
2,768 |
2,768 |
||
Current Assets |
|
|
10,665 |
19,081 |
20,717 |
21,585 |
23,472 |
25,532 |
Stocks |
0 |
0 |
0 |
0 |
0 |
0 |
||
Debtors |
8,462 |
14,725 |
16,406 |
18,788 |
19,446 |
20,318 |
||
Cash |
2,203 |
4,356 |
4,311 |
2,797 |
4,026 |
5,215 |
||
Current Liabilities |
|
|
(19,778) |
(35,686) |
(40,011) |
(42,979) |
(44,841) |
(46,994) |
Creditors |
(19,660) |
(27,227) |
(32,560) |
(35,528) |
(37,390) |
(39,543) |
||
Short term borrowings |
(118) |
(8,459) |
(7,451) |
(7,451) |
(7,451) |
(7,451) |
||
Long Term Liabilities |
|
|
(1,227) |
(9,897) |
(22,416) |
(21,717) |
(18,790) |
(15,864) |
Long term borrowings |
(801) |
(5,961) |
(17,076) |
(16,377) |
(15,677) |
(14,978) |
||
Other long term liabilities |
(426) |
(3,936) |
(5,340) |
(5,340) |
(3,113) |
(886) |
||
Net Assets |
|
|
41,517 |
32,586 |
29,154 |
25,867 |
26,884 |
27,786 |
CASH FLOW |
||||||||
Operating Cash Flow |
|
|
6,548 |
7,454 |
10,676 |
14,579 |
15,516 |
16,844 |
Net Interest |
(84) |
(500) |
(1,227) |
(1,396) |
(1,221) |
(1,071) |
||
Tax |
(832) |
(1,294) |
(144) |
(1,253) |
(698) |
(989) |
||
Capex |
(4,999) |
(6,445) |
(7,213) |
(8,094) |
(8,333) |
(8,707) |
||
Acquisitions/disposals |
0 |
(4,786) |
(10,269) |
(2,771) |
(1,429) |
(2,274) |
||
Equity financing |
64 |
(2,079) |
926 |
() |
0 |
0 |
||
Dividends |
(1,960) |
(1,877) |
(2,012) |
(1,879) |
(1,907) |
(1,915) |
||
Net Cash Flow |
(1,263) |
(9,527) |
(9,263) |
(814) |
1,928 |
1,888 |
||
Opening net debt/(cash) |
|
|
(2,680) |
(1,283) |
10,065 |
20,217 |
21,031 |
19,103 |
Other |
(134) |
(1,821) |
(889) |
() |
0 |
0 |
||
Closing net debt/(cash) |
|
|
(1,283) |
10,065 |
20,217 |
21,031 |
19,103 |
17,214 |
Source: Company accounts/Edison Investment Research
|
|
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