Information Services Corporation — Services division set to be a key organic driver

Information Services Corporation (TSX: ISV)

Last close As at 16/07/2024

CAD25.62

0.12 (0.47%)

Market capitalisation

CAD465m

More on this equity

Research: Industrials

Information Services Corporation — Services division set to be a key organic driver

In FY23 Information Services Corporation (ISC) remained on a positive trajectory of securing new contracts and customers, despite prevailing macroeconomic headwinds and a subdued Canadian property market. We expect this momentum to continue in FY24, bolstered by the Services division, the key organic engine of the group. Management has reaffirmed FY23 revenue and adjusted EBITDA guidance of C$207–212m (Edison: C$210m) and C$71–76m (Edison: C$75m), respectively. In addition, FY24 guidance has been introduced; our FY24e adjusted EBITDA estimate of C$90m falls within the guided range of C$83–91m, while our conservative FY24e revenue estimate of C$230m is marginally below the guided C$240–250m range. We will update our estimates following the release of FY23 results in early March.

Natalya Davies

Written by

Natalya Davies

Analyst

Industrials

Information Services Corporation

Services division set to be a key organic driver

Trading update

Industrial support services

5 February 2024

Price

C$24.0

Market cap

C$432m

Net debt (C$m) at 30 September 2023 (excluding lease liabilities)

165.8

Shares in issue

18.0m

Free float

69.5%

Code

ISV

Primary exchange

Toronto Stock Exchange

Secondary exchange

N/A

Share price performance

Business description

Information Services Corporation, headquartered in Canada, is a leading provider of registry and information management services for public data and records. It focuses on the development and management of secure government registries with significant experience in integrating and transforming government information into solutions for the people and businesses of the Province of Saskatchewan.

Analysts

Natalya Davies

+44 (0)20 3077 5700

Andy Murphy

+44 (0)20 3077 5700

Information Services Corporation is a research client of Edison Investment Research Limited

In FY23 Information Services Corporation (ISC) remained on a positive trajectory of securing new contracts and customers, despite prevailing macroeconomic headwinds and a subdued Canadian property market. We expect this momentum to continue in FY24, bolstered by the Services division, the key organic engine of the group. Management has reaffirmed FY23 revenue and adjusted EBITDA guidance of C$207–212m (Edison: C$210m) and C$71–76m (Edison: C$75m), respectively. In addition, FY24 guidance has been introduced; our FY24e adjusted EBITDA estimate of C$90m falls within the guided range of C$83–91m, while our conservative FY24e revenue estimate of C$230m is marginally below the guided C$240–250m range. We will update our estimates following the release of FY23 results in early March.

Year end

Revenue (C$m)

EBITDA (C$m)

PBT*

(C$m)

EPS*
(C$)

DPS
(C$)

P/E
(x)

Yield
(%)

12/21

169.4

67.8

51.4

2.25

0.83

10.7

3.5

12/22

189.9

64.4

46.5

1.95

0.92

12.3

3.8

12/23e

210.1

75.0

45.8

1.92

0.92

12.5

3.8

12/24e

230.2

89.8

50.9

2.12

0.92

11.3

3.8

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

In ISC’s recent trading update, management reaffirmed FY23 revenue and adjusted EBITDA guidance of C$207–212m and C$71–76m, respectively. Our corresponding FY23e forecasts of C$210.1m and C$75.0m lie comfortably within both ranges. Our FY23 forecast revenue and adjusted EBITDA growth of 10.7% and 16.5%, respectively, is largely attributable to the Saskatchewan Registries extension alongside a full-year contribution from last year’s acquisitions and strong organic growth from the Services division. Although our forecast FY23 basic EPS remains broadly flat at C$1.92, attributable to a substantial increase in net finance costs coupled with a rise in amortisation from the extension, we expect incremental growth from the Master Service Agreement (MSA) extension to come through in 2024, with an EPS forecast of C$2.12.

The company has also introduced FY24 revenue and adjusted EBITDA guidance of C$240–250m (Edison: C$230m) and C$83–91m (Edison: C$90m), respectively. These projections signify substantial year-on-year increases of up to 18% and 20%, respectively, compared to FY23 guidance. This anticipated growth is driven by robust organic expansion and ongoing customer acquisition efforts in the Services division. Furthermore, Registry Operations should benefit from a full-year contribution of introduced annual CPI fee adjustments from the MSA extension, which should somewhat offset the expected plateau in transaction volumes. The company maintains its focus on deleveraging the balance sheet and achieving a targeted net debt/EBITDA of 2.0–2.5x.

General disclaimer and copyright

This report has been commissioned by Information Services Corporation and prepared and issued by Edison, in consideration of a fee payable by Information Services Corporation. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2024 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

General disclaimer and copyright

This report has been commissioned by Information Services Corporation and prepared and issued by Edison, in consideration of a fee payable by Information Services Corporation. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2024 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

More on Information Services Corporation

View All

Latest from the Industrials sector

View All Industrials content

Industrials

AAC Clyde Space — Acquisition of Spacemetric

Industrials

Argent Industrial — Cash flush

Industrials

Severfield — Poised for expansion

Research: Healthcare

Oxford Cannabinoid Technologies — Early signs of revival in clinical activity

Oxford Cannabinoid Technologies (OCT) has announced its H124 results (to end-October 2023), an eventful period for the company, marked by successful clinical progression of lead asset OCT461201, albeit with some funding challenges. Key highlights included the initiation and subsequent positive safety data from OCT’s first Phase I clinical trial (Programme 1) and a foray into oncology (Programme 4). Tight funding conditions halted subsequent clinical progress, although the recently announced £1.3m R&D tax rebate, £1.2m fund-raise and planned clinical progression for second asset OCT130401 (Programme 2) offer signs of a potential revival in activity. We estimate that the fresh capital will support runway extension into Q4 CY24. Our valuation of the company stands at £25.3m or 2.6p per share, although we estimate the company needing additional funds towards the end of CY24 to further the company’s clinical pipeline.

Continue Reading

Subscribe to Edison

Get access to the very latest content matched to your personal investment style.

Sign up for free