StatPro Group
Written by
StatPro Group |
StatPro Revolution ARR rose 46% in FY15 |
Trading update |
Software & comp services |
1 February 2016 |
Share price performance
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StatPro Group is a research client of Edison Investment Research Limited |
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StatPro has reported that FY15 adjusted EBITDA is expected to be in line with our expectations, while revenues were c 4% lower than our forecasts, which we understand was mainly due to the continued weakness in the C$, ZAR and euro against sterling. We have tweaked our FY15 forecasts and eased FY16 due to the currency moves. We have also incorporated Investor Analytics (IA), the cloud-based risk analytics solutions provider that StatPro acquired earlier this month, into our forecasts. We continue to believe there is significant upside in the shares, given the lofty multiples of StatPro’s US-based financial software peers and SaaS companies.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/13 |
32.5 |
4.1 |
4.5 |
2.8 |
16.0 |
3.9 |
12/14 |
32.0 |
2.6 |
2.7 |
2.9 |
26.7 |
4.0 |
12/15e |
30.0 |
2.3 |
2.4 |
2.9 |
30.0 |
4.0 |
12/16e |
34.2 |
2.8 |
2.9 |
2.9 |
24.8 |
4.0 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Trading update: In-line FY15 EBITDA
StatPro Revolution’s annualised recurring revenue run rate (ARR) grew by 46% at constant currencies to £7.8m (c 27% of the total group ARR) as at 31 December, and by 8% in absolute terms in Q4. StatPro Seven’s recurring revenue was resilient with a net cancellation rate at constant currency, excluding the impact of conversions to Revolution, of c 3% (FY14: zero). Professional Services revenue was significantly lower, due to the absence of larger one-off projects. The launch of StatPro Revolution Performance module remains on track for the summer. FY15 adjusted EBITDA is expected to be c £4.0m, in line with our forecast, while FY15 revenue is expected to be c £30.0m (we forecast £31.3m). Net cash was £1.3m, in line with our forecasts, although we understand the SiSoft acquisition liability, which we had assumed would be settled in FY15, has not yet been paid. StatPro acquired Investor Analytics for up to $16m. This acquisition takes StatPro’s cloud-based ARR to c £11.1m, taking cloud-based ARR to c 35% of total pro forma group ARR total.
Forecasts: Incorporating Investor Analytics
We have reduced continuing revenue forecasts by £1.3m to £30.0m in FY15, and by £1.8m in FY16 to £31.0m. We have maintained our continuing profit forecasts for both FY15 and FY16. We have included 11 months of contributions from IA in FY16. In all, FY16 revenue rises by 4% to £34.2m, while PBT norm and EPS also rise by 4%, reflecting earnings accretion from the acquisition. We forecast the group to end FY16 with net debt of £4.7m (previously £1.8m net cash).
Valuation: Highly scalable cloud computing upside
StatPro’s stock trades on c 30x our FY15e EPS, which falls to c 25x in FY16e. Alternatively, the shares trade on c 1.6x FY16e EV/sales, one-third of the level of StatPro’s larger US peers, which typically trade above 4.9x EV/sales, while US-based pure SaaS companies typically trade in the region of 3.5-6.2x EV/sales.
Acquisition of Investor Analytics
On 22 January 2016, StatPro acquired IA for up to $16m. StatPro paid $7m in cash on closing and there are two deferred payments – $2m after one year and $1m after two years. Furthermore, there is an additional contingent payment – up to $6m after one year, dependent on securing a number of new contract wins. IA is expected to report FY15 revenue of $5.0m (of which c 94% was recurring) and an EBITDA loss of c $0.3m. Its ARR is currently c $4.85m.
StatPro is financing the transaction from increased debt facilities provided by the Technology Finance division of Wells Fargo Capital Finance. The debt facility has been increased to c £24.5m, of which £17.0m is committed. Hence, given its strong recurring revenues (c 94%), StatPro retains plenty of financial flexibility.
Cost synergies are expected to be c $1.0m pa (£0.7m) for data feeds, administrative services and other costs. StatPro is targeting a run rate adjusted EBITDA for IA of c $0.5-0.75m (£0.35-0.5m) in the first 12 months following its acquisition. It expects to report an exceptional cash charge of $1.0-1.5m (£0.7-1.0m) covering transaction fees and other one-off integration costs.
Forecasts: Incorporating Investor Analytics
We have reduced continuing revenues by £1.3m to £30.0m in FY15, in line with the trading update, and by £1.8m in FY16 to £31.0m. We have maintained our continuing profit forecasts for both FY15 and FY16, which reflects strong cost discipline. We have included 11 months of contributions from IA in FY16. In all, FY16 revenue rises by 4% to £34.2m, while PBT norm and EPS also rise by 4%, reflecting earnings accretion from the acquisition. We forecast the group to end FY16 with net debt of £4.7m (previously £1.8m net cash).
P&L
FY16 revenues for Traditional software rental and StatPro Revolution fall back due to the strength of sterling in relation to the C$, ZAR and the euro. However, we note the group now has an increased exposure to the strong US$ following the acquisition of IA. Data slips since this business area is being de-emphasised. We expect Professional Services to bounce in FY16, as FY15 was an abnormally quiet year, and the group should benefit from the launch of the StatPro Revolution Performance module over the summer.
We have included £1m of restructuring costs in FY16 (£0.7m net of tax).
Balance sheet and cash flow
We have shifted the anticipated SiSoft payment from FY15 to FY16, and added the IA $7m payment and $3m liabilities. However, we have ignored the contingent payment for now.
We have eased our FY15 operating cash flow forecast by £0.9m, to maintain the year-end net cash position at £1.3m, as indicated by the company. Capex has also eased as a function of the reduced FY15 revenues.
Exhibit 1: Forecasts
2015e |
2016e |
|||||
New |
Old |
Change (%) |
New |
Old |
Change (%) |
|
Revenues (£000s) |
||||||
Traditional software rental |
19,262 |
19,549 |
(1) |
16,762 |
17,549 |
(4) |
StatPro Revolution |
5,676 |
5,845 |
(3) |
8,910 |
9,154 |
(3) |
Investor Analytics |
|
|
|
3,205 |
|
|
Data |
3,417 |
3,832 |
(11) |
3,286 |
3,909 |
(16) |
Professional services |
1,650 |
2,089 |
(21) |
2,000 |
2,131 |
(6) |
Group revenue |
30,006 |
31,315 |
(4) |
34,163 |
32,743 |
4 |
Growth (%) |
(6.3) |
(2.2) |
|
13.9 |
4.6 |
|
Gross Profit |
30,006 |
31,315 |
(4) |
34,163 |
32,743 |
4 |
Op expenses (before devt costs) |
(27,286) |
(28,738) |
(5) |
(31,342) |
(29,959) |
5 |
Capitalisation of dev costs (net) |
(169) |
(26) |
538 |
265 |
63 |
321 |
Adjusted operating profit |
2,551 |
2,551 |
(0) |
3,086 |
2,846 |
8 |
Operating margin (%) |
8.5 |
8.1 |
4 |
9.0 |
8.7 |
4 |
Growth (%) |
(11.3) |
(11.3) |
0 |
21.0 |
11.6 |
81 |
Net interest |
(300) |
(300) |
0 |
(335) |
(200) |
67 |
Profit before tax norm |
2,251 |
2,251 |
(0) |
2,751 |
2,646 |
4 |
Amortisation of acquired intangibles |
(32) |
(32) |
0 |
0 |
0 |
|
Share based payments |
(188) |
(188) |
0 |
(200) |
(200) |
0 |
Exceptional items (net of tax) |
0 |
0 |
|
(700) |
0 |
|
Profit before tax |
2,031 |
2,031 |
(0) |
1,851 |
2,446 |
(24) |
Taxation |
(630) |
(630) |
(0) |
(770) |
(741) |
4 |
Net income |
1,401 |
1,401 |
(0) |
1,081 |
1,705 |
(37) |
Adjusted EPS (p) |
2.4 |
2.4 |
(0) |
2.9 |
2.8 |
4 |
P/E - Adjusted EPS |
30.7 |
|
|
25.2 |
|
|
Source: Edison Investment Research
Exhibit 2: Financial summary
£000s |
2011 |
2012 |
2013 |
2014 |
2015e |
2016e |
||
Year-end 31 December |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||||
Revenue |
|
|
31,715 |
32,001 |
32,486 |
32,018 |
30,006 |
34,163 |
Cost of Sales |
0 |
0 |
0 |
0 |
0 |
0 |
||
Gross Profit |
31,715 |
32,001 |
32,486 |
32,018 |
30,006 |
34,163 |
||
EBITDA |
|
|
6,118 |
6,728 |
5,463 |
4,359 |
3,953 |
4,812 |
Adjusted Operating Profit |
|
|
5,056 |
5,534 |
4,327 |
2,875 |
2,551 |
3,086 |
Amortisation of acquired intangibles |
(447) |
(440) |
(402) |
(188) |
(32) |
0 |
||
Exceptionals |
0 |
(693) |
(347) |
0 |
0 |
(700) |
||
Share based payments |
(119) |
159 |
(192) |
(26) |
(188) |
(200) |
||
Operating Profit |
4,490 |
4,560 |
3,386 |
2,661 |
2,331 |
2,186 |
||
Net Interest |
(627) |
(493) |
(273) |
(291) |
(300) |
(335) |
||
Profit Before Tax (norm) |
|
|
4,429 |
5,041 |
4,054 |
2,584 |
2,251 |
2,751 |
Profit Before Tax (FRS 3) |
|
|
3,863 |
4,067 |
3,113 |
2,370 |
2,031 |
1,851 |
Tax |
(955) |
(1,387) |
(1,030) |
(774) |
(630) |
(770) |
||
Profit After Tax (norm) |
3,474 |
3,654 |
3,024 |
1,810 |
1,621 |
1,981 |
||
Profit After Tax (FRS 3) |
2,908 |
2,680 |
2,083 |
1,596 |
1,401 |
1,081 |
||
Average Number of Shares Outstanding (m) |
60.8 |
62.2 |
67.5 |
67.5 |
67.6 |
67.9 |
||
EPS - normalised (p) |
|
|
5.7 |
5.9 |
4.5 |
2.7 |
2.4 |
2.9 |
EPS - FRS 3 (p) |
|
|
4.8 |
4.3 |
3.1 |
2.4 |
2.1 |
1.6 |
Dividend per share (p) |
2.60 |
2.70 |
2.80 |
2.90 |
2.90 |
2.90 |
||
Gross Margin (%) |
100.0 |
100.0 |
100.0 |
100.0 |
100.0 |
100.0 |
||
EBITDA Margin (%) |
19.3 |
21.0 |
16.8 |
13.6 |
13.2 |
14.1 |
||
Operating Margin (before GW and except.) (%) |
15.9 |
17.3 |
13.3 |
9.0 |
8.5 |
9.0 |
||
BALANCE SHEET |
||||||||
Fixed Assets |
|
|
62,315 |
60,272 |
55,992 |
56,113 |
56,460 |
63,700 |
Intangible Assets |
59,045 |
57,683 |
53,524 |
52,546 |
52,345 |
59,603 |
||
Tangible Assets |
2,390 |
1,974 |
1,883 |
2,470 |
3,018 |
3,000 |
||
Other assets |
880 |
615 |
585 |
1,097 |
1,097 |
1,097 |
||
Current Assets |
|
|
8,794 |
10,675 |
10,312 |
10,441 |
8,597 |
3,552 |
Stocks |
0 |
0 |
0 |
0 |
0 |
0 |
||
Debtors |
6,173 |
6,962 |
6,167 |
7,722 |
7,237 |
8,239 |
||
Cash |
2,447 |
3,681 |
4,014 |
2,692 |
1,334 |
(4,715) |
||
Current Liabilities |
|
|
(19,445) |
(19,927) |
(18,514) |
(20,271) |
(19,589) |
(21,040) |
Creditors |
(19,434) |
(19,913) |
(18,502) |
(20,259) |
(19,577) |
(21,028) |
||
Short term borrowings |
(11) |
(14) |
(12) |
(12) |
(12) |
(12) |
||
Long Term Liabilities |
|
|
(7,834) |
(1,400) |
(882) |
(598) |
(598) |
(2,696) |
Long term borrowings |
(5,835) |
0 |
0 |
0 |
0 |
0 |
||
Other long term liabilities |
(1,999) |
(1,400) |
(882) |
(598) |
(598) |
(2,696) |
||
Net Assets |
|
|
43,830 |
49,620 |
46,908 |
45,685 |
44,871 |
43,516 |
CASH FLOW |
||||||||
Operating Cash Flow |
|
|
9,925 |
9,233 |
9,403 |
7,705 |
7,240 |
7,904 |
Net Interest |
(423) |
(306) |
(98) |
(10) |
(300) |
(335) |
||
Tax |
(844) |
(1,261) |
(1,616) |
(1,173) |
(1,128) |
(608) |
||
Capex |
(4,785) |
(4,187) |
(4,412) |
(5,904) |
(5,213) |
(5,423) |
||
Acquisitions/disposals |
0 |
0 |
(990) |
0 |
0 |
(5,625) |
||
Equity financing |
(12) |
5,689 |
0 |
2 |
0 |
0 |
||
Dividends |
(1,502) |
(1,627) |
(1,856) |
(1,889) |
(1,957) |
(1,961) |
||
Net Cash Flow |
2,359 |
7,541 |
431 |
(1,269) |
(1,358) |
(6,048) |
||
Opening net debt/(cash) |
|
|
5,523 |
3,399 |
(3,667) |
(4,002) |
(2,680) |
(1,322) |
HP finance leases initiated |
0 |
0 |
0 |
0 |
0 |
0 |
||
Other |
(235) |
(475) |
(96) |
(53) |
0 |
0 |
||
Closing net debt/(cash) |
|
|
3,399 |
(3,667) |
(4,002) |
(2,680) |
(1,322) |
4,727 |
Source: Company accounts, Edison Investment Research estimates
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