StatPro Group
Written by
StatPro Group |
Significant cloud contract in America |
Contract win |
Software & comp services |
14 June 2016 |
Share price performance
Business description
Next events
Analysts
StatPro Group is a research client of Edison Investment Research Limited |
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StatPro has won a significant new contract, worth at least £1.2m over five years, with a global American financial institution. This follows last week’s £2.3m three-year contract win with a major Australian financial institution. We estimate that the two contracts will boost the group’s annualised recurring revenue run rate by c 2.7%, with growth potential. The two new contracts highlight the increasing potential for positive newsflow, as the group moves to late-stage cloud transition. Hence, with StatPro’s US-based financial software peers and SaaS companies trading on lofty multiples, we continue to believe there is significant upside in the shares.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/14 |
32.0 |
2.6 |
2.7 |
2.9 |
30.6 |
3.5 |
12/15 |
30.2 |
2.6 |
2.6 |
2.9 |
31.7 |
3.5 |
12/16e |
34.4 |
2.5 |
2.7 |
2.9 |
30.6 |
3.5 |
12/17e |
36.4 |
3.4 |
3.6 |
2.9 |
22.9 |
3.5 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Contract win with a global American institution
The latest deal with an un-named American financial institution uses StatPro’s latest cloud technology to replace its legacy systems, and includes a small amount of services as is typical with such deals. This and the deal announced last week both include the Performance Module – the group’s core transaction-based performance measurement module - that replaces the traditional StatPro Seven solution and is set to be commercially launched in September. This reflects the desires of some customers to move to the front of the queue to be up and running by the official launch date, as the installation process can be complex, involving data transfer and data set-up processes.
Financial impact and forecasts
We estimate the two new contracts will add c £850k, or c 2.7%, to the group’s annualised recurring revenue run rate, which was c £31.9m pro forma following the Investor Analytics acquisition. In our view, these deals underpin our forecasts and increase the risk to upgrades as the year progresses. StatPro prices its cloud solutions on the basis of the number of portfolios, and therefore there is the potential for the revenues from both clients to grow. Nevertheless, given the uncertainties over currency volatility and the imminent EU referendum and the reliance on additional new business through the year to meet our forecasts, we are conservatively maintaining our estimates.
Valuation: Highly scalable cloud computing upside
StatPro’s stock trades on c 31x our maintained FY16e EPS, which falls to c 23x in FY17e. Alternatively, the shares trade on c 1.7x FY17e EV/sales, one-third of the level of StatPro’s larger US peers, which typically trade above 5x EV/sales, while US-based pure SaaS companies typically trade in the region of 4-6x EV/sales.
Exhibit 1: Financial summary
£'000s |
2012 |
2013 |
2014 |
2015 |
2016e |
2017e |
||
Year end 31 December |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||||
Revenue |
|
|
32,001 |
32,486 |
32,018 |
30,187 |
34,413 |
36,408 |
Cost of Sales |
0 |
0 |
0 |
0 |
0 |
0 |
||
Gross Profit |
32,001 |
32,486 |
32,018 |
30,187 |
34,413 |
36,408 |
||
EBITDA |
|
|
6,728 |
5,463 |
4,359 |
4,044 |
4,339 |
5,202 |
Adjusted Operating Profit |
|
|
5,534 |
4,327 |
2,875 |
2,852 |
2,924 |
3,721 |
Amortisation of acquired intangibles |
(440) |
(402) |
(188) |
(32) |
0 |
0 |
||
Exceptionals |
(693) |
(347) |
0 |
0 |
(700) |
0 |
||
Share based payments |
159 |
(192) |
(26) |
(121) |
(200) |
(213) |
||
Operating Profit |
4,560 |
3,386 |
2,661 |
2,699 |
2,024 |
3,509 |
||
Net Interest |
(493) |
(273) |
(291) |
(290) |
(385) |
(345) |
||
Profit Before Tax (norm) |
|
|
5,041 |
4,054 |
2,584 |
2,562 |
2,539 |
3,376 |
Profit Before Tax (FRS 3) |
|
|
4,067 |
3,113 |
2,370 |
2,409 |
1,639 |
3,163 |
Tax |
(1,387) |
(1,030) |
(774) |
(788) |
(711) |
(945) |
||
Profit After Tax (norm) |
3,654 |
3,024 |
1,810 |
1,774 |
1,828 |
2,431 |
||
Profit After Tax (FRS 3) |
2,680 |
2,083 |
1,596 |
1,621 |
928 |
2,218 |
||
Average Number of Shares Outstanding (m) |
62.2 |
67.5 |
67.5 |
67.6 |
66.2 |
65.1 |
||
EPS - normalised (p) |
|
|
5.9 |
4.5 |
2.7 |
2.6 |
2.7 |
3.6 |
EPS - FRS 3 (p) |
|
|
4.3 |
3.1 |
2.4 |
2.4 |
1.3 |
3.3 |
Dividend per share (p) |
2.70 |
2.80 |
2.90 |
2.90 |
2.90 |
2.90 |
||
Gross Margin (%) |
100.0 |
100.0 |
100.0 |
100.0 |
100.0 |
100.0 |
||
EBITDA Margin (%) |
21.0 |
16.8 |
13.6 |
13.4 |
12.6 |
14.3 |
||
Operating Margin (before GW & except.) (%) |
17.3 |
13.3 |
9.0 |
9.4 |
8.5 |
10.2 |
||
BALANCE SHEET |
||||||||
Fixed Assets |
|
|
60,272 |
55,992 |
56,113 |
51,857 |
58,692 |
58,642 |
Intangible Assets |
57,683 |
53,524 |
52,546 |
48,613 |
55,659 |
55,816 |
||
Tangible Assets |
1,974 |
1,883 |
2,470 |
2,233 |
2,022 |
1,816 |
||
Other assets |
615 |
585 |
1,097 |
1,011 |
1,011 |
1,011 |
||
Current Assets |
|
|
10,675 |
10,312 |
10,441 |
10,665 |
3,382 |
3,545 |
Stocks |
0 |
0 |
0 |
0 |
0 |
0 |
||
Debtors |
6,962 |
6,167 |
7,722 |
8,462 |
9,647 |
10,206 |
||
Cash |
3,681 |
4,014 |
2,692 |
2,203 |
(6,264) |
(6,661) |
||
Current Liabilities |
|
|
(19,927) |
(18,514) |
(20,271) |
(19,778) |
(21,289) |
(22,103) |
Creditors |
(19,913) |
(18,502) |
(20,259) |
(19,660) |
(21,171) |
(21,985) |
||
Short term borrowings |
(14) |
(12) |
(12) |
(118) |
(118) |
(118) |
||
Long Term Liabilities |
|
|
(1,400) |
(882) |
(598) |
(1,227) |
(3,325) |
(1,926) |
Long term borrowings |
0 |
0 |
0 |
(801) |
(801) |
(801) |
||
Other long term liabilities |
(1,400) |
(882) |
(598) |
(426) |
(2,524) |
(1,125) |
||
Net Assets |
|
|
49,620 |
46,908 |
45,685 |
41,517 |
37,460 |
38,158 |
CASH FLOW |
||||||||
Operating Cash Flow |
|
|
9,233 |
9,403 |
7,705 |
6,548 |
7,501 |
9,187 |
Net Interest |
(306) |
(98) |
(10) |
(84) |
(385) |
(345) |
||
Tax |
(1,261) |
(1,616) |
(1,173) |
(832) |
(951) |
(686) |
||
Capex |
(4,187) |
(4,412) |
(5,904) |
(4,999) |
(4,947) |
(5,234) |
||
Acquisitions/disposals |
0 |
(990) |
0 |
0 |
(5,625) |
(1,399) |
||
Equity financing |
5,689 |
0 |
2 |
64 |
(2,100) |
0 |
||
Dividends |
(1,627) |
(1,856) |
(1,889) |
(1,960) |
(1,959) |
(1,920) |
||
Net Cash Flow |
7,541 |
431 |
(1,269) |
(1,263) |
(8,466) |
(396) |
||
Opening net debt/(cash) |
|
|
3,399 |
(3,667) |
(4,002) |
(2,680) |
(1,283) |
7,183 |
HP finance leases initiated |
0 |
0 |
0 |
0 |
0 |
0 |
||
Other |
(475) |
(96) |
(53) |
(134) |
0 |
() |
||
Closing net debt/(cash) |
|
|
(3,667) |
(4,002) |
(2,680) |
(1,283) |
7,183 |
7,580 |
Source: Company accounts, Edison Investment Research estimates
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