StatPro has released an in-line trading update for FY17. Annualised recurring revenue (ARR) for StatPro Revolution grew by 13% organically. Statutory revenues, EBITDA and cash were broadly in line with our forecasts and we are maintaining our FY18 forecasts. Given the busy M&A backdrop, which saw competitor BISAM sold for 7.3x sales earlier in the year, 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 |
StatPro Revolution ARR up 13% organically |
Trading update |
Software & comp services |
25 January 2018 |
Share price performance
Business description
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StatPro has released an in-line trading update for FY17. Annualised recurring revenue (ARR) for StatPro Revolution grew by 13% organically. Statutory revenues, EBITDA and cash were broadly in line with our forecasts and we are maintaining our FY18 forecasts. Given the busy M&A backdrop, which saw competitor BISAM sold for 7.3x sales earlier in the year, 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 |
12/15 |
30.2 |
2.6 |
2.6 |
2.9 |
56.6 |
2.0 |
12/16 |
37.5 |
2.7 |
3.5 |
2.9 |
42.5 |
2.0 |
12/17e |
48.9 |
4.2 |
5.0 |
2.9 |
30.0 |
2.0 |
12/18e |
57.3 |
6.1 |
7.2 |
2.9 |
20.8 |
2.0 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Year-end trading update: Sales, EBITDA are in line
FY17 revenue grew by 30% to c £49.0m (we forecast £48.9m) while EBITDA rose by 35% to £6.9m (we forecast £7.0m). Net debt finished the year at £20.2m, slightly above our £19.7m forecast. The annualised recurring revenue (ARR) for StatPro Revolution, the group’s cloud services analytics product, grew by 13% organically. The total cloud services ARR, which also includes Delta (acquired in May), jumped by 106%. The ARR for the group’s traditional Seven platform grew by 2%, after excluding the impact of conversions to the cloud platform. This reflects continued demand for the group’s composites product (for the aggregation of individual portfolios) and InfoVest (includes StatPro’s compliance solution).
Busy M&A backdrop
FY17 saw a number of transactions that make StatPro look cheap. Key competitor BISAM was acquired by FactSet for 7.3x sales. Separately, LSE acquired Yield Book (a key competitor of Delta) along with Citi Fixed Income Indices from Citi for 6.4x sales, although we understand that the $685m price largely related to the indices. Additionally, SS&C is acquiring DST Systems at c 2.4x 2018 sales.
Forecasts: Maintained
We have brought our end-FY17 net debt forecast in line with the update and this £0.5m increase impacts on subsequent years. Otherwise, we have maintained all our forecasts and will add FY19 forecasts after the results in mid-March.
Valuation: Highly scalable cloud computing upside
StatPro’s stock trades on c 30x our FY17e EPS, which falls to c 21x in FY18e. Alternatively, the shares trade on c 2.0x FY18e EV/sales, around one-third of the level of StatPro’s larger US peers and US-based pure SaaS companies. Our DCF model, when incorporating 10-year organic revenue growth of 4.4%, terminal growth of 2%, a long-term margin target of 24.5% and a WACC of 9%, would value the shares at 224p, 51% above the current share price.
Exhibit 1: Financial summary
£'000s |
2013 |
2014 |
2015 |
2016 |
2017e |
2018e |
||
Year end 31 December |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||||
Revenue |
|
|
32,486 |
32,018 |
30,187 |
37,545 |
48,948 |
57,304 |
Cost of Sales |
0 |
0 |
0 |
0 |
0 |
0 |
||
Gross Profit |
32,486 |
32,018 |
30,187 |
37,545 |
48,948 |
57,304 |
||
EBITDA |
|
|
5,463 |
4,359 |
4,044 |
5,104 |
7,030 |
8,916 |
Adjusted Operating Profit |
|
|
4,327 |
2,875 |
2,852 |
3,461 |
5,230 |
7,116 |
Amortisation of acquired intangibles |
(402) |
(188) |
(32) |
(1,060) |
(1,060) |
(1,060) |
||
Exceptionals |
(347) |
0 |
0 |
(11,378) |
0 |
0 |
||
Share based payments |
(192) |
(26) |
(121) |
(361) |
(213) |
(225) |
||
Operating Profit |
3,386 |
2,661 |
2,699 |
(9,338) |
3,958 |
5,831 |
||
Net Interest |
(273) |
(291) |
(290) |
(786) |
(998) |
(1,021) |
||
Profit Before Tax (norm) |
|
|
4,054 |
2,584 |
2,562 |
2,675 |
4,232 |
6,095 |
Profit Before Tax (FRS 3) |
|
|
3,113 |
2,370 |
2,409 |
(10,124) |
2,960 |
4,810 |
Tax |
(1,030) |
(774) |
(788) |
(395) |
(889) |
(1,280) |
||
Profit After Tax (norm) |
3,024 |
1,810 |
1,774 |
2,843 |
3,344 |
4,815 |
||
Profit After Tax (FRS 3) |
2,083 |
1,596 |
1,621 |
(10,519) |
2,071 |
3,530 |
||
Minority interests |
0 |
0 |
0 |
(94) |
(121) |
(129) |
||
Net income (norm) |
3,024 |
1,810 |
1,774 |
2,280 |
3,223 |
4,686 |
||
Net income (statutory) |
2,083 |
1,596 |
1,621 |
(10,613) |
1,950 |
3,401 |
||
Average Number of Shares Outstanding (m) |
67.5 |
67.5 |
67.6 |
65.3 |
65.2 |
65.7 |
||
EPS - normalised (p) |
|
|
4.5 |
2.7 |
2.6 |
3.5 |
4.9 |
7.1 |
EPS - FRS 3 (p) |
|
|
3.1 |
2.4 |
2.4 |
(16.3) |
3.0 |
5.2 |
Dividend per share (p) |
2.80 |
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 (%) |
16.8 |
13.6 |
13.4 |
13.6 |
14.4 |
15.6 |
||
Operating Margin (before GW and except.) (%) |
13.3 |
9.0 |
9.4 |
9.2 |
10.7 |
12.4 |
||
BALANCE SHEET |
||||||||
Fixed Assets |
|
|
55,992 |
56,113 |
51,857 |
59,088 |
71,757 |
72,285 |
Intangible Assets |
53,524 |
52,546 |
48,613 |
55,696 |
68,452 |
68,774 |
||
Tangible Assets |
1,883 |
2,470 |
2,233 |
2,742 |
2,655 |
2,861 |
||
Other assets |
585 |
1,097 |
1,011 |
650 |
650 |
650 |
||
Current Assets |
|
|
10,312 |
10,441 |
10,665 |
19,081 |
23,516 |
28,126 |
Stocks |
0 |
0 |
0 |
0 |
0 |
0 |
||
Debtors |
6,167 |
7,722 |
8,462 |
14,725 |
19,197 |
22,475 |
||
Cash |
4,014 |
2,692 |
2,203 |
4,356 |
4,319 |
5,651 |
||
Current Liabilities |
|
|
(18,514) |
(20,271) |
(19,778) |
(35,686) |
(42,727) |
(47,207) |
Creditors |
(18,502) |
(20,259) |
(19,660) |
(27,227) |
(34,268) |
(38,748) |
||
Short term borrowings |
(12) |
(12) |
(118) |
(8,459) |
(8,459) |
(8,459) |
||
Long Term Liabilities |
|
|
(882) |
(598) |
(1,227) |
(9,897) |
(22,223) |
(21,523) |
Long term borrowings |
0 |
0 |
(801) |
(5,961) |
(16,060) |
(15,360) |
||
Other long term liabilities |
(882) |
(598) |
(426) |
(3,936) |
(6,163) |
(6,163) |
||
Net Assets |
|
|
46,908 |
45,685 |
41,517 |
32,586 |
30,324 |
31,681 |
CASH FLOW |
||||||||
Operating Cash Flow |
|
|
9,403 |
7,705 |
6,548 |
7,454 |
11,604 |
14,417 |
Net Interest |
(98) |
(10) |
(84) |
(500) |
(998) |
(1,021) |
||
Tax |
(1,616) |
(1,173) |
(832) |
(1,294) |
(1,000) |
(846) |
||
Capex |
(4,412) |
(5,904) |
(4,999) |
(6,445) |
(6,486) |
(7,808) |
||
Acquisitions/disposals |
(990) |
0 |
0 |
(4,786) |
(10,861) |
(820) |
||
Equity financing |
0 |
2 |
64 |
(2,079) |
0 |
0 |
||
Dividends |
(1,856) |
(1,889) |
(1,960) |
(1,877) |
(1,893) |
(1,890) |
||
Net Cash Flow |
431 |
(1,269) |
(1,263) |
(9,527) |
(9,633) |
2,032 |
||
Opening net debt/(cash) |
|
|
(3,667) |
(4,002) |
(2,680) |
(1,283) |
10,065 |
20,200 |
Other |
(96) |
(53) |
(134) |
(1,821) |
(502) |
() |
||
Closing net debt/(cash) |
|
|
(4,002) |
(2,680) |
(1,283) |
10,065 |
20,200 |
18,168 |
Source: StatPro Group accounts, Edison Investment Research estimates
|
|
Research: TMT
The mission’s year-end trading update indicates that its FY17 profits were a shade ahead of the market forecast, with the bonus of a strong working capital performance delivering a very good reduction in net debt to below £7.5m. A greater degree of back-office integration in FY18, building on collaboration initiatives already in place, should help margins to progress, further boosted by reduced interest rates triggered by the stronger balance sheet. The lengthening record of delivering on expectations and of growing earnings and dividends is inconsistent with the deeply discounted rating.