StatPro Group — Trading remains in line with expectations

StatPro Group — Trading remains in line with expectations

Trading remains in line and we have maintained our forecasts, which imply 2.7% FY19 organic revenue growth. Management’s two key priorities for FY19 are 1) improving EBITDA margins in all areas of the business and 2) ensuring the Delta integration is a success. In the longer run, margins stand to benefit from the group’s increasing scale and costs dropping out as the group’s three software platforms are consolidated over the next few years. In our view, the shares continue to look attractive, given the group’s c £56m recurring revenue book and the declining rating (c 15x FY20e), especially in light of the active M&A backdrop in the financial software sector. We note that Axioma, a StatPro competitor in the risk space, was recently acquired by Deutsche Börse for $850m or c 8.5x sales.

Analyst avatar placeholder

Written by

StatPro Group

Trading remains in line with expectations

AGM trading update

Software & comp services

23 May 2019

Price

132.5p

Market cap

£87m

Net debt (£m) at 31 December 2018

24.6

Shares in issue

65.6m

Free float

82%

Code

SOG

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

6.9

12.3

(22.7)

Rel (local)

9.0

11.0

(17.5)

52-week high/low

180.5p

105.0p

Business description

StatPro Group provides cloud-based portfolio analytics solutions to the global investment community.

Next events

Trading update

July 2019

Interim results

August 2019

Analysts

Richard Jeans

+44 (0)20 3077 5700

Dan Ridsdale

+44 (0)20 3077 5729

StatPro Group is a research client of Edison Investment Research Limited

Trading remains in line and we have maintained our forecasts, which imply 2.7% FY19 organic revenue growth. Management’s two key priorities for FY19 are 1) improving EBITDA margins in all areas of the business and 2) ensuring the Delta integration is a success. In the longer run, margins stand to benefit from the group’s increasing scale and costs dropping out as the group’s three software platforms are consolidated over the next few years. In our view, the shares continue to look attractive, given the group’s c £56m recurring revenue book and the declining rating (c 15x FY20e), especially in light of the active M&A backdrop in the financial software sector. We note that Axioma, a StatPro competitor in the risk space, was recently acquired by Deutsche Börse for $850m or c 8.5x sales.

Year
end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

12/17

49.3

3.3

5.8

2.9

22.8

2.2

12/18

54.8

5.0

7.3

2.9

18.2

2.2

12/19e

58.0

6.2

8.0

2.9

16.5

2.2

12/20e

61.0

7.4

9.1

2.9

14.6

2.2

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

Two new contract wins underpin our forecasts

StatPro has recently announced two new contract wins: 1) a three-year contract with an EU investment manager for Revolution Delta, with a minimum contract value of €1.2m, including the addition of a new module to cover the new EU Money Market Regulations; and 2) a three-year contract extension with a top 20 fund administrator for Revolution, with a minimum contract value of £2.44m.

Extension of banking facilities

The group has increased its financing facilities to an aggregate £49m and extended them to April 2024. The funding is available for acquisitions, share buy-backs and general corporate purposes.

SiSoft legal case update

The SiSoft legal case was initiated in 2011, and in January 2017 the Commercial Court of Paris found in favour of StatPro. However, the Court of Appeal of Paris has now found in favour of the SiSoft shareholders and partially overturned the original ruling. StatPro strongly rejects the interpretation of the agreement by the Appeal Court and is considering an appeal to the French Supreme Court. We have assumed £0.85m of additional acquisition costs and £0.15m of interest. We now forecast the group to end FY19 with net debt of £22.2m (previously £21.2m).

Valuation: Highly scalable cloud computing upside

StatPro’s stock trades on c 17x our maintained FY19e EPS, which falls to c 15x in FY20e and to c 12x in FY21e. Alternatively, the shares trade on c 1.9x FY19 EV/Sales, around a third of the level of StatPro’s larger US financial software peers and a quarter of the level of US-based pure software-as-a-service companies. Our DCF model, when incorporating 10-year organic revenue CAGR of c 3.7%, terminal growth of 2%, a long-term operating margin target of 24.0% and a WACC of 9%, values the shares at 230p, 74% above the current share price.

Exhibit 1: Financial summary

£'000s

2016

2017

2018

2019e

2020e

2021e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

37,545

49,260

54,841

58,000

61,000

64,287

Cost of Sales

0

0

0

0

0

0

Gross Profit

37,545

49,260

54,841

58,000

61,000

64,287

EBITDA

 

 

5,104

6,838

9,011

9,499

10,499

12,303

Adjusted Operating Profit

 

 

3,461

4,917

7,214

7,880

8,886

10,641

Amortisation of acquired intangibles

(1,060)

(2,243)

(3,161)

(3,161)

(3,161)

(3,161)

Exceptionals

(11,378)

(3,934)

(2,578)

(1,000)

0

0

Share based payments

(361)

(626)

(207)

(675)

(700)

(725)

Operating Profit

(9,338)

(1,886)

1,268

3,044

5,025

6,755

Net Interest

(786)

(1,585)

(2,256)

(1,664)

(1,464)

(1,264)

Profit Before Tax (norm)

 

 

2,675

3,332

4,958

6,217

7,423

9,377

Profit Before Tax (FRS 3)

 

 

(10,124)

(3,471)

(988)

1,381

3,562

5,491

Tax

(489)

563

(141)

(932)

(1,410)

(1,875)

Profit After Tax (norm)

2,843

4,505

5,434

5,284

6,013

7,502

Profit After Tax (FRS 3)

(10,613)

(2,908)

(1,129)

448

2,152

3,616

Minority interests

(94)

(131)

(21)

0

0

0

Net income (norm)

2,186

3,764

4,796

5,284

6,013

7,502

Net income (statutory)

(10,707)

(3,039)

(1,150)

448

2,152

3,616

Average Number of Shares Outstanding (m)

65.3

64.8

65.7

65.9

66.2

66.5

EPS - normalised (p)

 

 

3.3

5.8

7.3

8.0

9.1

11.3

EPS - FRS 3 (p)

 

 

(16.4)

(4.7)

(1.8)

0.7

3.2

5.4

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 (%)

13.6

13.9

16.4

16.4

17.2

19.1

Operating Margin (before GW & except.) (%)

9.2

10.0

13.2

13.6

14.6

16.6

BALANCE SHEET

Fixed Assets

 

 

59,088

70,864

69,615

67,658

65,542

63,394

Intangible Assets

55,696

64,793

63,701

61,913

59,885

57,791

Tangible Assets

2,742

3,303

3,447

3,278

3,191

3,136

Other assets

650

2,768

2,467

2,467

2,467

2,467

Current Assets

 

 

19,081

20,912

18,438

21,112

25,967

32,433

Stocks

0

0

0

0

0

0

Debtors

14,725

16,601

15,867

16,781

17,649

18,600

Cash

4,356

4,311

2,571

4,331

8,318

13,833

Current Liabilities

 

 

(35,686)

(38,171)

(35,224)

(37,376)

(39,534)

(41,851)

Creditors

(27,227)

(30,720)

(27,433)

(29,585)

(31,743)

(34,060)

Short term borrowings

(8,459)

(7,451)

(7,791)

(7,791)

(7,791)

(7,791)

Long Term Liabilities

 

 

(9,897)

(22,989)

(25,444)

(22,518)

(19,591)

(16,665)

Long term borrowings

(5,961)

(17,076)

(19,418)

(18,719)

(18,019)

(17,320)

Other long term liabilities

(3,936)

(5,913)

(6,026)

(3,799)

(1,572)

655

Net Assets

 

 

32,586

30,616

27,385

28,877

32,384

37,311

CASH FLOW

Operating Cash Flow

 

 

7,454

10,676

12,839

15,702

17,117

19,183

Net Interest

(500)

(1,227)

(1,873)

(1,814)

(1,464)

(1,264)

Tax

(1,294)

(144)

(763)

(350)

(870)

(1,336)

Capex

(6,445)

(7,213)

(7,794)

(7,942)

(8,176)

(8,440)

Acquisitions/disposals

(4,786)

(10,269)

(3,417)

(1,225)

0

0

Equity financing

(2,079)

926

147

0

0

0

Dividends

(1,877)

(2,012)

(1,980)

(1,912)

(1,921)

(1,929)

Net Cash Flow

(9,527)

(9,263)

(2,841)

2,459

4,686

6,214

Opening net debt/(cash)

 

 

(1,283)

10,065

20,217

24,638

22,179

17,493

Other

(1,821)

(889)

(1,580)

()

0

0

Closing net debt/(cash)

 

 

10,065

20,217

24,638

22,179

17,493

11,279

Source: StatPro accounts, Edison Investment Research

General disclaimer and copyright

This report has been commissioned by StatPro Group and prepared and issued by Edison, in consideration of a fee payable by StatPro Group. Edison Investment Research standard fees are £49,500 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 Edison analyst 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 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd who holds an Australian Financial Services Licence (Number: 427484). 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

Neither this document and associated email (together, the "Communication") constitutes or form part of any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities, nor shall it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. Any decision to purchase shares in the Company in the proposed placing should be made solely on the basis of the information to be contained in the admission document to be published in connection therewith.

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 (nor will such persons be able to purchase shares in the placing).

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

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. 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.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by StatPro Group and prepared and issued by Edison, in consideration of a fee payable by StatPro Group. Edison Investment Research standard fees are £49,500 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 Edison analyst 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 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd who holds an Australian Financial Services Licence (Number: 427484). 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

Neither this document and associated email (together, the "Communication") constitutes or form part of any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities, nor shall it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. Any decision to purchase shares in the Company in the proposed placing should be made solely on the basis of the information to be contained in the admission document to be published in connection therewith.

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 (nor will such persons be able to purchase shares in the placing).

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

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. 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.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

ERM Power — Investor day confirms structural growth trends

The recent investor day confirmed the opportunities we see for ERM Power from an evolving energy market, which we expect will create medium-term growth potential especially for the Energy Solutions business. In the meantime, investors will benefit from strong forecasted cash flow generation, with total free cash flow over the period FY19–21 equivalent to c 40% of the current market cap. We expect this to be allocated in a balanced way between shareholders’ remuneration and growth capex.

Continue Reading

Subscribe to Edison

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

Sign up for free