StatPro Revolution’s annualised recurring contract revenue grew by 61% over the 12 months to £6.5m representing 23% of the recurring revenue book, up from 15% (at constant currencies) a year earlier. The total recurring revenue run rate rose 4% at constant currencies to £28.6m, though this was only c 1% higher at actual rates. The StatPro Revolution Performance module, which essentially replaces the legacy software suite, remains on track for launch in early FY16, and we expect this to accelerate the group’s cloud transformation next year. New functionality added to Revolution during the period included a solution to compute Standard Risk Measure (SRM) – a standard method used by Australian superannuation funds to describe investment risk and pushed by the Australian regulators, partly to cope with negative investment returns. The incorporation of this solution highlights the ability to respond to a client’s needs much more efficiently in a cloud environment; the tool might not have been seen as commercially viable in a traditional software environment.

We have eased our FY15 revenues by 3% and costs by 2%, with the lower numbers feeding through to FY16. Hence, EPS falls from 3.0p to 2.5p in FY15, and from 3.4p to 2.9p in FY16. We forecast the group to end FY15 with net cash of £1.4m (previously £1.7m), and this rises to £1.9m a year later (£2.5m).

The stock trades on c 32x our FY15e EPS, which falls to c 27x in FY16e. Alternatively, the shares trade on c 1.6x FY16e EV/sales, less than a third of the level of its larger US peers, which typically trade above 6x EV/sales, while USbased pure SaaS companies typically trade in the region of 4.5-6.2x EV/sales.