Following September’s successful launch of the StatPro Revolution Performance module, the Group has issued a brief trading update for Q3 2016; revenue and profits continue to be in line with the Board’s expectations and Annualised Recurring Revenue (ARR) for StatPro Revolution improved again. One of the beta clients, National Australia Bank, has gone live with eight end-clients – progress which was flagged at the investor presentation for the Performance module launch. Although not commented on in today’s announcement, we note that there have been notable currency movements during the quarter given the weakness of sterling. While the acquisition of Investor Analytics increased revenue and profit exposure to the US Dollar, StatPro has some natural and derivative hedging which will mitigate the impact on profits. With continued progress in line with expectations, we leave our estimates unchanged at present.
ARR for StatPro Revolution showed continued growth, at £14.7 million at the end of Q3 2016 (including the contribution from Investor Analytics’ cloud-based risk service, acquired in January 2016) versus a constant currency £8.2 million 12 months earlier and a reported £13.7 million at this year’s interim stage.
StatPro Revolution as a percentage of Group ARR increased further, to 39% versus 25% at constant currency as at September 2015 and a reported 38% as at the end of June 2016.
Sterling depreciation meant that average exchange rates over Q3 2016 for the US Dollar, Swiss Franc, Euro and the Rand were between 8%-16% lower than the averages for Q3 2015. Although that should improve reported Sterling revenues, we make no adjustments to estimates for currency since the fluctuations have so far been seen over just one quarter. The impact on profits is mitigated by an increase in non-sterling-denominated costs and debt.
StatPro uses foreign exchange contracts to hedge all material foreign currency transaction exposures but it does not hedge profit and loss translation exposures. The Group had currency swaps with a total principal value at 31 December 2015 of approximately £4.9 million, denominated in US Dollars, Canadian Dollars, and Euros, to create synthetic currency hedges in order to provide a partial hedge against movements in the fair value of investments in overseas subsidiaries.