Brave Bison Group plc* (BBSN.L, 1.3p/£8.0m) | Blackbird plc* (BIRD.L, 15.25p/£51.3m) | The Panoply Holdings (TPX.L, 75p/£41.3m) |1Spatial plc* (SPA.L, 26.5p/£29.3m)
Companies: BBSN BIRD TPX SPA
SPA has signed its largest ever contract to date, a $2.6m win with the State of Michigan, an existing customer. Key developments include greater usage of 1Integrate and also the introduction of 1Date Gateway – a recently launched product. Significantly, this is a state-wide master data management project and thereby provides an excellent example of the material opportunities available to SPA - made possible through the business’ strategic focus on this market. By virtue of Michigan choosing 1Spatial, this win also provides significant product validation and confirms our view - that SPA is uniquely positioned in this market. On this, we highlight also, Michigan’s decision to take 1Data Gateway – we see this product as ideally designed given the multiple stakeholders involved in this large project. The $2.6m TCV is a ‘minimum’, split $1.5m of Services (recognised over 2 yrs) and $1.1m Licence (over 5yrs). Given SPA‘s track record of strong customer retention and the strategic nature of this project, we are optimistic that contract duration may extend. Additionally, we also note scope for a ‘scale‘/‘scope’ increase also, as 1Integrate and 1Data Gateway licences are both usage linked. Finally, just one day after withdrawing market guidance (due to Covid uncertainty) this win provides significant comfort and reassurance regarding continuing business momentum.
FYJan20 prelims demonstrate progress on multiple fronts, sales up +33% to £23.4m. Within which, Spatial Solutions delivered +12% u/l organic growth – notwithstanding a SaaS transition (and so a near-term sales drag). GI benefitted financially also, but its real benefit is strategic – how it has introduced new customers, aided strategic alignment (with Esri) and also brought in new capabilities, already benefitting innovation. In line with strategic goals, we also note progress on profitability, with adj. PAT rising from £-0.1m to £1.1m and £+0.8m FCF in H2. Operational progress was evident too, we highlight 19 new strategic (LMDM) wins and multiple expansions with large existing enterprise customers also. Looking forward, we’re optimistic, as SPA continues to expand its skill-set and expertise through product development (so to more fully leverage its blue-chip customer base). Further, SPA is moving towards other large strategic accounts through partnerships and progress to date is encouraging. The sales pipeline is said to be healthy and FY21 trading YTD has been in line. This said, near-term caution is flagged, as Covid has lengthened the sales cycle. Consequentially, we withdraw our forecasts. Notwithstanding, we are reassured given SPA’s £5.1m y/e gross cash, u/l growth and clear progress on profitability.
Solid announcement today, stating expected FYJan20 sales of “no less than” £23m and EBITDA of “at least” £3m. Both numbers reflect a significant step-up from the prior year – showing both organic and acquired growth and additionally, continued cost discipline. We estimate ‘core’ organic Spatial Solutions growth at +7%. Key to achieving this was continued US momentum - wins included contracts with five US State Departments for Transport. Such progress not only demonstrates traction in this large market, but is also important financially, given the territory’s (higher margin) revenue mix – weighted towards licence sales. Such sales in-turn contributed growth in the recurring base, now £9.5m, up from £7.5m in FY18. The acquisition of GI also had a significant bearing on driving this uplift. Progress is also shown though a healthy year-end net cash balance of £3.9m (£5.1m gross). This in turn implies positive FCF of £1.5m in H2 – a significant milestone for the group and evidence of SPA’s transition to profitability. On outlook, pleasingly, SPA note little COVID related disruption to date. Indeed, we think the company is better placed than most considering its; bluechip customer base; exposure to defensible end-markets (Government, Utilities and Transport); growing ARR and strong backlog of contracted work. SPA is now trading on just 0.7x sales – even in the current environment, that’s a significant discount to sector peers.
1Spatial has announced an update to its flagship product 1Intergrate and more significantly, the launch of a new and complementary product 1Data Gateway. 1Integrate now offers a data analytics capability (provided by Google BigQuery) – a natural development and enhancement therefore of current capabilities (which focus on automating data aggregation and cleansing thereof). 1Data Gateway meanwhile is a new tool focussed on controlled data submission and retrieval to and from 1Integrate. Because of its complementary nature, we believe it should be of interest to both existing and potential 1Integrate users. No changes to forecasts however at this stage.
Today SPA has released an encouraging H2 update, detailing continuing progress on multiple fronts, from further contract wins to; strategic partnerships and; a positive update on Geomap-Imagis. While we make no changes to forecasts, the update provides further reasons for optimism and evidence of progress – towards profitability and higher quality earnings. Trading on just 1x Jan-20 sales forecasts, it could be argued that the market has not taken note. Herein lies the opportunity.
1Spatial has made significant financial and strategic progress over the last three years. The recent capital markets day provided the opportunity to articulate its longer-term ambitions. Its Location Master Data Management (LMDM) strategy aims to leverage the strengths of its 1Integrate platform and has the potential to accelerate growth and raise margins, in our view.
1Spatial held a well attended CMD yesterday which highlighted in particular: 1) The National Underground Asset Register (‘NUAR’) pilot – acting as a Data Gateway for quality assurance and integration of asset data into the register, and offering 1Spatial the opportunity to showcase its unique rules-based data engine to Utilities giants and governmental organisations; 2) Its Traffic Management Plan Automation solution which has a significant UK market opportunity; 3) Ongoing integration of Geomap-Imagis (‘GI’) which remains on track, and enhances 1Spatial’s opportunity to leverage the ESRI partnership to upsell business applications to existing customers and also to expand existing geographic footprint; and 4) The Building Information Modelling (‘BIM’) and facilities management opportunity acquired with GI. We make no changes to forecasts as a result of the CMD, however a path towards an automated SaaS cloud-based application looks increasingly clear through leveraging of the Group’s unique spatial data capability. 1Spatial’s EV/sales multiple of Calendar’20E 1.2x EV/Sales looks undemanding versus peers on 2.4x, especially given an increasingly mission-critical proposition for customers.
H120 saw a solid performance from 1Spatial’s core business augmented by a good start from its recent Geomap-Imagis (GI) acquisition. GI generated revenue of £2m and EBITDA of £0.5m in its first three months and additional synergies have been identified. It is early days but in the context of a £5.3m price tag (EV) we see this performance as encouraging. 1Spatial also highlighted significant contract wins post period end. It now looks well set to execute on its next phase: establishing a market leading position in Location Master Data Management (LMDM).
1Spatial’s interim results highlight the continuing progress the group is making with its refocussed strategy. The group has narrowed its focus to the core sectors of Government, Utilities and Transport and is transitioning to a term licencing model, significantly improving revenue quality and visibility. Group revenue and adj. EBITDA in the period of £10.9m and £1.7m respectively leave the group well placed to meet our full year expectations. The outlook is positive with a strong pipeline and significant order backlog and we continue to see significant additional opportunities for profitable growth on the horizon.
1Spatial has been awarded a pilot project to create a digital map of London’s underground utility assets (pipes and ducts) by the Greater London Authority (GLA). No financial terms have been released but the high-profile win further shows the value of its technology.
1 Spatial have announced a strategically important pilot collaboration with the Greater London Authority (GLA) to create a digital map of the utilities and pipes underground, testing the feasibility of creating a national register. 1Spatial will assist with the delivery of validated, platform ready asset register data, aimed at helping reduce accidental strikes of underground assets which are estimated to cost the UK economy £1.2bn/annum. The project starts with £3.9m of pilot projects split between London and the North East. We see this as a further indicator of the quality of 1Spatial’s geospatial data integrity and validation solution, although we make no changes to our forecasts at this time.
Kaspi.kz, the largest Paym ents, Marketplace and Fintech Ecosystem in Kazakhstan w ith a leading m arket share in each of its key products and services, has postponed its Initial Public Offering due to unfavourable market conditions. Registration document approved for Helios Towers. The Group provides essential network services, flexible infrastructure solutions and reliable power supply to mobile network operators in five African growth economies. Revenue increased 7 per cent. year-on-year to US$191m (H1 2018: US$178m), with Adjusted EBITDA up 15 per cent. year-on-year at US$99m (H1 2018: US$86m) for the six months ended 30 June 2019. Pricing rumoured at 115p to 145p implying valuation of up to $1.8bn
Companies: CCS IKA SGM DDDD SPA PPH SOLO SO4 RQIH QFI
1Spatial’s FY’19 results were largely pre-released alongside the announcement of the acquisition of Geomap-Imagis last week. As such there are no surprises in the full release today. The group continues to successfully execute its turnaround strategy, with the strong contract win momentum shown in FY’19 continuing into the current year. Last week’s acquisition and agreement with Esri represent the final steps in the group’s repositioning, bringing the French and Belgian operations into line with the wider group strategy while also delivering significant earnings accretion. Trading on just 1.4x FY’20 EV/Sales, the shares look very good value versus peers trading on 2.6x.
FY19 represented a year of good strategic and financial progress for 1Spatial. It divested Enables IT, raised capital and shifted to subscription licensing, all while increasing revenue and EBITDA margins. Investment in innovative 3D, LMDM and mobile projects should begin to bear fruit in FY20 and ensure that this progress continues. The recent acquisition of Geomap-Imagis (GI) further enhances its technical capability. Factoring GI into our forecasts helps raise our FY21e adjusted EPS by 14% to 1.0p.
Research Tree provides access to ongoing research coverage, media content and regulatory news on 1Spatial.
We currently have 76 research reports from 5
A number of REITs have the ability to thrive in current market conditions and thereafter. Not only do they hold assets that will remain in strong demand, but they have focus and transparency. The leases and underlying rents are structured in a manner to provide long visibility, growth and security. Hardman & Co defined an investment universe of REITs that we considered provided security and “safer harbours”. We introduced this universe with our report published in March 2019: “Secure income” REITs – Safe Harbour Available. Here, we take forward the investment case and story. We point to six REITs, in particular, where we believe the risk/reward is the most attractive.
Companies: AGY ARBB ARIX BUR CMH CLIG DNL HAYD NSF PCA PIN PXC PHP RE/ RECI SCE SHED VTA
Successful businesses ‘never let a crisis go to waste’. Indeed since an otherwise strong Q1’20 was interrupted by COVID-19, Mpac has further streamlined operations, accelerated R&D and launched new remote equipment diagnostic/acceptance testing, virtual reality & other ‘Industry 4.0’ services.
Brick and concrete products manufacturer Forterra has raised c. £55m gross in an equity placing in order to maintain its strong balance sheet and support the Group's continued investment programme. It was accompanied by, in our view, a reassuring trading statement which we believe is backed by yesterday’s brick industry data and comments from housebuilders, which suggest that demand has been recovering from its lockdown lows, before the PM’s promises to “build, build, build” housing and infrastructure.
The announcement that Avon Rubber is to sell milkrite | InterPuls, its dairy division, to DeLaval Holding for £180m gross proceeds is strategically logical and financially compelling. The fit of dairy and defence has always looked slightly anomalous and the terms of the deal show that the opportunity to augment dairy through value-accretive deals is difficult given the scale of the business and opportunities. Management must now recycle the cash balances that will be created into Avon Protection, where there are a greater number of potential investments.
Companies: Avon Rubber
RBG Holdings pre-close trading update to June 30th confirms a strong H1 performance for RBL, the Group’s law firm, with revenues up 36% like-for-like to c.£11.4m YoY. Convex, the CF boutique, understandably has faced COVID headwinds, with most of its H1 pipeline deferred indefinitely, whilst Litigation Finance continues to grow its pipeline and financing commitments on a longer term view. Due to continued uncertainty from COVID we withdraw our forecasts this morning, with a view to reinstating once more clarity on H1 outturn and momentum into H2 is available.
Companies: Rosenblatt Group
Resilient Trading Update
Companies: Macfarlane Group
Revenue for FY 2020 is ahead of expectation and we adjust our forecast accordingly. Sales are growing at an impressive rate; >50% pa despite COVID-19 and the virus had no effect on the company’s ability to deliver projects with 23 new customers live in Q4. We note COVID concerns are causing some delay on contract decisions, and sales would have been even stronger but for that. These delays do lead to caution on FY 2021, and we ease back our forecasts on more prudent management guidance. However, with the recent £5m equity placing, PCIP has plenty of cash to continue to invest in rolling out its exciting secure payments proposition. This cloud-based solution can be deployed remotely and assists call centres in moving agents to WFH and still collect payments securely. The outlook remains very bright with continued rapid growth expected.
Companies: PCI Pal
The Norcros operating companies largely performed relatively well in challenging market conditions (in both the UK and South Africa) in FY20 though year end trading was affected by COVID-19 lockdowns, as flagged previously. The group’s financial position appears robust following management actions (including foregoing an FY20 final dividend) and well-placed to both contend with weaker near-term markets and the pursuit of market share gains from a position of relative competitive strength. Our estimates remain suspended at this time.
As flagged in the April trading update, Solid State’s FY20 results showed a 19.7% growth in revenues and 34.3% jump in adjusted profit before tax. Demand from the medical and food retail sectors is strong but weakness in the oil & gas and commercial aviation sectors related to the coronavirus pandemic is likely to result in lower year-on-year sales during Q2 and early Q321. While management sees potential for a Q4 recovery, the current range of FY21 profit outcomes is wide, so it is not providing guidance.
Companies: Solid State
The year-end trading update was encouraging, with expected results showing good YoY growth, modestly below but close to our earlier expectations. Trading has been resilient, particularly in safety critical areas such as its nuclear exposure, with some weakness being seen in oil & gas, where there is limited exposure. Two new contract wins in the nuclear sector have also been announced today. FY 2021 forecasts remain under review. With strong finances, the company is well positioned to maximise M&A opportunities, through its PIE strategy.
The group has issued a trading update for the year ended 31 May 2020 highlighting an adjusted EBITDA of at least £11.5m which is close to the group’s original expectation, despite widespread disruption to operations in the second half. The statement notes ample liquidity headroom in excess of £10m with net debt (excluding IFRS 16 lease liabilities) reducing in H2 to £7.5m as planned. The Group’s order book and prospect pipeline remains strong overall and the update is accompanied by the announcement of two meaningful contract wins in the nuclear sector. A further significant positive development is the grant of outline planning permission for the conversion of the group’s 7 acre Hayward Tyler site in Luton into residential housing for up to 1000 dwellings. Whilst financial guidance for FY2021E remains withdrawn at this point due to on-going uncertainties around the impact of COVID-19, we see the group continuing to demonstrate good resilience, operating at close to normal levels, supported by exposure to multiple markets and a strong customer base that includes governments and their agents.
Successful K3 Capital placing to raise £30.45m (gross) at 150p to fund the £9.3m acquisition of Randd UK Ltd, an R&D tax credit specialist with an LTM EBITDA of c.£2.0m, with a margin of c.50% and revenues typically contracted for 5 tax years with many recurring thereafter, followed by future potential deals in SME exposed markets. K3 has established itself as an innovative company that is able to effectively gather, generate and mine large quantities of data in order to scale up M&A services to SMEs. Transferring these lead generation capabilities to adjacent SME markets can allow rapid growth from proven models, at scale.
Companies: K3 Capital Group
Caledonia's Q2 2020 production from its 64% owned Blanket mine in Zimbabwe was 13.5koz gold. This was an increase over the same period last year of 6.2%, leaving Caledonia with a first half production of 27.7koz – well ahead of this time last year (24.7koz) and on track to meet its 2020 full year guidance of 53-56koz (WHI etc. 55.5koz).
Spectra Systems Corporation is a provider of machine-readable high-speed banknote authentication, brand protection technologies and gaming security software. The company has announced that it has executed a new contract with a major world central bank to ‘enhance existing authentication sensors to detect a unique type of counterfeit notes'.
Companies: Spectra Systems Caledonia Mining Corporation Plc Com Shs Npv
Salt Lake Potash has received commitments to raise A$15m through the placement of unsecured zero-coupon Convertible Notes to Equatorial Resources (ASX:EQX) and institutional investors. The Convertible Notes have been structured as deferred equity with zero coupon and mandatory conversion into equity at the lower of 45c/share or a 5% discount to any future equity raising of at least A$10m. These funds will enable Salt Lake Potash to continue to develop Lake Way to the project schedule through July as they finalise debt financing. Plant practical completion and first SOP sales remain on schedule for the March 2021 quarter. The debt financing process in its final stages and with an agreement expected to be executed within weeks.
Companies: Salt Lake Potash
Marlowe delivered a strong performance during FY20A, with +7% organic revenue growth, and improved Adj EBITDA margins. Integration of acquisitions is progressing well, and with receipt of c£40m gross proceeds, Marlowe is well placed to accelerate the consolidation of its markets. We leave our forecasts unchanged and reaffirm our Buy rating.