StatPro has received a recommended all-cash offer at 230p per share (a 54.9% premium to the closing price) from Confluence Technologies, a private equity-backed (TA Associates) US-based provider of solutions to the global asset management industry. The offer is recommended by the board and supported by shareholders representing 65.2% of the shares. At the interims, management confirmed its focus on driving sales, having established the building blocks for growth (consolidation of the Revolution platform, new divisional structure) over the last few years.
Companies: Statpro Group
For the purposes of the Takeover Code, Edison Investment Research is deemed to be connected with SCISYS plc. Under Rule 20.1 Edison must not include any profit forecast, quantified financial benefits statement, asset valuation or estimate of other figures key to the offer, except to the extent that such forecasts, statements, valuations or estimates have been published prior to the offer period (as defined in the Takeover Code) by an offeror or the offeree company (as appropriate) in accordance with the requirements of the Code.
Consequently we have removed our estimates until the Offer Period ends.
StatPro produced a solid set of interim results, with organic annualised recurring revenue (ARR) growth accelerating to 3.2% from 1.1% at end-2018. The EBITDA margin continued to expand and the group has a widening range of growth drivers in place. After many years of development on the group’s Revolution cloud platform and new divisions in place, which also creates opportunities in the data space, the focus is increasingly shifting onto driving sales. Given the group’s c £57.3m recurring revenue book, the rating (c 16x FY20e) looks attractive, especially in light of the active M&A backdrop in the financial software sector.
StatPro’s interim results reflect growth in Annualised Recurring Revenue (ARR) and EBITDA which result from increasing margins, improved growth in new contract numbers and fewer cancellations. Although there is some influence on the shape of the reported numbers from restatements and some exceptional items, it is clear that progress has continued in the first half. The new divisional structure has given the businesses renewed impetus and it was clear from a number of announcements during the first half that the Group is benefitting from contract wins and extensions which include conversions from Seven to Revolution. The Group also announced an important strategic partnership with J.P. Morgan. We note the increasing momentum behind ARR and profitability growth. The new contracts, partnerships and the integration of acquisitions are underpinning our full year estimates. We update numbers mainly to reflect adjusting items and IFRS 16 as detailed below. We expect StatPro to continue to reflect progress in its strategic delivery and profitability as it adds new contracts and converts more of its existing clients to using the Revolution platform. We also note the £2.5 million of mooted cost savings from that latter process in the coming years.
Interswitch, a Nigeria-based payments firm, has hired advisers to resurrect plans for a stock-market listing in London and Lagos later this year, which may value the financial technology company at $1.3bn to $1.5bn.
Companies: MBT DVO SOG BMN INQO ATM GBP SMS PXS CKT
StatPro has announced that it has secured a conversion from its legacy StatPro Seven software to its cloud-based StatPro Revolution service with a large insurance company. This resulting three-year contract has a minimum value of £1.5 million representing a 77% increase in annual subscription. This large contract with an existing key client brings a good uplift in annual revenue and represents another conversion from Seven that remains within the Group while further endorsing the cloud-focused strategy. As StatPro moves towards the end of its programme of converting legacy Seven contracts into Revolution contracts, the announcement says that there are approximately £5 million of legacy StatPro Seven annual software subscriptions remaining to be converted. The Group remains on course to complete the full conversion of most of those remaining clients over the next two years. As previously flagged, as the process draws to a close, StatPro will be in a position to realise savings in IT costs as well as gaining improved revenues. We make no changes to estimates at present but note this further underpinning of our numbers for this year and next.
Positive newsflow continues, with StatPro announcing a significant £1.5m conversion from its legacy Seven suite to its modern Revolution cloud platform. This follows the recent news of a partnership with JP Morgan’s Data and Analytics business and the acquisition of an ESG research and index business. The deal is significant since it is a large contract with a key client, has an attractive 77% conversion premium and signals that the group is moving towards the end stages of conversions of its legacy Seven contracts. In our view, the shares continue to look undervalued, given the group’s c £56m recurring revenue book and the attractive rating (c 14x FY20e), especially in light of the active M&A backdrop in the financial software sector.
StatPro has announced a partnership with JP Morgan which it believes will be a significant contributor to growth in the future. We see the announcement as both another endorsement of StatPro’s cloud-based Revolution platform and an important new distribution channel for the Group. Initially for five years, the partnership will develop Risk and Performance Attribution capabilities for portfolio managers through J.P. Morgan's data and analytics platform. When launched, the service will be immediately available to J.P. Morgan’s European and Asian multi-asset clients and there will be an early adopter programme for its clients in North America. JP Morgan’s clients will have access to StatPro’s Revolution platform in tandem with JP Morgan’s Fixed Income Benchmark Indices. While we make no immediate changes to estimates given that this partnership has only just been announced, we expect it to support our current estimates as it gets under way.
StatPro has this morning announced the acquisition of a business active in the provision of ESG (Environmental, Social and Governance) ratings and indices. The deal offers a good fit with the group’s existing client base and product range, and is expected to be modestly earnings-enhancing in the first full year of ownership. We note a similar recent purchase by the London Stock Exchange. We upgrade our 2020E earnings estimates slightly to reflect the deal.
StatPro has acquired ECPI, a small private Italian environmental, social and governance (ESG) research and index business, from its management for a total consideration of c €2.9m (c £2.6m). While the deal is small, we believe there is significant potential to add value by cross-selling the products to StatPro’s large global client base. In our view, the shares continue to look undervalued, given the group’s c £56m recurring revenue book and the attractive rating (c 14x FY20e), especially in light of the active M&A backdrop in the financial software sector.
Alumasc Group plc, the prem ium building products, system s and solutions group, has announced its intention to m ove from the Premium Segment of the main market to AIM. Expected market cap of £33.4m. Expected 25 June 2019
Argentex a UK-based forex service provider founded in 2011 by its current management team which operates as a Riskless Principal for nonspeculative and forward foreign exchange as structured financial derivatives is looking to join AIM. Offer TBC, expected 25 June
Companies: IRR PCIP ANA SLNG SOG ALS BST KWS EMAN ASO
Following a solid performance in 2018, StatPro’s AGM statement confirms that the Group has traded in line with expectations during the first part of the current financial year. This is consistent with the outlook comment in the March FY 2018 results announcement which said that the Group had good visibility into H1 2019 with a solid business pipeline. We also note recent positive announcements on contracts – the latest of which was made earlier this week when the Group announced a three year extension for £2.44 million with a Top 20 Fund Administrator. Management had previously said that StatPro was seeing further growth from its fund administration clients in the first quarter of 2019. In his statement, Chairman Rory Curran reiterates two particular areas of focus: improving EBITDA margins – aided by the move to the new divisional structure – and ensuring that the Delta integration is a success. We leave estimates unchanged while noting the supportive contract announcements.
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.
StatPro has announced a useful extension to a contract with an existing customer – a total of €1.2m over three years from a Revolution Delta client. The news does not cause us to revisit our estimates, but provides a useful boost to forecast security, and demonstrates both client satisfaction and the positive tailwind of ongoing regulatory change. We look forward to hearing more around the time of the AGM later in May.
Induction Healthcare Group plc—a healthcare technology company focused on streamlining the delivery of care by Healthcare Professionals looking to join AIM. Expected raise of £14.58m at 115p, market cap of £34.07m. Expected 22 May 2019.
SDX Energy plc—a North Africa focused oil and gas company, announces its intention to complete a Canadian plan of arrangement under section 192 of the Canada Business Corporations Act and will have shares de-listed from the TSX-V and admitted to trading on AIM. Expected 28 May 2019, anticipated market cap of £76m
Renold plc—a leading international supplier of industrial chains and related power transmission products, announced that it will cancel the listing of the Company from the premium segment and apply for admission on AIM. Expected 06 June 2019.
Alumasc Group plc, the premium building products, systems and solutions group, has announced its intention to move from the Premium Segment of the main market to AIM. Expected market cap of £33.4m. Expected 25 June 2019
Companies: SOLG SCLP SYM TRB ONC SOG JAY PTSG RAI VP/
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LoopUp has announced a very strong H1 period, in line with the previous trading update and reflecting a number of months of exceptional performance. This is allowing the business to invest in the major identified new opportunity, to provide telephony within Microsoft Teams, where the early signs are extremely positive. We look forward to further detail on the Teams pipeline and sales levels over time.
Companies: LoopUp Group plc
Covid has accelerated the digitisation of all things physical. No more so than in the €10 trillion global construction industry, which some experts reckon has 5 years of catching up to do. A non-insignificant task (eg Crossrail & HS2) that could take decades to play out, but equally realise 100s of £bns of cost, time & productivity savings annually. The €8bn BuildTech sector (10%+ CAGR – see below) is at the heart of this transformation. Providing the glue & ‘digital twins’ that bind all the inter-connected ‘property lifecycle’ parts together – eg CAD/CAM (design), project mgt, visualisation, AI, asset maintenance (operate) and BIM (Building Info Modelling).
Companies: Eleco Plc
ZOO has provided a short trading update to accompany its AGM which will be held later today. The business is performing well…double-digit revenue growth y/y across H1 is clearly a strong result given the market disruption, and is tracking very well towards our full-year figure. We make no changes to estimates (which we reinstated in July) but will consider revisiting them at the time of the H1 results in early November.
Companies: ZOO Digital Group Plc
As flagged in the July trading update, the Eleco group (formerly Elecosoft) has delivered impressive first half financials in the face of the global pandemic. However, the results are somewhat overshadowed by the retirement of Executive Chairman, John Ketteley, after 23 years in the role. The COO, Jonathan Hunter, takes over as CEO and the Deputy Chairman, Serena Lang, steps up to Chairman. Both are very experienced and offer safe hands to guide Eleco forward through the unprecedented conditions of COVID-19. In the early stages of the pandemic, the group demonstrated its resilience as H1 revenue slipped just 4% YoY with 57% revenue being recurring. Moreover, benefiting from reduced cost of travel and marketing, H1 adj. PBT rose 12% YoY to £2.2m. The profit uplift was matched by strong cashflow, improving net cash from £1.1m at YE to a very healthy £4.4m at the end of June. Forecasts remain under review due to uncertainty in the COVID-19 environment, but Eleco continues to be well positioned – not just to weather the storm of pandemic, but to deliver a strong financial performance across the full year.
Actively managing the business successfully through the consequences of COVID-19, Ideagen finals to end April are in line with the May trading update and unchanged expectations: EBITDA of £18.5m as expected, revenue of £56.6m (£56.0mE originally), and robust free cash flow of £10.1m robust even after COVID restructuring costs, leading y/e net debt of £16.8m (0.9x net debt/EBITDA), as expected. Rapid and effective action to accommodate the consequences of lockdown maintained the quality of business, still achieving 5% organic growth, on top of three acquisitions in the period, to deliver 21% headline revenue growth. Once again, expectations were exceeded for recurring revenue, increasing from 74% at 1H20 to 76% (FY19: 67%): target recurring revenue had already been lifted from 75 to 80% by FY22 – and the horizon is now extended to 85% by FY23. FY19 acquisitions are all now integrated in line with the 72-step efficient process; organic growth is maintained even during a pandemic; trading since year end is robust; and the acquisition pipeline still remains active. With the success of the formula evident in its execution, and the benefit of future acquisitions unmodelled, we lift our target price to 235p (220p).
Companies: Ideagen Plc
LoopUp recently unveiled a major extension to its ambitions – the group is aiming to become a leading global provider of telephony “inside” Microsoft’s Teams product. The opportunity is clear and growing, as enterprise customers look to use Teams for “normal” external phone calls, and LoopUp seems well placed to deliver a differentiated offering using its existing infrastructure and knowhow. In this document we provide an overview of the new platform and explain its strategic significance.
Instem has delivered strong H1 20A results in our view. Despite the backdrop of COVID-19, all three business areas continue to perform well. Notably, the Informatics business made particularly impressive progress in the period. Management commentary on the outlook is positive and we maintain headline forecasts following the announcement. In addition, we increase our forecast FY 20E closing net cash position by £1m. This reflects revised assumptions on working capital movements in the second half.
Companies: Instem Plc
Ideagen is a leading supplier of information management software, specialising in Integrated Risk Management (IRM) solutions to highly regulated industries. Consistently recognised in the Gartner Magic Quadrant since 2016 for its solution set, Ideagen has developed a best-of-breed IRM suite through a blend of internally driven R&D and strategic acquisitions, earning the group significant presence in its core markets. Our mantra remains that the three certainties in life are death, taxes and regulatory compliance – Ideagen is positioned to grow from strength to strength, as organisations worldwide are faced with increasingly demanding regulatory standards, and the requirement to provide a referenceable trail of accountability. As the group embarks on its twelfth consecutive year of growth, coupled with the potential upside of inevitable acquisitions, we believe Ideagen is poised for ongoing acceleration into the coming years.
Salarius Ltd. (91.7% owned by TEK) has signed a distribution agreement with FXM Ingredients Inc. to distribute MicroSalt® in Mexico and Latin America.
Companies: Tekcapital Plc
The launch of LiveData Migrator with AWS represents another big step forward for WANdisco. Aside from diversifying the sales base, it suggests that the company’s technology is becoming the established way to migrate large, active datasets to the cloud. Disappointing H1 financials and a delay in the ramp of Azure revenue from Q3 to Q4 leads us to cut our FY20 forecasts. However, Q4 should see a big uplift in financial performance and our newly introduced FY21 forecasts see sales rising to $37m.
Companies: WANdisco Plc
ZOO Digital is one of the companies whose business models have stood it in good stead during the COVID-19 pandemic; its cloud-based platform has proved to be a key attribute over the last six months. Indeed, the changed working practices within the dubbing industry have helped to educate more potential users about the benefits of remote operating and the quality of performance that can be achieved when using the ZOOdubs platform. In our view, ZOO’s Capital Markets Day (CMD) presentations - a recording is available here - achieved a rare combination of being both informative and clear as to those operational benefits and the financial implications (a roadmap to U$100m of revenue) for the Group within an evolving market. We highlight some of the main messages from the speakers – from outside the company in several cases – which covered the market for localisation services, the use and benefits of ZOO’s platform and the technology behind the service.
Crimson Tide has reported a strong set of H1 results evidencing very strong sales momentum backed by long-term contracts and cash flow. H1 sales grew by 40% and EPS by 154%. Net cash has improved to £0.8m at June 2020 from nil at December 2019. The strategic focus on transportation and supermarkets is working well, partnerships are improving routes to market, and there is growing traction from investments in innovation. We have left our forecasts unchanged for now, but recognise positive pressure and have upgraded our target price from 3.1p to 4.3p. We reiterate our view that Crimson Tide’s valuation will be dictated by its ability to convert the significant opportunity rather than short-term metrics. H1 results show the group is nicely on track to do exactly that.
Companies: Crimson Tide Plc
PTY's results this morning are in line with indications given by the company on July 20th, when the company announced anticipated gross revenues of £30m and a “modest” adjusted pre-tax profit, in line with the adjusted PBTA of £0.06m published this morning, and a significantly reduced reported pre-tax loss. As previously announced, the company succeeded in moving from net debt (£1.2m pre lease liabilities) to net cash, £0.7m, at the half year end. Cost-savings have been significant at £4.2m gross, £2.4m net, opening the door to the significant transformation undertaken by the company and creating a new and robust underlying platform which has been stress-tested by Covid. As expected, net revenues (net fee income) have reduced on the back of the Scottish Government contract exit, which was low-margin and in run-off. The company expects to achieve a full-year profit equivalent to >£0.1m PBTA posted in FY2019A and a notable feature of the results is that no more non-underlying costs are expected going forward, leading to prospective upside both adjusted and unadjusted.
Companies: Parity Group Plc
Location Sciences Group PLC (LON:LSAI) is a high growth technology company and a global leader in location verification. The company recently reported results for the first half (H1) of 2020. These were in line with the trading update issued in July, with revenues up 1% (or +43% including securitis
Companies: Location Sciences Group Plc
LoopUp has delivered a trading update for H1, highlighting some exceptionally strong activity during the COVID-19 lockdown period, which appears to be at least partly translating into longer-term outperformance. We materially upgrade our forecasts for 2020 and 2021, and look forward to additional detail at the late-July Operational Update webinar.