StatPro Group PLC – Interim Results 2017

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2 August 2017

StatPro Group PLC

Revenue and profit growth through cloud investment

StatPro Group plc, (AIM: SOG, “StatPro”, “the Group”), the leading provider of portfolio analysis and asset pricing services for the global asset management industry, has published its interim results for the six months ended 30 June 2017.

Six months ended 30 June 2017 Six months ended 30 June 2016 % change
Revenue £21.62 m £17.55 m +23%
Annualised Recurring Revenue (“ARR”) (1) £53.19 m £36.17 m +47%
Adjusted EBITDA (2) £2.78 m £2.05 m +35%
Loss before tax £(2.29) m £(0.96) m
Free cash flow £3.52 m £(2.44) m
Loss per share – basic  (3.3)p  (1.2)p
Earnings per share – adjusted (2) 1.8p 1.1p +64%
Interim dividend per share 0.85p 0.85p

 

Financial highlights:

  • Group revenue up 23% to £21.62 million (2016: £17.55 million)
    • Organic growth in revenue 2% (2016: nil)
    • Currency impact on revenue 11% (2016: 2%)
  • Adjusted EBITDA increased by 35% to £2.78 million (2016: £2.05 million)
  • Loss before tax of £2.29 million (2016: £0.96 million) after acquisition and restructuring costs and other non-cash adjustments
  • Interim dividend maintained at 0.85 pence per share
  • Free cash flow in H1 2017 increased to £3.52 million (2016: outflow of £2.44 million)

Operating highlights:

  • StatPro Revolution organic revenue growth of 16% (2016: 62%)
  • Completed acquisition of UBS Delta – risk and performance analytics service for approx. €13 million (£11.2 million) in cash, paid over three years.
    • UBS Delta extends risk and performance analytics service from middle office to front office of asset managers
    • Acquisition phased over three to five years as StatPro incorporates UBS Delta’s functionality into flagship product, StatPro Revolution
    • Integration progressing to plan
  • Software as a service (SaaS) as a percentage of software now 82% (2016: 74%)
  • Multi-currency financing facility with Wells Fargo increased to £41.0 million

(1) Annualised Recurring Revenue is the annual value of revenue contractually committed at period end.  (2) Adjusted EBITDA and adjusted earnings/losses per share are EBITDA and earnings/losses per share after adjustment for amortisation of acquired intangible assets, acquisition transaction, redundancy and other integration costs, fair value movement on non-controlling interest put option and share based payments (notes 2 and 5).

Justin Wheatley, Chief Executive of StatPro, commented:

“Our underlying profitability has seen a solid improvement in H1 2017 and the recently acquired Delta business has significantly boosted our recurring revenues – a key metric for the business. Our ARR is now £53.19 million, up some 47% from this time last year.

“The acquisition of Delta was a major development for us. This business transforms our scale and significantly enhances our product capabilities.  Our focus is now on maintaining the service for Delta clients, whilst migrating Delta’s unique functionality onto StatPro Revolution’s platform.

“Our journey to transform StatPro into a SaaS business is largely complete, with over 82% of our software revenues coming from our cloud services. We expect to improve our margins at all levels as we benefit from the enhanced scale provided by Delta, our solid organic growth and the operational gearing inherent in a cloud-based business.”

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) 596/2014 (MAR).

A presentation for analysts of the interim results will be held at 9.30am today at the offices of Instinctif Partners, 65 Gresham Street, London, EC2V 7NQ.

Enquiries:

StatPro Group plc
Justin Wheatley, Chief Executive +44 (0) 20 8410 9876
Andrew Fabian, Finance Director
Panmure Gordon – Nomad and Broker
Corporate Finance – Freddy Crossley / Fabien Holler +44 (0) 20 7886 2500
Corporate Broking – Tom Salvesen
Instinctif Partners
Adrian Duffield / Kay Larsen / Chris Birt +44 (0) 20 7457 2020

 

About StatPro

StatPro is a global provider of award winning portfolio analytics solutions for the investment community. The Group’s cloud-based platform provides vital analysis of portfolio performance, attribution, risk and compliance. This multi-asset class analytics platform helps StatPro’s clients increase assets under management, improve client service, meet tough regulations and reduce costs.

The Group’s integrated and global data coverage includes over 3.2 million securities such as equities, bonds, mutual funds, FX rates, futures, options, OTCs, sector classifications and much else besides. StatPro also covers most families of benchmarks including MSCI, FTSE, Russell, NASDAQ and the open source Freedom Index.

The Group has operations in Europe, North America, South Africa, Asia and Australia, with hundreds of clients in 39 countries around the world.

StatPro has grown its Annualised Recurring Revenue from less than £1 million in 1999 to around £53 million today. Over 75% of recurring revenues are generated outside the UK. StatPro Group plc shares are listed on AIM.

 

Overview

The first half of the year saw a strong improvement in adjusted EBITDA, rising 35% to £2.78 million (2016: £2.05 million) with H1 revenues up 23% to £21.62 million (2016: £17.55 million).

ARR, which highlights the Group’s strategy of growing recurring revenue contracts, increased by 47% to £53.19 million (2016: £36.17 million) over the last 12 months.

Excluding the effect of the acquisition of Delta, revenues rose 13% and the operating profit was £0.62 million (2016: loss £0.60 million). Free cash flow increased to £3.52 million from a £2.44 million cash outflow. The Group has maintained the dividend at 0.85p.

StatPro is now truly cloud-based and firmly established as one of the leading services for the portfolio analytics market. 82% of the Group’s software ARR is now from SaaS.

The highlight of the first half was the acquisition of Delta from UBS for approximately €13 million (£11.2 million) in cash, paid over three years. Delta will enable StatPro to extend its risk and performance analytics service from the middle office to the front office of asset managers.

The acquisition of Delta is phased over three to five years as StatPro incorporates Delta’s functionality into its flagship product, StatPro Revolution. Throughout the transition, and until StatPro has fully integrated Delta’s functionality, UBS will continue to operate and support Delta for its clients.

Investor Analytics (now known as Alpha), acquired in 2016, is being integrated into the Group’s flagship cloud platform, StatPro Revolution.

These two acquisitions provide the Group with considerably enhanced capabilities, functionality and the ability to address a wider number of portfolio risk and performance segments.

The Group will continue to consider making acquisitions to widen its customer base and/or increase its product portfolio.

Current trading and outlook

The Group’s sales pipeline of larger prospects continues to grow as asset managers and fund administrators begin to see the benefits of StatPro’s cloud-based technology for their risk and performance management operations.

The Board is positive about the prospects for H2 2017 with trading expected to be in line with expectations. The addition of Delta underpins this confidence.

Operational review

Total StatPro Revolution revenue grew 61%, including acquisitions. The underlying growth, excluding acquisitions, was 27%. StatPro Seven also continues to be resilient with StatPro Composites seeing growth of 9% in ARR as more and more asset managers become compliant with Global Investment Performance Standards (“GIPS®“). Professional services have been lower in part due to the greater ease with which clients are able to implement StatPro Revolution, thus requiring less consulting.

Since launching the core module, StatPro Revolution Performance in September 2016, two fund administrator clients have on-boarded 36 of their own clients between them. They are looking to expand this significantly in the second half of 2017.

StatPro Revolution Performance has transformed the operations of fund administrators, allowing the on-boarding of new clients more efficiently, with greater ease of controlling data and increased speed and scale in calculating results and delivering services to their clients. It is notable that both of these fund administrators have spoken at conferences on the benefits of StatPro Revolution in providing their clients a better service.

The performance measurement and risk analytics market is largely a replacement market and it can take time for prospects to make decisions. However, the step change that the Group’s proven technology offers is giving StatPro a real advantage over incumbent legacy systems. Once a decision to switch has been made, it is normally for a five to ten-year period.

With the Group’s new technology now maturing as a service, StatPro is expanding its North America sales team. The Group has hired a senior executive, William Entwistle, to lead the team. William has previously worked at IDC, SS&C, and IBM and joins the Group’s operating board, the Group Executive Board. StatPro has also hired three new salespeople for North America and is likely to invest in further additions in H2 2017.

In Europe, the Group has consolidated its sales teams in London and Milan following the acquisition of Delta. StatPro currently has 12 salespeople across Europe and is looking to expand the London team during H2.

The Group has consolidated its Asian operation into Sydney, doubling its size, and closed its Hong Kong office. StatPro has also added further sales resource there to help support its Delta clients in the region.

Development of StatPro Revolution has been expanded to include additional resource to handle the integration of Delta, as well as continuing the existing road map for development. StatPro has made three releases so far this year, each delivering significant improvements in functionality. Two more are expected this year.

Acquisitions

Delta

StatPro is fully engaged in the process of integrating Delta into the Group with the focus on developing the unique Delta functions inside StatPro Revolution. The Group is engaging with Delta clients to explain the integration plans.

The Group is focussed on continuing to ensure that there is no disruption to Delta’s service, as StatPro has guaranteed the existing platform for five years. The business is having extensive consultations with clients to ensure optimal migration.

It is also clear that there are numerous opportunities for new business with Delta clients.

Alpha (previously Investor Analytics)

StatPro launched the first version of Alpha integrated with StatPro Revolution in March 2017 and the second version was released in July 2017. The Group expects to complete the integration of Alpha seamlessly into the StatPro Revolution platform next year.

Alpha’s physical servers have been moved from New Jersey to the Group’s private cloud capability in Toronto. The combination of Alpha and StatPro Revolution has resulted in a number of additional sales and the pipeline is growing well.

Increased investment in Infovest

In February 2017, StatPro increased its investment in Infovest to 72.7% by acquiring additional shares from three of the founders of the company. The business has made strong progress since StatPro acquired 51% of the business in March 2016.

Infovest revenues have grown 28%, and profitability has increased by approximately 47%. Infovest has been able to leverage the Group’s global network of clients to win new business in the US, Canada and the UK as well as its home market of South Africa.

Financial review

Revenue

Group revenue increased by 23% to £21.62 million (2016: £17.55 million). The revenue growth was driven by organic growth in StatPro Revolution combined with the positive impact of the Delta acquisition and currency benefits, offset by the expected reduction in revenue for StatPro Seven, as shown below.

£m % change
Revenue bridge
H1 2016 at actual rates 17.55
Underlying growth
StatPro Revolution 0.96 +16%
StatPro Seven (0.38) (4%)
Data/professional fees (0.23) (7%)
0.35 +2%
Impact of acquisitions and currency
Acquisitions 1.86
Currency impact 1.86
H1 2017 at actual rates 21.62 +23%

95% of Group revenue was recurring revenue (2016: 93%).

Recurring revenue

The Group’s SaaS business model of recurring revenue contracts provides excellent visibility of projected revenue. ARR at the end of June 2017 increased by 47% over the previous 12 months to £53.19 million (2016: £36.17 million). Organic growth of StatPro Revolution ARR was 9%.  Growth in StatPro Seven ARR was 3%; Data ARR fell by 2%. Excluding the impact of acquisitions and currency rates, overall organic growth in Group ARR was 3% (2016: 1%).

Our revenue derives from contracts in a mix of currencies, with the primary ones being EUR, USD, GBP and CAD and therefore the business is impacted by movements in fx rates but the spread of currencies for revenues and costs provides an element of natural hedging in the reported results.

There has been a significant increase (67%) in average revenue per StatPro Revolution/cloud client to £75,500 (2016: £45,300), boosted by continued focus on larger contract values, and the Delta acquisition, where average revenue per client is approximately £127,500. The organic growth of average ARR for StatPro Revolution was 19%.

Approximately 85% of new recurring contracted revenue came from existing clients (2016: 83%). Data fees were £2.03 million (2016: £1.81 million) and professional services revenue was £1.03 million (2016: £1.16 million).

SaaS-based KPIs

One KPI used by SaaS businesses is the ratio of costs of acquiring each customer (“CAC”) compared to the Lifetime Value of the customer contracts (“LTV”). The results for StatPro are presented below for June 2017 on a 12-month trailing basis.

 All contracts (unaudited)  
Year to 30 June Year to 30 June
2017 2016
Average Cost of Acquiring Customer (“CAC”) (£’000s) 120.0 85.9
Implied Customer Lifetime (years) 12.4 10.2
 
Average ARR per customer (£’000s) 98.8 79.3
Implied Customer Lifetime Value (“LTV”) (£’000s) 1,221 810
LTV: CAC 10.2 9.4

The comparatives for June 2016 have been restated to be consistent with the methodology adopted in the Annual Report for 2016

A value of three or higher for the ratio of LTV:CAC is considered the industry benchmark for a successful SaaS business and for StatPro it is well above this figure.

Operating expenses

Operating expenses (before amortisation of intangible assets and exceptional items) increased as planned by 22% (13% at constant currency) to £17.78 million (2016: £14.54 million). £1.96 million (13%) of the increase was related to operating costs within the recently acquired Delta business. Other increases in expenditure related to the investment in cloud technology, data costs, software and communications costs and cloud infrastructure. The average number of employees was 303 (2016: 255).

Adjusting items

One-off adjusting items amounting to a total of £2.71 million were incurred. These include: £2.51 million related to the transaction costs of the acquisition and associated restructuring charges in Delta as well as costs arising from streamlining StatPro’s European operations. The non-cash fair value movement on the non-controlling interest put option of £0.20 million relates to Infovest.

Six months to Six months to Six months to Six months to
 June 2017  June 2017  June 2017  June 2016
£’000s £’000s £’000s £’000s
Existing
operations Acquisition Total Total
Fair value movement on non-controlling interest put option 202 202
Acquisition transaction, redundancy and other integration costs 499 2,008 2,507 1,241
Total adjusting items 701 2,008 2,709 1,241

 

Profitability

Adjusted EBITDA increased to £2.78 million (2016: £2.05 million). Gross profit margin was 58% (2016: 60%) as shown in note 5. The adjusted EBITDA margin was 12.9% (2016: 11.7%). Delta was close to breakeven on an adjusted EBITDA basis in the short period since acquisition and the core business had an EBITDA margin of approximately 14.6%.

Finance income and expense

Net finance expense was £0.50 million (2016: £0.36 million), as a result of increased net debt associated with the financing of the Delta acquisition.

Loss before tax

The adjusted operating profit increased year on year to £1.94 million (2016: £1.29 million). Adjusting items include amortisation of acquired intangible assets (£0.88 million), acquisition related and restructuring costs (£2.51 million), fair value movement on non-controlling interest put option (£0.20 million), and share based payments (£0.14 million). The loss before taxation was £2.29 million (2016: £0.96 million).

EBITDA Reconciliation
2017 2016
£’000s £’000s % change
Adjusted EBITDA 2,780 2,053 35%
Depreciation of property, plant and equipment (743) (659)
Amortisation on purchased assets (95) (105)
Adjusted operating profit 1,942 1,289 51%
Amortisation on acquired intangible assets (881) (546)
Fair value movement on non-controlling interest put option (202)
Acquisition related, restructuring costs and negative goodwill (2,507) (1,241)
Share-based payments (144) (105)
Total adjusting items (3,734) (1,892)
Operating loss (1,792) (603)
Net finance expense (496) (357)
Loss before taxation (2,288) (960)

 

Taxation 

The tax credit was £0.27 million (2016: £0.25 million). The overall effective tax credit rate on the loss is 12% (2016: 26%). The underlying tax rate has reduced mainly due to reducing UK tax rates and R&D tax benefits.

Earnings/losses per share

Adjusted earnings per share was 1.8p (2016: 1.1p). Actual basic and diluted losses per share was 3.3p (2016: 1.2p).

Interim dividend

An interim dividend of 0.85 pence per ordinary share (2016: 0.85 pence) will be paid on 1 November 2017 to shareholders on the register at the close of business on 6 October 2017 (ex-div date will be 5 October 2017).

Balance Sheet

The Group’s net assets at the period end were £28.93 million (Dec 2016: £32.59 million). The primary movements in the six-month period were the increase in intangible assets of £10.33 million, mainly relating to the acquired intangibles from the Delta acquisition, and the increase in borrowings related to acquisition payments. There has also been an increase in deferred revenue, which is a non-cash liability to £18.58 million (Dec 2016: £17.60 million).

Cash flow and financing

StatPro continues to be cash generative with cash generated from operations of £7.48 million (2016: £2.29 million), benefitting from strong positive working capital movements. The free cash flow was an inflow of £3.52 million (2016: outflow of £2.44 million). The Group ended the period with net debt of £18.92 million (Dec 2016: £10.06 million). The increase in net debt arose primarily because of the financing of the Delta acquisition, and further payments on Infovest and Investor Analytics acquisitions, using the Group’s debt facilities.

Financing facility

As part of the acquisition of Delta signed in April 2017, the multi-currency financing facilities with Wells Fargo were increased. The key features of the facilities, now amounting to £41.0 million, are:

  • Five-year commitment period to April 2022
  • £10 million committed revolving credit facility
  • Committed term loans totalling £19.0 million
  • Committed deferred drawdown loans totalling £4.5 million
  • £7.5 million uncommitted additional facility available

The primary financial covenants are linked to recurring revenue and EBITDA while allowing the Group to invest for growth. The financing costs are amortised over the five-year term. This facility strengthens the Group’s long-term financial structure and therefore the Board believes that the Group is well positioned to manage the business risks.

Acquisitions

During H1 2017, StatPro completed one acquisition and increased its investment in an existing subsidiary, as follows:

Acquisition of Delta

On 15 May 2017, StatPro completed the First Closing of the acquisition, from UBS, of its risk and performance analytics service, UBS Delta. An initial payment of approximately £7.5 million has been made, out of a total cash consideration of approximately €13 million (£11.2 million), with the remainder being paid over three years.

Increase in majority control of Infovest

The Group increased its shareholding in Infovest Consulting (Pty) Ltd (“Infovest”), from 51.0% to 72.7% in February 2017. The consideration for the additional 21.7% shareholding was ZAR 19.1 million (£1.15 million) in cash.

Further details on these acquisitions are provided in note 9.

Research and development and capex

The research and development team is now focused solely on the Group’s cloud-based solutions, the StatPro Revolution platform. R&D expenditure increased to £3.62 million (2016: £2.27 million), equating to 17% of Group revenue (2016: 13%). R&D has increased as a result of the work commenced on integrating the Delta product onto the Revolution platform and although R&D is higher than H1 2016, the level of R&D spend in relation to revenue is similar to the level in FY 2016. Capitalised development costs were £2.62 million (2016: £1.87 million) and amortisation on internal development was £1.94 million (2016: £1.71 million). Capital expenditure on property, plant and equipment was £1.46 million (2016: £1.02 million), of which £1.09 million were financed under finance lease arrangements.

Principal risks and uncertainties

The directors continue to evaluate the principal business risks and uncertainties affecting the Group and further discussion of the principal risks and uncertainties can be found on pages 24 to 27 of the StatPro 2016 Annual Report.

 

Group Income Statement

For the six months ended 30 June 2017

Notes Unaudited Unaudited Unaudited Unaudited Audited
Six months to 30 June Six months to 30 June Six months to 30 June Six months to 30 June Year to 31       December
2017 2017 2017 2016 2016
£’000s £’000s £’000s £’000s £’000s
Existing operations Acquisition * Total
Revenue 3 19,754 1,861 21,615 17,546 37,545
Operating expenses before amortisation of intangible assets and other adjustments (15,826) (1,957) (17,783) (14,545) (30,254)
Amortisation of acquired intangible assets (570) (311) (881) (546) (1,060)
Amortisation of other intangible assets (2,034) (2,034) (1,817) (4,191)
Goodwill impairment (9,724)
Fair value movement on non-controlling interest put option 4 (202) (202) (628)
Movements in provisions for contingent consideration 272
Acquisition related, restructuring costs and negative goodwill 4 (499) (2,008) (2,507) (1,241) (1,298)
Operating expenses (19,131) (4,276) (23,407) (18,149) (46,883)
Operating profit/(loss) 623 (2,415) (1,792) (603) (9,338)
Finance income 33 7 33
Finance expense (529) (364) (819)
Net finance expense (496) (357) (786)
Loss before taxation 5 (2,288) (960) (10,124)
Taxation 267 252 74
Loss for the period (2,021) (708) (10,050)
Profit attributable to non controlling interests 98 71 94
Loss attributable to equity shareholders (2,119) (779) (10,144)
(2,021) (708) (10,050)
Loss per share – basic 2  (3.3)p  (1.2)p (15.4)p
                           – diluted 2  (3.3)p  (1.2)p (15.4)p

* This relates to the results of the acquisition made during the financial period

Group Statement of Comprehensive Income

For the six months ended 30 June 2017

Unaudited Unaudited Audited
Six months to 30 June Six months to 30 June Year to        31 December
2017 2016 2016
£’000s £’000s £’000s
Loss for the period (2,021) (708) (10,050)
Other comprehensive income to be reclassified to the income statement:
Net exchange differences (333) 4,864 6,606
Total comprehensive (loss)/income for the period (2,354) 4,156 (3,444)
Attributable to:
Non controlling interests 109 71 139
Equity shareholders (2,463) 4,085 (3,583)
Total comprehensive (loss)/income for the period (2,354) 4,156 (3,444)

 

Group Balance Sheet

At 30 June 2017

Notes Unaudited Unaudited  Audited
At 30 June At 30 June At 31 December
2017 2016 2016
£’000s £’000s £’000s
Non-current assets
Goodwill 10 44,447 53,656 44,759
Other intangible assets 10 21,266 11,107 10,937
Property, plant and equipment 3,457 2,895 2,742
Other receivables 135 237 134
Deferred tax assets 2,541 890 516
71,846 68,785 59,088
Current assets
Trade and other receivables 8,161 9,211 12,051
Financial instruments – other 10
Current tax assets 1,518 1,042 2,674
Cash and cash equivalents 3,354 3,615 4,356
13,043 13,868 19,081
Liabilities
Current liabilities
Financial liabilities – borrowings (4,212) (511) (8,459)
Financial instruments – non-controlling interest put option * (1,615) (1,929) (2,557)
Financial instruments – other (9) (283) (32)
Trade and other payables * (6,296) (5,385) (7,573)
Current tax liabilities (602) (162) (485)
Deferred income (18,536) (15,631) (17,534)
Provisions * 11 (1,284) (1,197) (680)
(32,554) (25,098) (37,320)
Net current liabilities (19,511) (11,230) (18,239)
Non-current liabilities
Financial liabilities – borrowings (18,062) (12,245) (5,961)
Other creditors * 11 (3,443) (2,375) (819)
Deferred tax liabilities (1,864) (2,202) (1,416)
Deferred income (40) (41) (67)
Provisions * 11
(23,409) (16,863) (8,263)
Net assets 28,926 40,692 32,586
Shareholders’ equity
Share capital 12 678 678 678
Share premium 23,537 23,537 23,537
Shares to be issued 63 63 63
Treasury shares 12 (2,328) (2,328) (2,328)
Other reserves 6,980 5,627 7,324
Retained earnings (142) 12,796 3,018
Total shareholders’ equity 28,788 40,373 32,292
Non controlling interests 138 319 294
Total equity 28,926 40,692 32,586

* For consistency with the year-end audited accounts for 2016, the comparatives for some components of provisions have been reclassified to non-controlling interest put option, and trade and other payables.

Group Statement of Cash Flows

For the six months ended 30 June 2017

Unaudited Unaudited Audited
Notes Six months to 30 June Six months to 30 June Year to 31 December
2017 2016 2016
£’000s £’000s £’000s
Operating activities
Cash generated from operations 6 7,479 2,291 7,454
Finance income 33 7 30
Finance costs (328) (223) (530)
Tax received 173 453
Tax paid (753) (1,421) (1,747)
Net cash flow from operating activities 6,604 654 5,660
Investing activities
Acquisition of subsidiaries (net of cash acquired) 9 (10,269) (4,806) (4,786)
Investment in intangible assets (2,716) (2,080) (4,940)
Purchase of property, plant and equipment (365) (1,016) (1,518)
Proceeds from the disposal of property, plant and equipment 13
Net cash flow used in investing activities (13,350) (7,902) (11,231)
Financing activities
Net proceeds from bank loan 7 7,281 10,797 11,685
Net (payments to)/proceeds from finance leases 7 (280) 1,040 (330)
Purchase of own shares (2,079) (2,079)
Dividends paid to non-controlling interests (135)
Dividends paid to shareholders (1,327) (1,327) (1,877)
Net cash flow from financing activities 5,539 8,431 7,399
Net (decrease)/increase in cash and cash equivalents (1,207) 1,183 1,828
Cash and cash equivalents at start of period 4,356 2,203 2,203
Effect of exchange rate movements 205 229 325
Cash and cash equivalents at end of period 3,354 3,615 4,356

 

Group Statement of Changes in Shareholders’ Equity

For the six months ended 30 June 2017

Unaudited Share capital Share premium Shares to be issued Treasury shares Other reserves * Retained earnings Non-controlling interest Total equity
£’000s £’000s £’000s £’000s £’000s £’000s £’000 £’000s
At 1 January 2016 678 23,537 63 (249) 2,692 14,796 41,517
Profit for the period (779) 71 (708)
Other comprehensive income 4,864 4,864
Total comprehensive income 4,864 (779) 71 4,156
Transactions with owners:
Put option relating to non-controlling interests (1,929) (1,929)
Non-controlling interests 248 248
Purchase of own shares (2,079) (2,079)
Share based payment transactions 105 105
Tax relating to share option scheme 1 1
Dividends (1,327) (1,327)
At 30 June 2016 678 23,537 63 (2,328) 5,627 12,796 319 40,692

 

Unaudited Share capital Share premium Shares to be issued Treasury shares Other reserves * Retained earnings Non-controlling interest Total equity
£’000s £’000s £’000s £’000s £’000s £’000s £’000 £’000s
At 1 January 2017 678 23,537 63 (2,328) 7,324 3,018 294 32,586
Profit for the period (2,119) 98 (2,021)
Other comprehensive income (344) 11 (333)
Total comprehensive income (344) (2,119) 109 (2,354)
Transactions with owners:
Non-controlling interests 130 (130)
Share based payment transactions 144 144
Tax relating to share option scheme 12 12
Dividends (1,327) (135) (1,462)
At 30 June 2017 678 23,537 63 (2,328) 6,980 (142) 138 28,926

* Other reserves includes a merger reserve of £2,369,000 (2016: £2,369,000), a translation reserve surplus of £6,540,000 (2016: £5,187,000) and a reserve relating to the put option held by non-controlling interests of a debit balance of £1,929,000 (2016: £1,929,000).  The merger reserve arose on acquisitions and represents the difference between the fair value and the nominal value of the shares issued.  The translation reserve incorporates the gains and losses on revaluation of the net assets and liabilities of subsidiary undertakings and other currency gains and losses that are presented in equity.

Notes to the interim financial information

For the six months ended 30 June 2017

1. Principal Accounting policies

This interim report was approved by the Board of directors on 1 August 2017. The financial information set out in this interim report has been prepared under IFRS as adopted by the European Union and on the basis of the accounting policies set out in the statutory accounts of StatPro Group plc for the year ended 31 December 2016, amended as explained below.

New and amended accounting standards and interpretations

There were no new or amended IFRS and IFRIC interpretations effective as of 1 January 2017 which impact this interim report.

Interpretations and revised standards that are not yet effective and have not been early adopted by the Group

The following interpretations to existing standards have been published that are mandatory for the Group’s future accounting but which the Group has not adopted early.  Management has not yet fully assessed the impact of these new standards.

  • IFRS 9 Financial Instruments – Classification and Measurement – 1 January 2018
  • IFRS 15 Revenue from Contracts with Customers – 1 January 2018
  • IFRS 16 Leases – 1 January 2019

This report is not prepared in accordance with IAS 34, which is not mandatory. This interim report has not been audited but has been reviewed in accordance with ISRE 2410 by the Company’s auditors, Ernst & Young LLP. The financial information does not constitute statutory accounts within the meaning of section 435 of the Companies Act 2006. Statutory accounts for StatPro Group plc for the year ended 31 December 2016 reported under IFRS have been delivered to the Registrar of Companies. The auditors’ report on those accounts was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006.  Copies of this report will be posted or provided electronically to shareholders. Further copies are available free of charge on request from the Company Secretary at the Company’s registered office, Mansel Court, Mansel Road, London SW19 4AA.

Basis of preparation – going concern

After making appropriate enquiries, the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future.  For these reasons, the Board continues to adopt the going concern basis in preparing the interim report.

2. Earnings/losses per share

Basic (loss)/earnings per share has been calculated based on the loss after taxation of £2.12 million (2016: £0.78 million) and the weighted average number of shares of 64.72 million (2016: 65.84 million).  The basic and diluted losses per share were 3.3p (2016: 1.2p).

Earnings Weighted average number of shares Earnings per share Earnings Weighted average number of shares Earnings per share
Six months to 30 June Six months to 30 June Six months to 30 June Six months to 30 June Six months to 30 June Six months to 30 June
2017 2017 2017 2016 2016 2016
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
£’000s ’000s pence £’000s ’000s pence
Loss per share – basic and diluted (2,119) 64,715 (3.3) (779) 65,836 (1.2)

Adjusted earnings per share are shown in the table below. The diluted adjusted earnings per share are based on potentially dilutive shares outstanding of 1.80 million (2016: 1.06 million).  The reported diluted loss per share for the year to 31 December 2016 has been adjusted to 15.4p from the 15.1p previously reported.

Earnings Weighted average number of shares Earnings per share Earnings Weighted average number of shares Earnings per share
Six months to 30 June Six months to 30 June Six months to 30 June Six months to 30 June Six months to 30 June Six months to 30 June
2017 2017 2017 2016 2016 2016
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
£’000s ’000s pence £’000s ’000s pence
Loss per share – basic (2,119) 64,715 (3.3) (779) 65,836 (1.2)
Add back: amortisation of acquired intangibles 881 1.4 546 0.8
Add back: Non-controlling interest put option 202 0.3
Add back: Acquisition related, restructuring costs and negative goodwill 2,507 3.9 1,241 1.9
Effect of tax on adjusting items (451) (0.7) (391) (0.6)
Add back: share based payments 144 0.2 105 0.2
Adjusted earnings per share 1,164 64,715 1.8 722 65,836 1.1
Potentially dilutive shares 1,799 (0.0) 1,059 (0.0)
Adjusted earnings per share – diluted 1,164 66,514 1.8 722 66,895 1.1

 

3. Revenue analysis

Revenue by type of service was as follows:

2017 2017 2017 2016
Existing Acquisition Total Change
£ million £ million £ million £ million %
Revenue
StatPro Revolution/cloud  6.94  1.86  8.80  5.45 61%
StatPro Seven  9.76   –     9.76  9.13 7%
Data fees  2.03   –     2.03  1.81 12%
Total recurring revenue  18.73  1.86  20.59  16.39 26%
Professional services  1.03   –     1.03  1.16 (11%)
Total revenue  19.76  1.86  21.62  17.55 23%
Percentage of total revenue that is recurring 95% 100% 95% 93%

The Acquisition relates to Delta

A key performance indicator for the Group is the Annualised Recurring Revenue (“ARR”) from client contracts. The movement in Annualised Recurring Revenue (“ARR”) in the 12-month period to June 2017 was as follows:

Annualised Recurring Revenue June 2017 June 2016
£ million £ million
At 30 June 2016 36.17 28.62
Net impact of exchange rates 1.51 3.30
At 30 June2016 (at 30 June 2017 rates) 37.68 31.92
ARR added from acquisitions 14.53 3.97
New contracted revenue 5.47 5.27
Cancellations/reductions (4.49) (4.99)
Net increase 0.98 0.28
At 30 June 2017 53.19 36.17
Percentage increase in revenue
Total ARR increase 47% 26%
Total ARR increase at constant currency 41% 13%
Total ARR – organic increase 3% 1%

 

The Annualised Recurring Revenue profile of StatPro Revolution clients (including Delta cloud solution) was as follows:

StatPro Revolution  Annualised revenue Number of clients Average revenue per client Annualised revenue* Number of clients Average revenue per client *
Annualised revenue bands June 2017 June 2017 June 2017 June 2016 June 2016 June 2016
£’000s Number £’000s £’000s Number £’000s
<£10k 334 95 3.5 382 124 3.1
£10k – £50k 3,265 133 24.5 2,196 102 21.5
£50k-£100k 4,570 60 76.2 3,099 40 77.5
£100k-£200k 9,877 72 137.2 5,403 41 131.8
>£200k 11,311 29 390.0 3,179 8 397.4
Total 29,357 389 75.5 14,259 315 45.3

* at constant currency

4. Adjusting items

One-off adjusting items amounting to a total of £2.71 million were incurred in H1 2017. These include: £2.51 million related to the acquisition of Delta and associated restructuring charges in the core business. The fair value movement on the non-controlling interest put option of £0.20 million relates to Infovest.

Six months to Six months to Six months to Six months to
 June 2017  June 2017  June 2017  June 2016
£’000s £’000s £’000s £’000s
Existing
operations Acquisition Total Total
Fair value movement on non-controlling interest put option 202 202
Acquisition transaction, redundancy and other integration costs 499 2,008 2,507 1,241
Total adjusting items 701 2,008 2,709 1,241

 

5. Adjusted profit before taxation, adjusted operating profit, adjusted EBITDA and gross margin analysis

a) Adjusted profit before taxation

Unaudited Unaudited Audited
Six months to 30 June Six months to 30 June Year to 31 December
2017 2016 2016
£’000s £’000s £’000s
(Loss)/Profit before taxation (2,288) (960) (10,124)
Add back: Amortisation on acquired intangible assets 881 546 1,060
Add back: goodwill impairment 9,724
Add back: fair value movement on non-controlling interest put option 202 628
Add back: movements in provisions for contingent consideration (272)
Add back: acquisition related, restructuring costs and negative goodwill 2,507 1,241 1,298
Add back: Share based payments 144 105 361
Adjusted profit before tax 1,446 932 2,675

 

b) Adjusted operating profit

` Unaudited Unaudited Audited
Six months to 30 June Six months to 30 June Year to 31 December
2017 2016 2016
£’000s £’000s £’000s
Operating (loss)/profit (1,792) (603) (9,338)
Add back: Amortisation on acquired intangible assets 881 546 1,060
Add back: goodwill impairment 9,724
Add back: fair value movement on non-controlling interest put option 202 628
Add back: movements in provisions for contingent consideration (272)
Add back: acquisition related, restructuring costs and negative goodwill 2,507 1,241 1,298
Add back: Share based payments 144 105 361
Adjusted operating profit 1,942 1,289 3,461

 

c) Adjusted EBITDA

Unaudited Unaudited Audited
Six months to 30 June Six months to 30 June Year to           31 December
2017 2016 2016
£’000s £’000s £’000s
Operating (loss)/profit (1,792) (603) (9,338)
Add back: Depreciation of property, plant and equipment 743 659 1,327
Add back: Amortisation on purchased intangible assets 95 105 316
Add back: Amortisation on acquired intangible assets 881 546 1,060
Add back: goodwill impairment 9,724
Add back: fair value movement on non-controlling interest put option 202 628
Add back: movements in provisions for contingent consideration (272)
Add back: acquisition related, restructuring costs and negative goodwill 2,507 1,241 1,298
Add back: Share based payments 144 105 361
Adjusted EBITDA 2,780 2,053 5,104
Adjusted EBITDA margin 12.9% 11.7% 13.6%

 

d) Gross profit margin analysis

Gross profit margin analysis helps us assess the profitability of incremental revenue as the business evolves into a pure cloud business and the costs drivers begin to change.  As there are a number of methodologies for allocating costs, we have described how we have allocated the cost elements.  The Board’s view is that, as the business grows, the inherent scalability of cloud technology will lead to greater profitability in the future.

Unaudited Unaudited Unaudited
Six months to 30 June Six months to 30 June Year to 31 December
2017 2016 2016
% % %
Revenue 100.0% 100.0% 100.0%
Cost of services (42.1%) (40.0%) (38.9%)
Gross profit margin 57.9% 60.0% 61.1%
   
R&D costs (5.4%) (6.3%) (5.4%)
Sales & Marketing costs (11.0%) (8.9%) (10.3%)
General & Administration costs (29.3%) (33.6%) (32.8%)
(45.7%) (48.8%) (48.5%)
Share-based payments 0.7% 0.5% 1.0%
Adjusted EBITDA 12.9% 11.7% 13.6%

 

Definition of cost category for gross margin analysis:

Cost of services includes Clients Services employee salaries, Data employee salaries, Development employee salaries related to support, contractors’ costs, data costs, costs of software and hardware maintenance.

R&D includes the element of Development employee salaries that relates to new research and development.

Sales & marketing includes Sales and Marketing employee salaries, external marketing costs and sales commissions.

General & administration includes the Finance, HR and IT employee salaries, communications costs, occupancy costs, professional fees, travel and expenses, and other costs.

         
Six months to 30 June   Six months to 30 June   Year to 31 December
General & Administration costs 2017   2016   2016
%   %   %
Finance, HR & Administration (2.0%)   (3.2%) (3.2%)
IT & Internal projects (5.0%)   (4.8%) (4.7%)
Executive management (2.4%)   (2.7%) (2.7%)
Employee-related costs including travel (6.6%)   (7.3%) (7.4%)
(16.0%)   (18.0%) (18.0%)
Property & communications (9.1%)   (10.1%) (9.8%)
Professional fees, insurance and other (4.2%)   (5.5%) (5.0%)
(13.3%)   (15.6%) (14.8%)
Total General & Administration costs (29.3%)   (33.6%) (32.8%)

 

Free cash flow

Unaudited Unaudited Audited
Six months to 30 June Six months to 30 June Year to 31 December
2017 2016 2016
£’000s £’000s £’000s
Cash generated from operations before exceptional payments 8,762 3,166 8,905
Net interest paid (295) (216) (500)
Net tax paid (580) (1,421) (1,294)
Purchase of property, plant and equipment (365) (1,016) (1,518)
Investment in intangible assets (2,716) (2,080) (4,940)
Free cash flow (before adjusting items) 4,806 (1,567) 653
Acquisition-related and restructuring costs (1,283) (875) (1,451)
Free cash flow 3,523 (2,442) (798)

Property, plant and equipment amounting to £1.09 million acquired under finance leases is excluded from the cash flow.

6. Reconciliation of profit before tax to net cash inflow from operating activities

Unaudited Unaudited Audited
Six months to 30 June Six months to 30 June Year to 31 December
2017 2016 2016
£’000s £’000s £’000s
Loss before taxation (2,288) (960) (10,124)
Net finance expense 496 357 786
Operating loss (1,792) (603) (9,338)
Goodwill impairment 9,724
Fair value movement on non-controlling interest put option 202 628
Movements in provisions for contingent consideration (272)
Acquisition-related, restructuring costs and negative goodwill 2,507 1,241 1,298
Depreciation of property, plant and equipment 743 659 1,327
Loss on disposal of property, plant and equipment 29
Amortisation of intangible assets 2,915 2,363 5,251
Decrease/(increase) in receivables 3,501 826 (1,937)
(Decrease)/increase in payables and provisions (433) (1,560) 380
Increase in deferred income 975 135 1,453
Share based payments 144 105 362
Net cash inflow from operating activities before exceptional payments 8,762 3,166 8,905
Acquisition-related and restructuring costs (1,283) (875) (1,451)
Net cash inflow from operating activities 7,479 2,291 7,454

 

7. Reconciliation of net cash flow to movement in net (debt)/cash

At 1 January Non-cash Exchange At 30 June
2017 Cash flow changes differences 2017
£’000s £’000s £’000s £’000s £’000s
Cash and cash equivalents (per balance sheet) 4,356 (1,207) 205 3,354
Overdrafts
Cash and cash equivalents (per statement of cash flows) 4,356 (1,207) 205 3,354
Finance leases (1,228) 280 (1,073) 3 (2,018)
Bank, other loans and derivatives (13,192) (7,281) (94) 311 (20,256)
Net (debt)/cash (10,064) (8,208) (1,167) 519 (18,920)

 

At 1 January Non-cash Exchange At 30 June
2016 Cash flow changes differences 2016
£’000s £’000s £’000s £’000s £’000s
Cash and cash equivalents (per balance sheet) 2,203 1,183 229 3,615
Overdrafts
Cash and cash equivalents (per statement of cash flows) 2,203 1,183 229 3,615
Finance leases (269) (1,040) (1,309)
Bank, other loans and derivatives (650) (10,797) (11,447)
Net cash 1,284 (10,654) 229 (9,141)

 

8. Dividend

An interim dividend for 2017 of 0.85 pence per ordinary share (2016: 0.85 pence) will be paid on 1 November 2017 to shareholders on the register on 6 October 2017.  A final dividend for 2016 of 2.05 pence per ordinary share was paid on 26 May 2017.

9. Acquisitions

Acquisition of UBS Delta

On 15 May 2017, StatPro completed the First Closing of the acquisition from UBS of its risk and performance analytics service, UBS Delta. An initial payment of approximately £7.5 million has been made, out of total cash consideration of approximately €13 million (£11.2 million), with a fair value of £10.55 million. The remaining payments will be paid as follows:

  • In May 2019 – approximately £1.4 million
  • In May 2020 – approximately £2.3 million

UBS Delta enables StatPro to extend its risk and performance analytics service from the middle office to the front office of asset managers.

The acquisition is phased over three to five years as StatPro incorporates UBS Delta’s cloud-based functionality into its flagship product, StatPro Revolution.

The tables below provides the allocation of the purchase price to the fair value of intangible and tangible assets acquired as required under IFRS 3 and whilst these have been reviewed by the auditors, they are subject to audit at the year end. The provisional fair values of the assets and liabilities are presented below. The goodwill is not deductible for tax purposes.

The business was operated as part of a larger business unit and it is not practical to disclose pre-acquisition results.

Fair value of assets acquired and liabilities assumed Provisional
fair value
£’000
Trade debtors 2,240
Intangible asset – Brand and client contract 2,359
Intangible asset – Technology 8,436
13,035
Deferred income (1,867)
Other creditors and provisions (373)
Deferred tax liability (429)
(2,669)
Total identifiable net assets at fair value 10,366
Goodwill arising on acquisition 184
Fair value of purchase consideration 10,550

 

Increase in investment in Infovest

The Group increased its shareholding in Infovest Consulting (Pty) Ltd (“Infovest”), a South African-headquartered software provider, specialising in data warehouse, ETL and reporting software for the asset management industry, from 51.0% to 72.7% in February 2017. The consideration for the additional 21.7% shareholding was ZAR 19.1 million (£1.15 million) in cash. The transaction resulted in the derecognition of £1.15 million of the non-controlling interest put option and a £130,000 equity transfer from non-controlling interest to the retained earnings reserve.

The valuation of this buy-out is based on a formula linked to recurring revenue but with a minimum profit level with the multiple being just under eight times adjusted EBITDA.

Total cash payments on acquisitions in H1 2017 were as follows:

£ million
Delta initial payment 7.53
Investor Analytics deferred payment 1.59
Infovest increase 1.15
Total 10.27

 

10. Goodwill and other intangible assets

Goodwill increased by £0.18 million as a result of the acquisition of Delta offset by a reduction due to currency movements.

Other intangible assets increased by £10.33 million, mainly due to the Delta acquisition and comprise internally generated development costs capitalised, acquired intangible assets (technology, brands and client contracts) and purchased intangible assets.

11. Other creditors and provisions

Other creditors greater than one year increased to £3.44 million, mainly due to the deferred consideration due on Delta.

Provisions of £1.28 million at 30 June 2017 (2016: £1.20 million) relates to residual deferred contingent consideration and provisions for redundancies and onerous contracts.  £0.62 million utilised in the period relates to the purchase of shares in SiSoft Sarl. On 25 July 2017, former shareholders of SiSoft Sarl lodged an appeal against the French Commercial Court’s decision on the valuation of the shares purchased by StatPro. Management believe there is no merit in the appeal as the valuation was backed by an expert’s report and no further amount has been provided.

Provisions – Group 2017 2017 2017 2016
Contingent consideration Redundancies and onerous contracts Total Total
£’000s £’000s £’000s £’000s
At 1 January 657 23 680 642
Utilised in the period (616) (1,283) (1,899) (556)
Arising in the period 2,507 2,507 1,029
Exchange differences (4) (4) 82
At 30 June 41 1,243 1,284 1,197

Some items that were included in provisions in June 2016 have been reclassified (e.g. non-controlling interest put option).

12. Share capital and treasury shares

No shares were issued during the period (2016: nil). At 30 June 2017, there were 67,813,650 shares (2016: 67,813,650 shares) in issue including 3,098,713 (2016: 3,098,713) held in treasury (64,714,937 excluding treasury shares). The treasury shares do not accrue dividends and are excluded from the earnings per share calculation.

 

Independent review report to StatPro Group plc 

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2017, which comprises the Group Income Statement, Group Statement of Comprehensive Income, Group Balance Sheet, Group Statement of Cash Flows, Group Statement of Changes in Shareholders’ Equity and the related notes 1 to 12. We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the Company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our work, for this report, or for the conclusions we have formed.

Directors’ Responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the Interim Report in accordance with the AIM Rules issued by the London Stock Exchange which require that it is presented and prepared in a form consistent with that which will be adopted in the Company’s annual accounts having regard to the accounting standards applicable to such annual accounts.

As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRS’s as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with the AIM Rules issued by the London Stock Exchange.

Our Responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2017 is not prepared, in all material respects, in accordance with the accounting policies outlined in Note 1, which comply with IFRS’s as adopted by the European Union and in accordance with the AIM Rules issued by the London Stock Exchange.

Ernst & Young LLP
London
1 August 2017

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