High-quality recurring revenues through annual licences underpin the investment case at StatPro, provider of ‘portfolio analytics’ and data to global asset managers to help them stay competitive and meet regulatory creep.
Under chief executive Justin Wheatley, StatPro grew strongly during a transformational calendar 2006, though the market focused on below-forecast profits, despite the shortfall arising almost entirely due to sterling’s strength and the group’s dollar exposure. The figures were strong despite currency constraint, with adjusted pre-tax profits surging 56% higher to �2.6m, shy of the �2.9m envisaged by house broker Arbuthnot. Turnover grew by 35% to 14.6m, with organic growth good at 18% and acquisitions accounting for 17%.
As important as the headline numbers was growth in the recurring element of sales to �12.5m, which now represents 85% of the top line, and offers management and investors bags of visibility.
Of last year’s acquisitions, Australia’s Alphai and Kizen (a South African compliance product) were small bolt-on deals, with the most important deal being FRI, almost as big as StatPro in terms of sales. FRI, acquired for �25m, is a leading source of data on bonds and strengthened the group’s hand in the North American market. The deal also brings cross-selling benefits, with StatPro able to sell data as well as software to its clients.
This year analysts are looking for growth in profits to �4.9m and in earnings to 7p (5.8p) from a top-line �23m, ahead of �6.5m from �28m by 2008. We think the forward rating of 13.7 times looks undemanding, given the group’s great cash-generative characteristics, recent move to dividends and healthy forecast earnings growth for the next two years. Buy.
