StatPro FY pretax up 48% in 2009, confident of good growth ahead

StatPro Group PLC (AIM: SOG) said it has performed extremely well in its financial full year, with a marked improvement in all key financial performance indicators. For the 12 months ended 31 December 2009, the company reported a 48% increase in adjusted pretax profits to £6.9m, adjusted earnings (EBITDA) grew by 28% to £8.63m and earnings per share (EPS) increased by 29% to 9p. Revenue rose 13% year-on-year to £31.56m.

The improved earnings performance resulted in a very strong cash generation. The company’s free cash flow increased by 123% to £6.27m compared to £2.82m in the previous year. Consequently, enabling the company to pay-down debt, StatPro’s net debt reduced significantly by the end of the period to £8.89m compared to £14.62m in 2008.  StatPro is is raising the total dividend by 20% to 2.1p per share.

A large proportion of the software and data provider’s total revenues are made up from recurring contract revenue, with StatPro’s recognised recurring revenues accounted for 93% of total revenue during the year, 19% more than in 2008.

"These results show that StatPro has built a strong and profitable niche business in the global financial sector with a highly predictable revenue stream from a large base of recurring revenue contracts. With a weighted average contract length of 20 months, this recurring revenue continues to provide us with great visibility”, StatPro chief executive Justin Wheatley commented.

The company sells SaaS-based (Software as a Service), analytics and data platform on a rental basis to investment management companies, allowing them to analyse portfolio performance, attribution, risk and GIPS compliance. StatPro also provides market data and valuation feeds including a Complex Asset Pricing service.

The company said that 20% of its analytics clients are now on the SaaS platform, which is up from approximately 10% at the start of 2009. According to StatPro this represents another key measure of the success of its hosting strategy, and moreover the company said there is a large pipeline of existing clients that want to make the move to SaaS. Subsequently it is confident that many more clients will convert to the platform this year.

The company noted that activity levels are high in the asset management industry, as the businesses look to streamline operations and improve services to their clients whilst complying with new regulation. StatPro believes that the coming year will see strong competition between asset managers to win assets and the key to this will be their performance and risk management as well as how they report it.

As it predicted, StatPro said that M&A activity resulted in a slightly lower than usual renewal rate of 90%, compared with 94% in the previous year. However, this activity also resulted in new business for StatPro within the UK, South African, European and North American markets which are all performing well. 

Additionally, the company said its data operations are central to its strategy both for evaluated price services and for analytics. The Complex Asset Pricing service is attracting a growing number of clients and is expected to achieve significant growth in 2010. Similarly the Index service has grown considerably in 2009. StatPro said it continues to expand general data coverage for bonds and illiquid assets, to broaden the appeal of its services.

At the end of 2009, the company launched the first of its new products, StatPro Seven, and its latest product StatPro Revolution is being unveiled today. StatPro said its traditional market has been the top 1,000 asset managers with assets under management of over US$5 billion but with the new services it aims to extend its reach to all tiers of the market.

The company said its addressable market is now getting much bigger. According to StatPro’s research, there are well over 7,000 organisations with assets under management over US$500 million and a further 23,000 with assets of less than US$500 million. Furthermore the company believes that the vast majority of these businesses do not have access to high quality analysis of their performance as existing services are generally too expensive and complicated to maintain.

StatPro Seven, the new SaaS product, is aimed at the middle office of asset managers and combines performance, attribution, risk and reporting services together with StatPro’s data service to offer a comprehensive online analytics service for performance teams.

The company said the product’s key feature is that it is charged on a ‘per portfolio’ basis, which according to StatPro offers excellent value for money and reduces the total cost of ownership for its clients. The company noted that the software suite also offers a broader range of products with every client provided all seven services in one package, whereas at present the average number of products per client is currently 1.9.

StatPro Revolution is focused on the front office and is designed to make portfolio analytics simple. The web-browser based service provides performance, attribution, risk, reporting and other functions. According to StatPro the user simply provides the holdings in their portfolio and StatPro Revolution will automatically calculate the results, accessing a database of over 500,000 price series including global equities, bonds, funds and indices.

Whereas StatPro Seven is targeted at the specialist performance measurers and risk managers, StatPro Revolution is suitable for fund managers, analysts, sales staff, account managers, support staff and senior executives, StatPro said.

The company also noted that StatPro Revolution also broadens its market within the company’s existing user base by targeting the front office specifically. StatPro has already started pre-marketing the product to certain key clients and said it has received a very positive response so far.

The product’s initial beta trials will commence on 30 March 2010, with the release of successive updates during the year, and in July 2010 the will be made beta publically available to users who sign up over the web. Ultimately the company expects StatPro Revolution to go-live towards the end of the year.

“[the contracted revenues] combined with the launch of our new products gives us confidence that we can continue to grow our revenue and our profits in the coming year and are well positioned for continued growth", Wheatley added.

Having simplified and improved its offering into a unified platform, and also simplifying its pricing tariff, StatPro believes it can provide the best portfolio analytics service. Now that the SaaS products are at fruition, the company intends to focus on organic sales growth by increasing its investment into its sales teams and increasing its marketing profile. Given the under-exploited nature and size of the portfolio analytics market there is considerable growth potential, StatPro said.