1Spatial — Contract momentum underpins growth prospects

1Spatial (AIM: SPA)

Last close As at 15/10/2024

GBP0.66

1.75 (2.71%)

Market capitalisation

GBP74m

More on this equity

Research: TMT

1Spatial — Contract momentum underpins growth prospects

1Spatial’s H1 results showed a continued improvement in the quality of revenues, while recent deal flow provides good support for our expectation of faster growth and margin expansion from H2. Most notably, with the results the company has announced a second win (subject to contract completion) for the key 1Streetworks SaaS product. The size of the deal – £1m over one year with a UK county council – provides a good indication that the market opportunity for this product is substantial, while the deployment should also lower the barriers for adoption of the product with other potential clients. We are leaving our estimates unchanged and believe continued strong deal flow into H2 could lay a foundation for upside in FY26.

Written by

Dan Ridsdale

Head of Technology

TMT

1Spatial

Contract momentum underpins growth prospects

Interim results

Software and computer services

14 October 2024

Price

64.5p

Market cap

£72m

Net debt at H125

£0.9m

Shares in issue

111.2m

Free float

79%

Code

SPA

Primary exchange

AIM

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

0.0

(9.2)

38.7

Rel (local)

(0.8)

(9.2)

26.7

52-week high/low

76.0p

46.0p

Business description

1Spatial’s core technology validates, rectifies and enhances customers’ geospatial data. 1Spatial’s SaaS products leverage the core technology to solve significant workflow bottlenecks, such as the creation of traffic management plans and validating data for public safety entities.

Next events

FY25 trading update

March 2024

Analyst

Dan Ridsdale

+44(0)20 3077 5700

1Spatial is a research client of Edison Investment Research Limited

1Spatial’s H1 results showed a continued improvement in the quality of revenues, while recent deal flow provides good support for our expectation of faster growth and margin expansion from H2. Most notably, with the results the company has announced a second win (subject to contract completion) for the key 1Streetworks SaaS product. The size of the deal – £1m over one year with a UK county council – provides a good indication that the market opportunity for this product is substantial, while the deployment should also lower the barriers for adoption of the product with other potential clients. We are leaving our estimates unchanged and believe continued strong deal flow into H2 could lay a foundation for upside in FY26.

Year end

Revenue (£m)

EBITDA*
(£m)

EBIT*
(£m)

EPS*
(p)

EV/EBITDA
(x)

P/E
(x)

01/23

30.0

5.0

2.0

1.2

14.5

52.5

01/24

32.3

5.5

2.5

1.4

13.3

45.2

01/25e

35.8

5.7

2.4

1.4

12.7

46.5

01/26e

38.7

7.6

3.8

2.6

9.6

25.1

Note: *EBITDA, EBIT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

H1 results: Improving mix, continued investment

H125 revenues grew by 5% y-o-y to £16.2m, while recurring revenues increased by 9% to £8.9m (55% of sales) driven by a 26% increase in term licence revenue over the period. Gross margin at 52% was marginally up year-on-year and EBITDA grew by 18% to £2.0m. Net borrowings were £0.9m, down from £1.1m net cash at end FY24, although positive cash flows are expected in H2, reflecting typical renewal seasonality and recent commercial momentum.

Recent deal flow across the US, EU and now SaaS

1Spatial’s recent deal flow has been encouraging, with wins across the US (Federal-level win in the US, Contract wins underpin US growth opportunity), and Europe and now for 1Streetworks in the UK. With these deals contributing in H2 and the UK market expected to improve somewhat following the election uncertainty, we expect a greater than usual increase in revenues and margins into the seasonally stronger H2. Consequently, we leave our estimates unchanged. A continuation of deal flow momentum through H2 could lay a foundation for upside in FY26.

Valuation: Major upside potential, encouraging signs

1Spatial trades at a discount to peers on an EV/sales basis, but at a premium on an EV/EBITDA and P/E basis, which highlights that the business has a cost base built for growth. We believe that, through its progress with 1Streetworks and in the US, the company is delivering more evidence that its growth initiatives are gaining traction. The upside from successful execution could be significant. Our DCF analysis indicates that a share price of 100p is readily achievable if the company gets halfway to its five-year £40m annual recurring revenue goal for 1Streetworks, and achieving it would justify a fair value of 270p.

Exhibit 1: Financial summary

£'k

2021

2022

2023

2024e

2025e

2026e

Year end 31 January

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

24,600

27,027

30,002

32,315

35,800

38,700

Cost of Sales

(11,451)

(13,078)

(14,504)

(14,389)

(16,110)

(16,641)

Gross Profit

13,149

13,949

15,498

17,926

19,690

22,059

EBITDA

 

 

3,632

4,182

4,997

5,479

5,700

7,600

Normalised operating profit

 

 

435

1,302

2,026

2,463

2,411

3,811

Amortisation of acquired intangibles

(917)

(561)

(386)

(391)

(391)

(391)

Exceptionals

(492)

0

(194)

(693)

0

0

Share-based payments

(272)

(326)

(192)

33

33

33

Reported operating profit

(1,246)

415

1,254

1,412

2,053

3,453

Net Interest

(187)

(195)

(210)

(355)

(355)

0

Joint ventures & associates (post tax)

0

0

0

0

0

0

Exceptionals

0

0

0

0

0

0

Profit Before Tax (norm)

 

 

248

1,107

1,816

2,108

2,056

3,811

Profit Before Tax (reported)

 

 

(1,433)

220

1,044

1,057

1,698

3,453

Reported tax

308

163

14

123

(425)

(863)

Profit After Tax (norm)

198

886

1,362

1,581

1,542

2,858

Profit After Tax (reported)

(1,125)

383

1,058

1,180

1,274

2,590

Minority interests

0

0

0

0

0

0

Discontinued operations

0

0

0

0

0

0

Net income (normalised)

198

886

1,362

1,581

1,542

2,858

Net income (reported)

(1,125)

383

1,058

1,180

1,274

2,590

Basic average number of shares outstanding (m)

112

111

111

111

111

111

EPS - basic normalised (p)

 

 

0.18

0.80

1.23

1.43

1.39

2.57

EPS - diluted normalised (p)

 

 

0.17

0.77

1.20

1.40

1.36

2.53

EPS - basic reported (p)

 

 

(1.01)

0.35

0.95

1.06

1.14

2.33

Dividend (p)

0.00

0.00

0.00

0.00

0.00

0.00

Revenue growth (%)

5.2

9.9

11.0

7.7

10.8

8.1

Gross Margin (%)

53.5

51.6

51.7

55.5

55.0

57.0

EBITDA Margin (%)

14.8

15.5

16.7

17.0

15.9

19.6

Normalised Operating Margin (%)

1.8

4.8

6.8

7.6

6.7

9.8

BALANCE SHEET

Fixed Assets

 

 

18,273

17,100

19,277

21,524

23,118

23,600

Intangible Assets

15,187

15,003

17,408

19,951

22,058

23,053

Tangible Assets

3,086

2,097

1,869

1,498

985

472

Investments & other

0

0

0

75

75

75

Current Assets

 

 

18,332

18,018

19,222

17,030

18,488

21,078

Stocks

0

0

0

0

0

0

Debtors

10,890

12,271

14,151

12,770

14,222

15,374

Cash & cash equivalents

7,278

5,623

5,036

4,260

4,266

5,704

Other

164

124

35

0

0

0

Current Liabilities

 

 

14,813

14,903

17,093

15,334

16,834

17,349

Creditors

13,418

13,284

15,797

14,004

15,504

16,019

Tax and social security

0

0

0

99

99

99

Short term borrowings

470

531

660

647

647

647

Other

925

1,088

636

584

584

584

Long Term Liabilities

 

 

7,057

5,110

4,097

4,913

4,913

4,913

Long term borrowings

2,542

1,861

1,322

2,534

2,534

2,534

Other long term liabilities

4,515

3,249

2,775

2,379

2,379

2,379

Net Assets

 

 

14,735

15,105

17,309

18,307

19,860

22,416

Minority interests

0

0

0

0

0

0

Shareholders' equity

 

 

14,735

15,105

17,309

18,307

19,860

22,416

CASH FLOW

Op Cash Flow before WC and tax

2,961

4,048

4,593

4,356

5,345

7,600

Working capital

791

(1,578)

537

(112)

48

(637)

Exceptional & other

52

(107)

12

0

0

0

Tax

484

176

179

140

(425)

(863)

Net operating cash flow

 

 

4,288

2,539

5,321

4,384

4,968

6,100

Capex

(2,312)

(2,613)

(4,017)

(5,362)

(4,895)

(4,595)

Acquisitions/disposals

(585)

0

0

0

0

0

Net interest

0

0

0

0

0

1

Equity financing

0

0

14

19

0

0

Dividends

0

0

0

0

0

0

Other

585

(1,708)

(1,994)

357

(67)

(67)

Net Cash Flow

1,976

(1,782)

(676)

(602)

6

1,439

Opening net debt/(cash)

 

 

(3,887)

(4,403)

(3,231)

(3,054)

(1,079)

(1,085)

FX

194

127

89

(174)

0

0

Other non-cash movements

(1,654)

483

410

(1,199)

0

0

Closing net debt/(cash)

 

 

(4,403)

(3,231)

(3,054)

(1,079)

(1,085)

(2,524)

Source: Company data, Edison Investment Research

General disclaimer and copyright

This report has been commissioned by 1Spatial and prepared and issued by Edison, in consideration of a fee payable by 1Spatial. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2024 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

General disclaimer and copyright

This report has been commissioned by 1Spatial and prepared and issued by Edison, in consideration of a fee payable by 1Spatial. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2024 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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