Steady as she goes as StatPro shifts to the cloud
13 March 2013 | 663 views | 0
StatPro Group plc, (AIM:SOG), the AIM listed provider of cloud-based portfolio analysis and asset pricing services for the global asset management industry, today announces its unaudited preliminary results for the year ended 31 December 2012.
· Good progress made in transitioning from traditional software to cloud-based software business
· StatPro Revolution annualised recurring revenue more than trebled to £1.51 million at 31 December 2012 (2011: £0.45 million**)
· StatPro Revolution customer number increased to 156 at year end (2011: 50)
· StatPro Revolution now has 21 fund administrator partners (2011: 10), a key target market for the service, including 6 of the major operators (2011: 1)
· Successful Placing completed in November 2012 raising £5.81 million (net of expenses)
Justin Wheatley, Chief Executive, commented:
"We are delighted with the results for StatPro Revolution which has had significant growth in 2012. As we make the investment to transition StatPro to a pure cloud-based provider the underlying performance of StatPro Seven has been pleasing and we have also seen significant take up of StatPro Revolution with existing clients. We are equally pleased to add many new channel partners including five large global fund administrators. These achievements will underpin our future success and we expect to make significant progress in 2013 and beyond as a result."
Chief Executive's Review
We are pleased with the excellent progress made in 2012 towards our strategy of becoming a purely cloud-based analytics service provider. The existing business has continued to provide us with a strong, profitable platform from which we can drive StatPro forward, capitalising on cloud computing to enter new regions and market tiers, as well as revitalise our existing customer base.
By the end of the year, StatPro Revolution, our cloud based portfolio analysis service, was being used by over 156 organisations, in 22 countries (2011: 9). We have successfully completed the switchover of development work from StatPro Seven to StatPro Revolution and begun development of StatPro Revolution Plus ("R+"), to be launched over the next three to five years.
The cloud-based natuloud-based nature of StatPro Revolution means it can be shared between colleagues, businesses and customers. We are confident that, with the 21 fund administrators signed up as partners by the year end, we are now on the verge of seeing the start of a 'network effect', with each new customer of the service potentially driving uptake by others. We therefore believe the outlook for StatPro to be positive.
We are pleased to report that revenue for 2012 increased to £32.00 million (2011: £31.72 million) and adjusted EBITDA increased by 10% to £6.73 million (2011: £6.12 million). Taking into account exceptional costs of £0.98 million (2011: nil) due to the restructuring in January 2012, profit before tax was down 2% at £3.78 million (2011: £3.86 million). Cash flow from operations (before exceptional items) was also strong at £10.18 million (2011: £10.37 million) and, following a successful placing in November 2012, net cash was £3.67 million at the end of December 2012 (2011: net debt £3.40 million). Adjusted earnings per share was up 4% to 5.9p (2011: 5.7p) and the Board has recommended an increase in the dividend of 4% for the year to 2.7p (2011: 2.6p).
Other KPIs that improved in 2012 include the contract renewal rate, increasing to 93% (2011: 92%), and annualised recurring contract revenue, up 4% (on a constant currency basis) to £29.52 million. As the Group is going through a complex transformation of technology platforms this is a pleasing result. In early 2012, we took the decision to focus all active sales efforts on our new cloud-based service StatPro Revolution rather than StatPro Seven. The result has been a marked increase in sales of StatPro Revolution in 2012 with annualised recurring revenues rising over 200% at constant currency to £1.51 million (2011: £0.45 million) and the number of clients of StatPro Revolution increasing to 156 (2011: 50).
Our strategic focus is to work with partners both for distribution channels and for up-selling additional products. Our secondary focus is to migrate our existing clients of StatPro Seven to StatPro Revolution and StatPro Revolution Plus ("R+") over the next 3 to 5 years. In the short term, progress towards that goal will be manifest by the proportion of our existing clients of StatPro Seven who have also subscribed for StatPro Revolution.
Our strategy is to leverage the clients, relationships and expertise of other companies. StatPro offers its own unique expertise in the form of StatPro Revolution and this is something that many companies desire but would be hard pressed to achieve themselves, due to the complexity of the underlying technology and the access to data. The design of StatPro Revolution also makes this a practical proposition and results in mutual benefits. At the end of 2012, we had 21 companies acting as distributors for StatPro Revolution including 6 major operators.
The key objective for many of our clients is to source as much as possible from one supplier. It is however impossible for any single company to offer everything, since mastering the required expertise in numerous fields becomes too complex. This is where product partners play a crucial role. We have already partnered with a major data provider to offer their data through the StatPro Revolution platform. Now, with a simple click of the mouse, a user can buy coverage of his or her portfolio from over 3.2 million assets. We have also entered into an agreement with Russell Investments to provide their widely popular indexes through StatPro Revolution's online store, uniquely charging on a per portfolio basis. This is a significant step for an index vendor to take, embracing StatPro Revolution's disruptive business model and we are delighted to have secured the partnership. We intend to expand these services further with other data offerings, especially in the area of compliance and to work with a number of software suppliers using our new web application programming interface ("API").
For StatPro's larger clients, the move to the cloud is an opportunity to improve productivity and the quality of the service they provide to their clients. We are in constant dialogue with our clients to explain our strategy and objectives and this transparency has reaped rewards. We now have a significant number of existing clients using StatPro Revolution and many more testing it. Clients can see that StatPro Revolution is a quantum step up in sophistication and a quantum step down in complexity. We have also shared our plans for R+, which will simplify their operations even more.
StatPro Revolution is a platform for distributing analytics and StatPro Seven is a system to produce performance calculations. This means that StatPro Revolution cannot replace StatPro Seven, but it can certainly enhance it. Only when we have all modules of R+ in full production (expected by the end of 2014), will we be able to replace StatPro Seven fully with a cloud-based version. In the meantime, therefore, we are focused on maximising the uptake of StatPro Revolution by clients of StatPro Seven.
Spreading the service
Sharing is the key functionality that will drive StatPro Revolution sales. The uniquely simple way of allowing a fund manager to share access to a portfolio with other people and organisations, sets StatPro Revolution apart from anything else in the market. As more and more people have a portfolio shared with them, so they will become aware of StatPro Revolution. The depth of analysis available in StatPro Revolution and its speed is also unique in its sophistication and with each release it is getting more sophisticated.
As we gain more users for the service, the core benefits of the product will become more and more apparent to fund managers and thus also to fund administrators. Many fund administrators lack specific knowledge of performance or risk, but their larger competitors have this edge. For them to get all that expertise packaged in such a simple way is a real benefit. In addition, they can generate additional revenues via data services for their clients. For clients of fund administrators the small per portfolio fee is well worthwhile to gain access to StatPro Revolution without having to do any work in respect of data management. Several of our smaller fund administrator partners are making great use of StatPro Revolution to help sell their overall services.
Training and Support
In order to help our many new distributors (largely fund administrators), we are producing a handbook that sets out the key methods of selling and supporting analytics. We will be offering training courses for their sales teams to get familiar with our services and help them win more business. Equally, we will offer training courses for their support teams to familiarise them with common client queries. We will also assist in actual sales processes in order to promote StatPro Revolution as much as possible.
In 2013, we will be focusing on improving the sophistication of the sharing function and also of our compliance products. We will launch a UCITS IV (Undertakings for Collective Investment in Transferable Securities) module shortly which will target the many UCITS funds that exist. The offer greatly simplifies the compliance process as well as significantly reducing the cost. Towards the end of 2013 we plan to release an enhanced cloud-based risk module, which will effectively replace all the current functions available in the risk module of StatPro Seven. Clients that have only the Risk module of StatPro Seven, will be able to upgrade to StatPro Revolution at that point.
R+ will have its beta release in the middle of 2013 and we will initially target clients with significant numbers of small portfolios. R+ is designed to handle massive amounts of data in an efficient manner. With large datasets, the problem is often not the brute force of calculation, rather it is the quality of the user interface to enable efficient interaction with so much data. Our unique graphical interface is specifically designed to allow performance teams to handle vastly more data, far more efficiently than has ever been possible before.
We aim to continue to promote StatPro Revolution's strongly differentiated brand to increase awareness and generate interest in StatPro Revolution. The new improved StatPro Store will be launched mid-year and it will have additional modules available for purchase. As the number of clients and products grows, so marketing will become an increasingly important part of our business. The barrier to purchase for an existing client of StatPro Revolution is significantly lower when it comes to an extra module, than it is to win the client initially. Whilst these things take time to put in place, 2013 will be a year when we expect significant strides to be made towards building the underlying foundations for future success.
I remain constantly impressed at the expertise and resourcefulness of the people that work at StatPro. In 2012 I have seen even higher levels of motivation and pride in working on such an ambitious solution like StatPro Revolution. I would like to thank each employee for their hard work in 2012 and I look forward to an even more successful 2013.
In line with our policy of paying a progressive dividend, which aims to balance return to investors with our investment needs, we are pleased to announce an increase in our full year dividend to 2.7p per share in 2012 (2011: 2.6p).
Transforming the business from one technology platform to another is no simple task, but it is one that is largely done from a product and organisational perspective. We believe that over the next two to three years we will see continued growth in our StatPro Revolution sales. In part this will come from our direct efforts, but increasingly it will come from our growing network of partners and also from the viral effect of people sharing portfolio access with each other. As a result we remain confident of a successful outcome for the year.