1Spatial* - Positive Trading Update; Re-iterate Recommendation of buy


Key Data

EPIC
SPA

Share Price
40p

Spread
35p - 45p

Total no of Shares
21.19 million

Market Cap
8.5 million

12 Month Range
37p - 165p

Market
AIM

Website
www.1spatial.com

Sector
Software & Computer Services

Contact
Nic Snape
Chief Executive
01223 420414

1Spatial, an industry leader for the provision of solutions management tools for business critical location data, has this morning released an upbeat trading update that reaffirmed our expectations for full year numbers. Interim results for the 9-months trading period ended 31 December 2010 will be released on 22 March 2011.

1Spatial is a well-managed, acquisitive business that has been consistently profitable since its 2003 MBO. The company returned to the equity market last October through the reverse takeover of the AIM listed shell, IQ Holdings plc. The listing enables 1Spatial to participate more actively in the consolidation of the fast growing geospatial market while strengthening its technical capabilities and extending geographic boundaries. The geospatial market between 2006 and 2010 grew at 38.4% CAGR to US$2.65 billion.

The company's trading update confirmed that spending by UK Government departments and other Agencies had been constrained from the election and until the completion of the Coalition's 'Comprehensive Spending Review' and Pre-Budget Report, which suggests the company may not have been fully recovering overheads for several months. However, since then, business has returned to more normal levels of activity and ' ... revenue for the period is ahead of management's expectations and 1Spatial remains firmly on track in the run up to the year end. Over the last three months the Company has secured a number of contracts in the National Mapping Agency arena and the public and private sectors....' Indeed, on 12th January 2011, Ordnance Survey awarded the company a 'ground-breaking' Framework Agreement, which is testament to both its market leading software and service offering as well as its strategy. Consequently, we are not changing our existing annualised forecasts (before exceptional items) for the 15-month trading period ending 30th June 2011.

1Spatial has a strong management team with a good track record and started its public or quoted life with net cash on the balance sheet. The company remains fundamentally cash generative and on an earnings growth track despite the difficult UK and global economies. In recognition of the persistently but well documented difficult macro-economic environment, we have maintained our forecasts but trimmed our 2012 EV/EBITDA valuation multiple from 10 to 7.5 times, which is broadly equivalent to a 50% discount to the FTSE Technology P/E multiple of 24.9 times and indicates target price of 100p. With the shares trading at 40p and with a target price of 100p, we re-iterate our recommendation of Buy.

Forecast Table


Year to 30 June
Sales
(000)
Pre-tax Profit
(000)
Earnings per share (p)
Price Earnings Ratio (x)
Dividend (p)
Yield (%)

2009A
8,403
303
1.27
31.4
0.0
0.0

2010A
8,008
73
0.93
43.0
0.0
0.0

2011E1
8,508
675
5.44
7.4
0.0
0.0

2012E
9,785
1,510
8.25
4.8
0.0
0.0


Source: Growth Equities & Company Research

Notes:

1 Annual results for the 15-month trading period ending 30 June 2011 will be released at the year end.

*1Spatial is a corporate client of Rivington Street Holdings the ultimate owner of GE&CR. Rivington Street Corporate Finance and Bishopsgate Communications, both subsidiaries of Rivington Street Holdings are advisers to 1Spatial. The SF t1ps Growth Fund which is managed by a Rivington Street Holdings subsidiary owns shares in 1Spatial as does Rivington Street Holdings CEO Tom Winnifrith.

22nd March 2011
Analyst: Philip Morrish
Email: philip.morrish@gecr.co.uk
Tel: 0207 562 3662


1Spatial* - Interim Results Reaffirm Expectations; Australian Acquisition Agreed; Buy at 39.5p with Target Price of 100p


Key Data
EPIC
SPA
Share Price
39.5p
Spread
35p - 44p
Total no of Shares
21.19 million
Market Cap
8.37 million
Net Cash
0.2 million (as at 31/12/2010)
12 Month Range
35p - 150p
Market
AIM
Website
www.1spatial.com

Sector
Software & Computer Services
Contact
Nic Snape
Chief Executive
01223 420414




1Spatial, an industry leader in the provision of data quality and integration solutions tools for business critical location-information, has today released interim results for the 9-months trading period ended 31st December 2010. These were in line with its guidance statement of 20th January 2011, which confirmed that our expectations remained deliverable (see our note of 20th January 2011).
Not only was the trading period challenging at an operational level due the global recession and the rebalancing of many government budgets, which delayed the implementation of agreements, but the group also became publically quoted company through the reverse takeover of IQ Holdings. Additionally, the company completed its repositioning as a market leader in the provision of quality location-data and intelligent data management solutions. The group operates from centres of excellence in Cambridge (UK) for software development, operational management and marketing with Cork (Eire) and Sydney (Australia) providing both Sales/Consulting and first line customer support.

Sales revenues slipped by 2.9% from 5.554 million to 5.395 million, however, cost of sales were 33,000 lower than the comparable period. This was due to delays in the awarding and commencing of new contracts, which resulted in gross profit falling by 4.8% from 2.611 million to 2.485 million. The gross margin slipped by 0.9 basis points to 46.1%, which demonstrates the robust nature of the core business. Other administration expenses declined by 16% to 2.578 million from 3.069 million and resulted in a considerably reduced operating loss of 0.93 million against the comparable period's 0.458 million. Net finance expenses fell from the comparable period's 9,000 to 3,000 and resulted in a pre-tax loss before exceptional charges of 0.96 million (2009: 0.467 million).

Exceptional charges totalled 1.709 million (2009: nil) and fully reflect the impact on the company completing its operational restructuring (0.337 million), the writing down of goodwill and IPR related to earlier acquisitions (0.621 million) and a loss of 0.751 million arising on the issue of shares as part of the reverse takeover of IQ Holdings. 1Spatial also recorded a net extraordinary profit of 22,000, which comprised the pre-acquisition losses for IQ Holdings of 0.296 million and a final profit of 0.318 million from the discontinued Laser Scan business. Consequently, the (basic) loss per share for the continuing business fell from 39.7p to 16.2p.

These largely non-cash, one-off charges reduced the group balance sheet net assets as of 31st December 2010 by 0.606 million to 2.295 million. However, the group is inherently cash generative and ended the period with net cash of 0.192 million, a swing of 0.735 million.

Table: Profit & Loss Account, 000

9 months ended 31st December
2010
2009
% Change

Revenues
5,395
5,554
(2.9)

Cost of Sales
(2,910)
(2,943)
(1.1)

Gross Profit
2,485
2,611
(4.8)

Margin
46.1%
47.0%

Other Administration Expenses
(2,578)
(3,069)
(16.0)

Operating Loss
(93)
(458)
(79.7)

Net Finance Expenses
(3)
(9)
(66.7)

Pre-tax Loss before Exceptional Items
(96)
(467)
(79.4)

Exceptional Items
(1,709)
0
NA

Pre-tax Loss
(1,805)
(467)
NA

Tax Charge
(8)
0
NA

Extraordinary Items
22
268
NA

Retained
(1,791)
(199)
NA


(Basic) Loss per share
(16.2p)
(39.7p)
(59.2)


Source: Company and Growth Equities & Company Research

During the reported period, the group, as part of an international consortium, completed the delivery of the geospatial data management systems that underpin all Ordnance Survey Great Britain's data products, Project Phoenix. This solution will go into live production during the second half of current financial year and will be further extended under a long-term maintenance contract. Additionally, the group was awarded a seven figure, ground breaking 4-year framework contract with Ordnance Survey Great Britain as well as delivering data management solutions for 12 of the German Lder. In addition IGN France and KMS are just some of the clients that have all gone into operation. The group is currently generating recurring revenues in excess of 1.7 million from this segment of the location-data market.

1Spatial has not eased up on its long-term developments and is currently running a cloud-based, location-data validation service trial with customers in the UK, Eire and Australia, which if successful will result in a globally scalable SaaS-based solution. Additionally, the group is developing through its strategic Data Improvement Process' initiative a platform for organisations to efficiently exploit their location-data to improve quality that should lead to more accurate decision making for which it has high hopes of further increasing and strengthening the recurring revenue stream.

The group has signed a Heads of Agreement for the acquisition of an Australian company that will extend its position in the growing Australian location-data market. This acquisition, which is expected to complete before the end of the current financial year, is planned to be fully funded from the group's working capital. 1Spatial is confident that, once the acquisition has been assimilated, the enlarged Australian presence will open up additional opportunities in the fast expanding Asia Pacific region.

1Spatial has a strong management team with a good track record and remains fundamentally cash generative and on an earnings growth track despite the difficult UK and global economies. Although these results reaffirm earlier confidence in our forecasts, for now we continue to value the group on an undemanding 2012 EV/EBITDA valuation multiple of 7.5 times and unchanged target price of 100p. With the shares trading at 39.5p and with a target price of 100p, we re-iterate our recommendation of Buy.

Financial Records & Forecast Table

Year to 30th June
Sales
(000)
Pre-tax Profit
(000)
Earnings per share (p)
Price Earnings Ratio (x)
Dividend (p)
Yield (%)

2009A
8,403
303
1.27
31.1
0.0
0.0

2010A
8,008
73
0.93
42.5
0.0
0.0

2011E 1
8,500
670
5.44
7.3
0.0
0.0

2012E
9,780
1,510
8.25
4.8
0.0
0.0


Source: Growth Equities & Company Research

1Spatial to present at the London Innovators and Investors Forum

It is our pleasure to invite you to attend the forthcoming Innovators & Investors Forum on the 29th January 2013 at the Business Design Centre, London. This will be an exclusive invitation only event organised by Shares Magazine and Cenkos Securities.

As an active private investor, we are sure you would appreciate this unique opportunity to receive privileged access to 30 diverse, forward thinking and energetic technology companies at a single event.

Many of the exhibiting companies are currently involved in some very exciting projects in an effort to drive future growth, and development within their industries.

The event will be supported with an extensive conference program, including keynote speakers and company presentations.

We sincerely hope you are able to attend and that you find the experience both profitable and enlightening. Companies represented include:

1Spatial
Avanti Communications
Bango
Bond International Software Group
Brady
CML Microsystems
Corac
Cyan Holdings
eg Solutions
Energetix Group
eServGlobal
Forbidden Technologies
Fusion IP
Globo
incadea
InternetQ
IQE
KBC Advanced Technologies
Netcall
Optimal Payments
Plastics Capital
Probability
Quindell Portfolio
StatPro Group
WANdisco


Event time: 12.30pm to 5.30pm

Complimentary refreshments and luncheon provided

To register for this event please click here


CONFERENCE AGENDA AS AT 09.01.13
(To be updated once presentation speakers are confirmed)

12:30 Registration & Lunch

14:00 Keynote speaker - Richard Penny, Senior Fund Manager - Legal and General

14:15 Shares Magazine presentation - Russ Mould, Editorial Director

14:30 Company presentation - David Richards, President & CEO - WANdisco

14:45 Company presentation - Henrik Bang, CEO - Netcall

15:00 Company presentation - Marcus Hanke, CEO - 1Spatial

15:15 Company presentation - tbc

15:30 Coffee Break

16:00 Company presentation - Stephen Blundell, CFO - eServGlobal

16:15 Company presentation - David Baynes, CEO - Fusion IP

16:30 Company presentation - Stephen Streater, CEO - Forbidden Technologies

16:45 Company presentation - Charles Cohen, CEO - Probability

17:00 Company presentation - Simon Smith, Non-Executive Director - Cyan Holdings

17:15 Close

This agenda is subject to change and alterations

For further information, please visit our events page