Investors prepared to take early-stage positions in companies offering massive market potential really should be putting 1Spatial (LON:SPA) into their portfolios.
Today this group is only capitalised at £78m, yet it is on the verge of boosting its revenues significantly within just a few years, which could see it valued at several times more than currently.
Some 92% of the company’s equity is held by investment professionals, which is a very good pointer of its prospects.
The Business
A global leader in Location Master Data Management, the group helps more than 1,000 organisations unlock the value of their data by validating, auditing, cleansing, correcting, synchronising and enhancing their spatial and non-spatial data.
Demand for current and authoritative geospatial data has never been greater.
In every sector, organisations are using location data to make better decisions – improving profits, saving time and saving lives.
Its solutions ensure data governance, facilitating the efficient, effective and sustainable operation of customers around the world.
Its global clients are primarily within the Government, Utilities and Transport sectors and include national mapping and land management agencies, utility companies, transportation organisations, government and defence departments.
The Cambridge-based group has operations in the UK, Ireland, the USA, France, Belgium, Tunisia, and Australia.
Going For Strong ARR
I love to see company’s building up their annual recurring revenues and that is one of the aims of this enterprising group.
Earlier this month it demonstrated material progress on the group’s US expansion plans, when it declared that it had secured several new contracts in the US, an area of importance in its global growth.
1Spatial now has contracts or framework agreements with 21 US States, up from 18 US States at the year end.
The group states that its US business has considerable expansion potential, where it has an ambition to generate on average $1m ARR from each State per annum.
These repeatable solution sales contribute to the Group’s increasing levels of recurring revenue and provide good revenue visibility from the Group’s US operation.
CEO Claire Milverton stated that:
“We continue to see considerable opportunity in the US, supporting the digital transformation of transport and emergency services departments, for which accurate, reliable, and up to date location data is vital.
These wins and the renewal demonstrate the quality of our product and underpin our ambition to generate on average $1m in ARR from each State per annum. Alongside our newly launched SaaS offerings, the Company has a number of growth vectors available to deliver on its ambitions.”
AGM Trading Update
Earlier this month, at the group’s AGM, Chairman Andrew Roberts updated investors stating that:
“Trading for the full year is expected to be in line with expectations.
We have secured several new contracts in Europe and the US in recent months, and we continue to make progress with our innovative 1Streetworks SaaS offering.
Planned targeted headcount increases across the US Enterprise and 1Streetworks businesses are well underway.
With the onboarding of an NG9-1-1 (public safety) specialist in May and a highly experienced sales director joining the Company early in H2 to strengthen the 1Streetworks team.
This reflects our approach to ensure our sales and delivery teams have a greater sector focus.
The Group has a strong order book, a growing recurring revenue stream and substantial sales pipeline underpinning the Board’s confidence in the outturn for FY25.
We believe the investments we continue to make in people and technology have positioned the business well to take advantage of the huge opportunity ahead.”
The Equity
There are some 111m shares in issue.
Around 92% is held by institutional investors.
The largest holder is Threadneedle Asset Management with 19.94% of the equity.
Other large holders include Canaccord Genuity Wealth (16.62%), Azini Capital Partners (12.37%), Harwood Capital (6.70%), BGF Investment Management (6.25%), Liontrust Investment Partners (4.92%), Perpetual Investment Management (3.96%), Herald Investment Management (3.56%), Octopus Investments (3.48%), and Hargreaves Lansdown Asset Management (3.42%).
Analyst’s Views
At Panmure Liberum analysts Andrew Ripper and Caspar Erskine rate the group’s shares as a Buy, looking for 80p a share as their Price Objective.
They are going for the current year to end January 2025 to show through with sales of £37m (£32m) and pre-tax profits of £2.4m (£2.1m), lifting earnings to 2.1p (2.0p) per share.
For the coming year they see £40m revenues, with £3.9m profits and 3.0p per share in earnings.
My View
ARR – I just love it!
Any sensible Finance Director wants to enjoy the strong build-up of annual recurring revenues, it strengthens financial armour when funding growth, especially on a global scale.
It will be a slow accretion of contracts but there will soon be a point where 1Spatial’s business will almost be self-feeding.
At the current 71p this group’s shares are a cracking growth stock for patient and risk-tolerant investors.
Note – Investors should review further articles and presentations on this group featured on this website in March this year.