StatPro is taking a hit from its transition to SaaS, but as we’ve noted before it is managing the transition fairly well (see Cloud transition working for StatPro Group). Its H1 financials are reasonable given that factor, and are in line with expectations thanks to its core cash generating business line, which means it is in the fortunate position of being able to use that resource to fund the many aspects of the new SaaS business.
For the six months to 30 June 2011, revenue was down 6% to £15.61m, due in part to SaaS-related costs but also the disposal of a high margin contract with Johannesburg Stock Exchange. Profit before tax plummeted 50% to £1.79m. But annualized recurring contact value was up 3% to £29.66m (at cc), and net debt was down from £6.31m to £5.15m. 34% of its clients use the hosted platform, up from 24%.
Overall those figures tell the story that the SaaS transition is still costing StatPro, with no significant income from the SaaS Revolution business line at yet (around £0.5m according to analysts at Cenkos). Further costs can be expected – chief executive Justin Wheatley told us that the spend on SaaS-related items (development, data, marketing, expanding the sales team) during the current financial year would be around £4m. That’s a substantial sum – and does not include expenditure from previous years – but it is actually reassuring. It demonstrates that StatPro understands the measure of change required throughout the business to make the most of the SaaS opportunity and is prepared to make the upfront investment.
With its core business (based around the Seven product), benefitting from high levels of renewals (91%) and able to generate recurring revenue, but presenting limited prospects for expansion, StatPro needed to expand its addressable market and SaaS technology was a brave way forward. Given the work completed to date, its prospects look good. It is offering a front end information distribution system, accessible at a low cost ($100 per portfolio, per month, for 100 users) to a new and large potential market that includes the many thousands of small fund managers, IFA’s, and more. As well as generating revenue from Revolution subscriptions, Wheatley also believes it will drive additional sales of Seven.
The company has extensive plans for Revolution, including partnerships with data providers to feed Revolution (it would be nothing without data) and an online marketplace where customers can buy additional data. It also plans to add social networking features such as blogs and videos. One comment from Wheatley stood out “we will sell social media in an applied business environment”. Clearly he understands the transformative power of disruptive technologies like SaaS and social media and is not blandly trying to replicate the on premise model in a new environment.