StatPro's (LON:SOG) new Revolution software substantially broadens the group’s potential market by targeting front offices and smaller players in the wealth management industry, according to analysts at research boutique Edison.

In a note to investors following today’s third quarter update, which reported that trading met expectations, analyst Richard Jeans explained that modular investment analysis software was historically sold to ‘middle offices’ of larger firms and it would have been installed on site.

However with the lower cost Revolution software – which is hosted on the ‘cloud’ - StatPro has lowered the traditional customer entry level for sophisticated investment analysis software and as a result it now has a much broader market.

Looking more closely at today’s update, Jeans said: “new business was satisfactory in what is typically the quietest quarter.” 

He added: “While the outlook clearly retains significant uncertainties, management remains cautiously optimistic and further investment in sales and marketing is expected in FY12 to drive the group’s new cloud-based technology services. 

“In our view the current depressed margins provide an opportunity for forward-thinking investors.” 

This morning StatPro noted that the global economic outlook had worsened since it last updated the market and that there had been an increase in demand for its risk-based products and services as a result.

However, it also pointed out that these market conditions make it more challenging to accurately forecast levels of new business and renewal rates, although the firm’s “high level of recurring revenue and prospects for new business” generated by its Revolution and Seven offerings gave it reason to be confident.

StatPro said that revenues in 2011 for its Revolution cloud-based portfolio analysis and research service would be modest, but that this service had added further clients and portfolios during Q3 2011. The firm added that there are “positive indications” that it shall make further progress in signing new clients in both Q4 2011 and 2012, which will be the service’s first full year since its launch.

StatPro said that new business for its StatPro Seven product in the third quarter “was satisfactory in what is typically the lowest quarter for signing new commitments”. The firm said it signed its first client for its new StatPro Seven Risk bureau service that was launched in Q3 2011. Renewal rates “remain high” and are projected to be around 90 per cent or better for the full year.

“Our increased marketing presence has enabled us to make progress with all our products,” said Justin Wheatley, StatPro’s chief executive. 

“Our clients can see how a combination of StatPro Seven and StatPro Revolution will enable them to communicate better with their clients at a time of high volatility and uncertainty in the markets. Regulation continues to drive needs and our cloud platform allows us to adapt even faster to client priorities.”

Revenue and profits for the nine months to the end of September 2011 were in line with the firm’s expectations, it said.

StatPro, which sells portfolio analysis and asset pricing services for the worldwide asset management industry, noted that the global economic outlook had worsened since it last updated the market and that there had been an increase in demand for its risk-based products and services as a result.

However, it also pointed out that these market conditions make it more challenging to accurately forecast levels of new business and renewal rates, although the firm’s “high level of recurring revenue and prospects for new business” generated by its Revolution and Seven offerings gave it reason to be confident.

StatPro said that revenues in 2011 for its Revolution cloud-based portfolio analysis and research service would be modest, but that this service had added further clients and portfolios during Q3 2011. The firm added that there are “positive indications” that it shall make further progress in signing new clients in both Q4 2011 and 2012, which will be the service’s first full year since its launch.

StatPro said that new business for its StatPro Seven product in the third quarter “was satisfactory in what is typically the lowest quarter for signing new commitments”. The firm said it signed its first client for its new StatPro Seven Risk bureau service that was launched in Q3 2011. Renewal rates “remain high” and are projected to be around 90 per cent or better for the full year.

“Our increased marketing presence has enabled us to make progress with all our products,” said Justin Wheatley, StatPro’s chief executive. “Our clients can see how a combination of StatPro Seven and StatPro Revolution will enable them to communicate better with their clients at a time of high volatility and uncertainty in the markets. Regulation continues to drive needs and our cloud platform allows us to adapt even faster to client priorities.”

It announced the first install through this new distribution agreement this morning. The new cloud-based analytics software platform has now been implemented for Unicorn Asset Management.

StatPro highlighted that Phoenix – who provide a range of investment administration services to boutique investment management firms – and it is now offering the Revolution platform to all its clients.

The new software provides a cost effective, cloud-based, portfolio analysis service. 

"We are really delighted to provide Revolution to Phoenix Fund Services and its clients,” Statpro finance director Justin Wheatley said.

“Thanks to StatPro Revolution, investment firms of all sizes can now afford to provide accurate reporting and analysis to their clients. We call it 'analytics for the people' and we're proud to be helping the industry to become more transparent."

Phoenix founder Steve King said: "StatPro Revolution enables Phoenix to provide our clients with access to the most sophisticated portfolio analysis and reporting at a great price. 

He added: “Revolution provides real added value to our clients, who are sophisticated boutique and specialist investment managers that in the past would have struggled to justify the costs of accessing such a quality service."

StatPro revealed this morning it has signed its first distribution agreement for the Revolution product, its newly-launched portfolio analysis platform for asset managers. It will be sold by Trasset International, which provides back office systems to the financial sector and which has 50 clients in asset management and private wealth.

Recurring revenues for the year were 93 percent, and sales of the company’s flagship StatPro Seven product continued to be strong.

During the course of 2010 StatPro added 44 new client contracts to the StatPro Seven service with new sales coming from all regions. 

Net debt, meanwhile, is expected to reduce by £3.4 million to £5.5 million thanks to the strong operating cahsflow, which is expected also to fund an increased dividend payment.

Cenkos, StatPro’s broker, is predicting the firm will post 2010 revenues of £33 million, giving EBITDA of £8.5 million.

Next month the company launches Revolution, which is a low cost, high spec analytics package for fund managers, which has all the bells and whistles of a much more expensive piece of software.

It includes risk management functions, performance and attribution analysis as well as the capacity to publish bespoke reports for clients explaining how and why their portfolios performed the way they did. 

For StatPro it takes the company further down the software as a service (SaaS) route. Currently around 30 percent of its revenues come from this source. 

For the uninitiated SaaS is part of the cloud computing phenomenon where programmes are delivered on demand via the internet, rather than sold as rentals and installed on customers’ premises.

As such products tend to be easy to use and support. Costs are lower, which has a knock on effect on price. 

In the case of Revolution, StatPro is offering the service at a fee of US$100 per portfolio a month. 

Chief executive Justin Wheatley said: “We believe that StatPro Revolution is currently the only internet service of its kind in the market with this level of sophisticated portfolio analytics. 

“Priced at just US$100 per portfolio per month, it is affordable for any financial services company to use anywhere in the world. 

“This means we can target a significantly larger market than our current target market. 

“This combined with the early successes we have had with StatPro Revolution, has prompted the board to increase the level of spending on marketing and development during 2011.  

“With our high levels of recurring revenue, our strong levels of cash generation and a unique product set, we continue to believe the long-term opportunities for StatPro are significant."

This growth will be driven by its two new products StatPro Seven and StatPro Revolution.

It has hired Ruggero Frisina as its new European sales director. The company hopes that Frisina will help it take advantage of the opportunities in the European market.

Frisina will lead the new sales initiative and he will manage the European business development team.

"We are delighted to welcome Ruggero to the StatPro team at a particularly exciting time in the company's development as we expand our product offering and target an additional customer base,” chief executive Justin Wheatley said.

“We now have an experienced sales director in each of our key territories, North America, Europe, South Africa and Australia.

“We have the correct sales structure to capitalise on our increased product capabilities."

StatPro Seven was launched earlier this year, and the full launch of StatPro Revolution is scheduled for 2011. 

The company is trying to expand its addressable client base to cover asset management entities of all sizes. 

StatPro Seven focuses on performance specialists in the middle office whilst Revolution is aimed at front office professionals. 

Liquidity risk measures how easy or difficult it is to sell a particular stock or share.

A highly liquid stock might be offloaded in a time of crisis at a minimal loss because there is a ready market for it.

However disposing of an illiquid investment is often problematic, particularly when the volumes involved are large.

The StatPro software differs from the other liquidity risk devices in that it doesn’t solely rely for its data set on observed buying and selling prices of a stock, or particular investment type.

Instead, factors such as market capitalisation, the percentage of ownership of a stock and the size of an issue for a fixed income instrument are taken into account.

“The risk manager can then drill down through every component of liquidity risk, discovering how much is coming and from where, without any previous knowledge of the portfolio,” StatPro said in a release to the stock exchange this morning.

“This tool enables the risk manager to x-ray the liquidity risk of the portfolio, spotting any challenging situations.”

Chief executive Justin Wheatley said says there has been a great deal of innovation in the area of risk, in particular mathematical modelling of the concept of “value at risk”.

However very little research has gone into the liquidity risk, he added.

“The reason is that while measuring market risk you can create models that are calibrated with market data, you cannot do the same for liquidity risk,” Wheatley explained.

“The approach we have developed is a major achievement in measuring market liquidity risk when trading volume and market price information is not available and we are thrilled to offer this enhanced solution to our clients.

“We continue to invest in product development and believe this adds significant value to our offering."

During the nine months to 30 September, StatPro has won seven more clients for its portfolio analytics platform StatPro Seven, while securing a deal from a major global custodian bank for newly launched portfolio analysis software StatPro Revolution in early October.

The performance in the third quarter has led the group to expect a “successful outcome” for the full year.

“Trading in Q3 was in line with our expectations and we continue to have success with signing new clients for our StatPro Seven platform.

“Following the successful phase II launch of our public Beta earlier this month we look forward to welcoming more beta clients and the continued growth of the business,” said chief executive of StatPro Justin Wheatley.

StatPro called the deal with the custodian bank a “significant milestone” which endorsed its investment and validated the market potential. Edison Investment Research has stated that the Revolution platform had the potential to produce a significant revenue stream for the group.

StatPro has continued to progress the development of StatPro Seven and StatPro Revolution, with the latter's public beta phase II having been released on 4 October.

Also post-period, Nedbank’s South African custodian division has signed for StatPro Seven Performance, Attribution, Fixed Income, Compliance and Analytics Reporting modules plus Index Data services.

Edison Investment Research commented on the update, noting that the positive outcome was achieved despite challenging trading conditions.

It said the group remains on target for the full commercial launch of its new SaaS (software as a service) product, StatPro Revolution, in January and added: "We believe the potential for StatPro Revolution continues to be significantly underrated by the market."

StatPro believes to be the first business to offer a genuine SaaS solution that integrates data and software as a service for portfolio analysis, serving fund managers of all sizes at affordable prices.

The group said that SaaS technologies are transforming whole sectors including portfolio analytics.

Statpro has operations in Europe, North America, South Africa and Australia, with approximately 75 percent of recurring revenues being generated outside the UK.

Nedbank’s South African custodian division has signed for StatPro Seven Performance, Attribution, Fixed Income, Compliance and Analytics Reporting modules plus Index Data services.

The parties did not disclose the financial terms of the deal.

General Manager of Nedbank Louise Currie said that the software would help it not only meet but exceed industry standards.

StatPro said that the demand for StatPro Seven remains solid and that the software is “well positioned to meet the needs of the global asset management community”.

“We continue to see strong interest in StatPro Seven, our fully hosted analytics platform from asset managers and custodian banks around the world.

“We have an excellent reputation in South Africa and this agreement with Nedbank underlines our leading position in that market,” said chief executive of StatPro Justin Wheatley.

This is the group’s second major order secured this month.

Earlier in October, StatPro won an order for its newly launched portfolio analysis software StatPro Revolution from a major custodian bank.

Edison Investment Research earlier stated that the Revolution platform had the potential to produce a significant revenue stream for the group.

StatPro floated on the London Stock Exchange in May 2000 and transferred its listing in June 2003 to AIM.

The company sells a SaaS-based (Software as a Service) analytics and data platform on a rental basis to investment management companies allowing them to analyse portfolio performance, attribution, risk and GIPS compliance.

The group has operations in Europe, North America, South Africa and Australia, with approximately 75 percent of recurring revenues being generated outside the UK.

However, its new software platforms have been well received, and as already revealed the group is committing a further £700,000 to Revolution development this year.

"Early market reaction to StatPro Revolution has been very positive and sales of Seven continue to be solid, we are confident therefore of a successful outcome to the year," said chief executive Justin Wheatley.

Elsewhere, the group painted a mixed picture of trading, saying its markets had been affected by the turmoil on the bond and equity markets.

However the chief executive reckons there are opportunities as new banking and financial regulation is introduced in Europe and the US.

"We consider such regulation to be an opportunity for StatPro to make further sales, especially of our acclaimed Risk and Compliance capacity," Wheatley added.

"In addition, we have seen renewed interest in our Complex Asset Pricing capability especially in respect of illiquid bonds, of which there are an increasing number."

Underlining StatPro’s confidence in the future, it is paying an interim dividend of 0.7p, a rise of 17 per cent.

The StatPro Revolution public beta can accessed from: http://www.statpro.com/revolution.

Wheatley is now interested in 7,159,367 Statpro shares, representing approximately 11.8% of the issued share capital and options over 1,135,000 shares.

The company sells a SaaS-based (Software as a Service) analytics and data platform on a rental basis to investment management companies allowing them to analyse portfolio performance, attribution, risk and GIPS compliance. StatPro also provides market data and valuation feeds including a Complex Asset Pricing service. 

StatPro has grown its recurring revenue from less than £1 million in 1999 to £28.4 million at end-December 2009.

StatPro floated on the London Stock Exchange in May 2000 and transferred its listing in June 2003 to AIM. The group has operations in Europe, North America, South Africa and Australia, with approximately 75 percent of recurring revenues being generated outside the UK.