Join our community of smart investors

Global Data displays pricing power

Subscription renewal rates have remained steady despite price rises for two-thirds of customers
August 1, 2022
  • Cash conversion remains above 100 per cent
  • Half-year dividend increases by 26 per cent

There is an assumption that software subscription businesses are more resilient during recessions. GlobalData (DATA), a data analytics platform, says it “provides essential tools” to businesses. If this is true, price rises should be readily accepted by customers without a drop off in subscription renewal rates.

Assessing the quality of a software product by just reading financial reports is tricky, but on the few indicators we have, Global Data is performing well. Subscription revenue grew 21 per cent and now makes up 83 per cent of the group total. Renewal rates have remained steady from last year, despite price rises, which is a good indicator that customers are happy with the service.  

In the first half of the year, prices increased for 65 per cent of customers by an average of 8 per cent. That’s impressive and suggests that the platform may actually be “essential” to many. Given the low capital nature of GlobalData, most of the price rises have dropped through to the cash flow figure. Free cash flow increased 32 per cent to £45.7mn.

Rising interest rates are a nuisance. Net debt increased 304 per cent to £191mn because of the acquisition of two businesses in the second half of last year. Global Data has also signed an agreement to acquire economic research firm TS Lombard before the end of the third quarter. Finance costs have tripled to £9.1mn.

The interest payments can still easily be paid off but they are only going to rise as more debt is refinanced, which will provide headwinds to cash generation. The forward PE ratio of 23.2 is a little pricy but the successful price rises give us confidence it can maintain growth. Hold.

Last IC View: Hold, 1,301p, 28 Feb 2022

GLOBALDATA (DATA)   
ORD PRICE:941pMARKET VALUE:£1.1bn
TOUCH:930p-980p12-MONTH HIGH:1,684pLOW: 900p
DIVIDEND YIELD:2.2%PE RATIO:44
NET ASSET VALUE:71p*NET DEBT:266%
Half-year to 30 JunTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
202191.116.09.76.1
202211215.09.47.7
% change+23-6-3+26
Ex-div:8 Sep   
Payment:7 Oct   
*Includes intangible assets of £369mn, or 312p a share