1Spatial (LSE:SPA) has created sophisticated mapping software that gives public and private sector customers the ability to create detailed digital maps at local, regional, and national level. It’s an innovative product that’s becoming increasingly useful in our fast-moving world.
1Spatial is winning contracts
The company has reached a £51m market cap as a series of deals led its share price to rocket in recent weeks.
There’s its collaboration with Esri UK, for which it signed a multi-year £1m contract with Northern Gas Networks. This is to help migrate the gas network to Esri’s novel ArcGIS utility network model. 1Spatial expects recurring revenue to be over £200k for this deal.
It will contribute by ensuring the quality of the data is fit and ready to migrate. This contract opens a door into the utilities sector that desperately needs updating to compete in a ‘smart’ world.
On 1 April, 1Spatial announced it’s also won a multi-year contract in collaboration with Version 1. This is to help the UK Department for Environment, Food and Rural Affairs (Defra) manage its land and verify subsidy claims made by farmers. It’s a five-year contract worth around £0.9m.
1Spatial is a domestic and internationally-focused business with a variety of clients. Notably these include a lot of UK names like Ordnance Survey, Network Rail, and the Energy Networks Association. While there’s many more in the US.
Its software ensures the detailed digital maps used by these organisations are accurate and clear.
A lot of international infrastructure needs repairing and updating, especially as governments advance towards a 5G interconnected world. That’s an opportunity for 1Spatial as its platform allows organisations to map all their assets above and below ground. This means collating a database of pipes, cables, tunnels and all the intricacies of old and new infrastructure. Over time, this should build a comprehensive picture of where everything is. And in doing so, it could save a fortune in preventing accidental damage to properties and landscapes. For example, when a digger driver laying a foundation accidentally bursts a gas line.
Surprisingly, 1Spatial’s kit is also used by Alphabet‘s Google (the king of digital maps) to view and manage its offices and help plan efficient use of electricity. Furthermore, at government level, the platform is useful in disaster prevention planning. For instance, accurately mapping areas deemed high risk for fire or flood will ensure emergency services can respond quickly.
Room for growth
This company appears to have a lot of scope for growth in the years ahead. Especially as the UK government has made it clear, it wants to encourage investment in UK tech companies.
This is all very well, but there are downsides. My primary concern is that the share price has risen quickly. Could that mean investors have already priced in growth potential? Future business success depends on its ability to renew and win contracts. Losing a big contract would mean a hit to its income. And being an AIM-listed share means it’s likely to be subject to share price volatility. Foreign exchange rate fluctuations could affect its revenues, or rivals could swoop in and offer a superior product.
Nevertheless, I think this company looks to have growth potential ahead. Above all, with Big Data tech stocks in demand, I’d buy shares in 1Spatial today.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Kirsteen has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Alphabet (A shares) and Alphabet (C shares). Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.