Back on track

Datagroup 1 June 2021 Update
Download PDF German PDF Download

DATAGROUP

Back on track

IT services

Scale research report - Update

1 June 2021

Price

€62.8

Market cap

€523m

Share price graph

Share details

Code

D6H

Listing

Deutsche Börse Scale

Shares in issue

8.3m

Last reported net debt at 31 March

€55.8m

Business description

DATAGROUP is an IT outsourcing provider, focused on the German Mittelstand market. It offers the full range of IT services on a modular basis, through its CORBOX ‘cloud enabling platform’. Services include service desk, end-user services, data centre services, application management and SAP services.

Bull

A compelling growth strategy, scaling the business across the Mittelstand sector.

Cloud services business model gives it an advantage over competitors.

Centralised SLA-based approach with a focus on customer satisfaction puts company in a strong position to consolidate a fragmented market.

Bear

Highly exposed to the German economy.

Acquisitions bring risks, but DATAGROUP has a proven track record in integrating acquisitions.

Increased debt levels

Analyst

Edwin de Jong

+31 (0)6 5122 5490

After a difficult FY20, IT services provider DATAGROUP’s earnings recovered in H121, driven by a turnaround in its Financial IT Services (FIS) unit, which took a hit in FY20. The M&A-driven business model is intact, with the addition of Urano and dna in H121, and DATAGROUP’s target of an EBIT margin of 9% should be within reach in the medium term (2022/23). Trading at 24.3x FY22e P/E on consensus estimates, DATAGROUP is valued at an 11% premium to peers.

H121 results show recovery from FY20

DATAGROUP’s H121 results recovered from a difficult FY20, which was affected by problems at its FIS unit. Revenue grew 24.4% to €211.5m, with the majority of growth originating from the acquisitions of Portavis and Cloudeteer last year. In contrast to the first lockdown, the second lockdown in Germany had a small positive effect on revenues, as commercial activities held up and new client wins were booked. EBIT increased 44% to €13.9m, partly due to cost savings from the restructuring of DATAGROUP’s FIS unit. FIS was the reason for the disappointing results last year, but the new management has adjusted prices for certain services and staff productivity has increased. Net profit increased by 21% as a result of a higher tax charge.

FY21 will be strong; FY22/23 ambitions intact

DATAGROUP increased its recently issued (March) FY21 guidance to revenue of more than €440m (previously €410–420m) and EBITDA of more than €61m (previously €56–58m). The increase is mostly driven by M&A, as CEO Max Schaber indicated in the post-H121 analyst call that the revenue contribution from Urano and dna this year will probably be slightly below €20m, while the EBITDA contribution will be over €2m. As such, the increased guidance should be achieved by the consolidating effect of the two acquisitions. DATAGROUP reiterated its ambition of reaching a 9% EBIT margin by 2022/23 versus FY22 previously (H121: 6.6%). Given the ongoing recovery at FIS and the margin levels of around 8% in previous years, this aspiration could be realistic.

Valued at a premium compared to peers

After the profit warning in August last year relating to setbacks at FIS, DATAGROUP’s shares fell below €40, but the share price has since recovered to more than €60 since. At current consensus estimates, the shares are trading at a premium to peers of 11% on an FY22e P/E of 24.3x, a premium that has been more or less stable since early this year.

Consensus estimates

Year
end

Revenue
(€m)

EBITDA
(€m)

EPS
(€)

DPS
(€)

P/E
(x)

Yield
(%)

09/19

306.8

46.9

1.74

0.70

33.7

1.2

09/20

358.2

53.8

0.03

0.70

N/A

1.3

09/21e

433.0

60.5

1.91

0.68

32.0

1.1

09/22e

462.0

68.5

2.53

0.81

24.3

1.3

Source: DATAGROUP, Refinitiv

Edison Investment Research provides qualitative research coverage on companies in the Deutsche Börse Scale segment in accordance with section 36 subsection 3 of the General Terms and Conditions of Deutsche Börse AG for the Regulated Unofficial Market (Freiverkehr) on Frankfurter Wertpapierbörse (as of 1 March 2017). Two to three research reports will be produced per year. Research reports do not contain Edison analyst financial forecasts.

H1 results show recovery

On 25 May, DATAGROUP published its H121 results to end March. Total revenues increased by 21.3% to €211.7m, with organic growth of c 10% in Q1 decreasing to 5.4% in Q2, much higher than the c 2% achieved in H120. Order intake has been strong, especially from the public sector, but also for home office improvement and pandemic-related special orders, eg IT facilities for vaccination centres. In contrast to the first lockdown, the second lockdown in Germany has had a slightly positive effect, as commercial activities held up and new client wins were recorded (14 new customers in H121 versus 21 in FY20).

Nevertheless, the acquisitions of Portavis in March last year and a minority participation in the much smaller Cloudeteer in June delivered the largest portion of revenue growth.

Gross margin decreased to 66.0% from 68.1% in H120, as material expenses increased as a percentage of sales due to special projects (like COVID vaccination centres), for which one-stop- shop contracts were closed, which included lower-margin equipment sales.

EBIT increased 44% to €13.9m, partly due to the cost savings from the restructuring of DATAGROUP’s FIS unit, which is on track. FIS was the reason for the disappointing results last year, but the new management has adjusted prices for certain services and staff productivity has increased.

Net profit increased by 21% as a result of higher taxes on profit. The financial position improved further from net debt of €63m in September 2020 to €55.8m in March 2021.

Exhibit 1: Key H121 figures

€000s

H120

H121

Change %

Revenues

170,010

211,482

24.4

Services & maintenance

143,039

176,253

23.2

Trade

26,794

34,864

30.1

Other

4,040

166

(95.9)

Own work capitalised

633

394

(37.8)

Total revenues

174,506

211,677

21.3

Material expenses/purchased services

(55,588)

(71,930)

29.4

Gross profit

118,918

139,747

17.5

Personnel expenses*

(90,768)

(100,199)

10.4

Other income

15,028

3,141

(79.1)

Other expenses

(19,539)

(12,410)

(36.5)

EBITDA

23,639

30,279

28.1

Depreciation from PPA

(2,036)

(2,332)

14.5

Other depreciation

(11,967)

(14,073)

17.6

EBIT

9,636

13,874

44.0

Financial result

(1,160)

(1,119)

(3.5)

EBT

8,476

12,755

50.5

Taxation

449

(1,927)

(529.2)

Net income

8,925

10,828

21.3

EPS (€)

1.07

1.30

21.3

Source: Company data

FY21 driven by M&A

Although 2021 is still strongly affected by the pandemic and lockdowns in large segments of the German economy, the second lockdown had no negative effects on DATAGROUP. Moreover, it was able to report an increase in organic growth compared to FY20 ahead of the level that is targeted in its business model of 4–6%. This was driven by the increased focus of private and public clients on IT.

DATAGROUP increased its recently issued FY21 guidance from revenues of €410–420m to more than €440m (FY20: €358.2m). Guidance for EBITDA increased to more than €61m from €56–58m (FY20: €53.8m). In the conference call, CEO Max Schaber stated that the revenue contribution from the two acquisitions this year is likely to be somewhat below €20m, while the EBITDA contribution will be more than €2m. As such, the increased guidance should be achieved by the consolidating effect of the two acquisitions alone.

Although the company had stated previously that its ambition of reaching a 9% EBIT margin by FY22 (H121: 6.6%) was too optimistic, Mr Schaber stated in the post-results call that DATAGROUP still has a strong ambition to reach the 9% EBIT margin target by 2022/23. As such, the delay in reaching this target seems limited. In H121, a large step was taken with an improvement in the EBIT margin from 5.5% to 6.6%. In the three years before FY20, DATAGROUP reached EBIT margins of c 8% and the business proposition has improved since in terms of scale, recurring business and product development. Together with the ongoing recovery in the FIS unit, we believe this aspiration is within reach.

Urano acquisition improves geographical profile

Inorganic growth is an important pillar in DATAGROUP’s strategy. After the acquisition of Portavis in March 2020, DATAGROUP announced the acquisition of dna in April 2021 and 70% of the shares of Urano Informationssysteme in early May 2021.

dna has just over 100 employees and annual revenues in the high single-digit million euros. Urano is much larger with roughly 300 employees and turnover of c €50m. DATAGROUP has the option to acquire the remaining 30% of Urano shares after two years.

Urano strengthens DATAGROUP’s profile and footprint in the Rhineland-Palaatinate and Hesse regions, in which DATAGROUP’s profile has so far been small. Public authorities in Rhineland-Palaatinate and Hesse are an important client group,as are SMEs in the region. Urano fits the traditional profile of a target company that could benefit from DATAGROUP’s CORBOX service offering, while adding new solutions (for the school sector in the case of Urano) to DATAGROUP’s proposition.

dna adds exposure to the financial sector and offers significant potential for synergies with Portavis, which was acquired last year. The acquisition process took much longer than for Urano, as dna has one major client, Finanz Informatik, which increases risk. This client provides IT services to German landesbanken and DATAGROUP eventually secured a longer-term commitment (more than five years) from this client.

Premium valuation

DATAGROUP is trading at an 11% premium on consensus FY22e P/E at 24.3x and a discount of 4% on FY22e EV/EBITDA of 8.9x versus peers. This P/E-based premium is relatively stable compared to our January update.

Compared to peers, which are more dependent on selling time or projects, like Atos, All for One Group and GFT, DATAGROUP has a much more resilient business model. The recurring revenue base amounts to 82% of total revenues, with limited revenues from one-time services and equipment. Furthermore, it has potential to achieve an EBIT margin close to 9%, a solid track record of integrating acquisitions, creating cross-selling synergies from upselling additional services and a clear focus on the large German SME sector. We believe all of this could justify a premium compared to peers.

Exhibit 2: Peer group comparison

Market cap

P/E (x)

EV/EBITDA (x)

Company

(local CCY m)

2020

2021e

2022e

2020

2021e

2022e

Allgeier

€262

N/A

43.4

32.7

3.3

8.0

7.1

ATOS

€6,010

8.2

7.8

7.1

5.3

4.8

4.6

Bechtle

€6,658

34.4

31.1

28.2

18.2

16.8

15.4

Cancom

€1,892

29.4

29.5

24.9

13.1

11.3

9.8

CENIT

€117

49.8

35.5

23.3

10.8

8.9

7.3

GFT

€538

31.3

20.6

17.5

14.5

12.0

10.6

q.Beyond

€222

N/A

N/A

N/A

N/A

27.3

9.0

S&T

US$1,333

24.0

19.9

16.2

10.6

9.4

8.1

SNP Schneider

€439

N/A

51.0

27.5

50.1

22.0

14.1

All for One Group

€304

23.9

24.0

19.1

7.7

7.7

6.8

Peer average

 

28.7

29.2

21.8

14.8

12.8

9.3

DATAGROUP

€523

42.7

32.0

24.3

11.4

10.2

8.9

Premium/(discount)

 

49%

9%

11%

(23%)

(21%)

(4%)

Source: Refinitiv. Note: Priced at 27 May 2021. Valuation multiples for DATAGROUP are not calendarised.

General disclaimer and copyright

Any Information, data, analysis and opinions contained in this report do not constitute investment advice by Deutsche Börse AG or the Frankfurter Wertpapierbörse. Any investment decision should be solely based on a securities offering document or another document containing all information required to make such an investment decision, including risk factors. This report has been commissioned by Deutsche Börse AG and prepared and issued by Edison for publication globally.

Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

Any Information, data, analysis and opinions contained in this report do not constitute investment advice by Deutsche Börse AG or the Frankfurter Wertpapierbörse. Any investment decision should be solely based on a securities offering document or another document containing all information required to make such an investment decision, including risk factors. This report has been commissioned by Deutsche Börse AG and prepared and issued by Edison for publication globally.

Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Share this with friends and colleagues

You may be interested in