Capital base is boosted

SNP Schneider-Neureither & Partner 7 January 2019 Update
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SNP Schneider-Neureither & Partner

Capital base is boosted

Capital increase

Software & comp services

7 January 2019

Price

€15.94

Market cap

€105m

Net debt (€m) at 30 September 2018

32.8

Shares in issue

6.6m

Free float

71%

Code

SHF

Primary exchange

Frankfurt (Xetra)

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(11.0)

(16.8)

(52.3)

Rel (local)

(6.3)

(5.3)

(41.6)

52-week high/low

€36.24

€15.11

Business description

SNP Schneider-Neureither & Partner is a software and consulting business focused on supporting customers in implementing change, and rapidly and economically tailoring IT landscapes to new situations. It has developed a proprietary software suite, CrystalBridge and Transformation Backbone with SAP LT (T-B), which automatically analyses, applies and tracks changes in IT systems.

Next events

Prelim FY18 results

31 January 2019

Annual report

29 March 2019

Q1 results

30 April 2019

Analysts

Richard Jeans

+44 (0)20 3077 5700

Katherine Thompson

+44 (0)20 3077 5730

SNP Schneider-Neureither & Partner is a research client of Edison Investment Research Limited

In December, SNP completed its capital increase, raising gross proceeds of €18.7m (c €17.6m net). The funds will provide the group with significant financial flexibility and support its international growth strategy, including acquisitions. We have updated our model for the capital increase, which results in EPS coming back by 17.1% in both FY19 and FY20, solely reflecting the dilution impact from the new shares. Following the Q3 results, which showed a strong recovery in profits, we noted that there were signs that the group’s important S/4HANA transformation business had been picking up as SNP had won several small S/4HANA migrations. While the shares look punchy on c 27x our FY19e earnings, the rating could fall quickly as new projects come through.

Year end

Revenue
(€m)

PBT*
(€m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

12/16

80.7

6.0

100.4

39.0

15.9

2.4

12/17

122.3

3.8

61.9

0.0

25.7

0.0

12/18e

137.9

(1.1)

(19.4)

0.0

N/A

0.0

12/19e

153.4

6.0

58.6

25.0

27.2

1.6

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Capital increase raises €18.7m gross (c €17.6m net)

The capital increase results in the issue of up to 1.127m new bearer shares, increasing the number of shares from 5.474m to 6.602m. The take-up of the subscription rights issue (one new share for every five existing shares at €16.60 per new share) was 90.6%. The balance has been placed at the subscription price with SN Assets, a private company affiliated with the CEO, Dr Andreas Schneider-Neureither. Dr Schneider-Neureither now holds c 22% of SNP’s expanded share capital. While SNP does not require the funds immediately, the money provides the group with extra financial flexibility and weighs concerns over the covenants on SNP’s €40m promissory notes. The €17.6m net proceeds add to the group’s €16.6m cash position as at the end of September while the promissory notes are not repaid until 2020 through to 2022. As part of the capital raising process, MC Investments, a private investment company, has acquired a c 8% stake in the company and is SNP’s second largest shareholder after the CEO.

Forecasts: Updated for the capital increase only

We have updated our model for the capital increase. The 20.6% increase in the number of shares reduces EPS by 17.1% going forward. We have not reduced the net interest charge as the funds are not being used to pay down debt. We have reduced our dividend forecasts to reflect the dilution in FY19 and FY20. We now forecast the group to end FY18 with net debt of €22.6m (previously €40.2m), which falls to €21.0m (€38.6m) at end-FY19 and €15.7m (€33.3) at end-FY20.

Valuation: Strong growth play in the ERP space

The stock trades on c 27x our earnings in FY19e, falling to c 14x in FY20e. Our discounted cash flow valuation (based on c 7% organic revenue CAGR over 10 years, 10% WACC, 14.8% long-term operating margin and 2% terminal growth) is €30/share, c 90% above the current share price.

Exhibit 1: Financial summary

€'000s

2015

2016

2017

2018e

2019e

2020e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

56,236

80,685

122,343

137,895

153,449

166,606

Cost of sales

0

0

0

0

0

0

Gross Profit

56,236

80,685

122,343

137,895

153,449

166,606

EBITDA

 

 

5,484

8,124

6,868

3,343

10,883

16,162

Adjusted Operating Profit

 

 

4,222

7,114

5,113

55

7,239

12,390

Amortisation of acquired intangibles

0

(657)

(2,021)

(1,600)

(1,600)

(1,600)

Exceptionals

356

400

(3,600)

(300)

0

0

Associates

(3)

8

(24)

0

0

0

Operating Profit

4,575

6,865

(532)

(1,845)

5,639

10,790

Net Interest

(828)

(1,137)

(1,327)

(1,200)

(1,300)

(1,100)

Profit Before Tax (norm)

 

 

3,394

5,977

3,786

(1,145)

5,939

11,290

Profit Before Tax (FRS 3)

 

 

3,747

5,728

(1,859)

(3,045)

4,339

9,690

Tax

(1,195)

(1,517)

(807)

343

(1,782)

(3,387)

Profit After Tax (norm)

2,198

4,460

2,980

(801)

4,157

7,903

Profit After Tax (FRS 3)

2,552

4,211

(2,666)

(2,701)

2,557

6,303

Minority interest

0

(147)

234

(267)

(289)

(312)

Adjustments for normalised earnings

0

0

0

0

0

0

Net income (norm)

2,198

4,313

3,214

(1,069)

3,868

7,591

Net income (FRS 3)

2,552

4,064

(2,431)

(2,969)

2,268

5,991

Average Number of Shares Outstanding (m)

3.7

4.3

5.2

5.5

6.6

6.6

EPS - normalised (c)

 

 

58.8

100.4

61.9

(19.4)

58.6

115.0

EPS - normalised & fully diluted (c)

 

 

58.8

100.4

61.9

(19.4)

58.6

115.0

EPS - FRS 3 (c)

 

 

68.3

94.6

(46.8)

(53.8)

34.4

90.7

Dividend per share (c)

34.00

39.00

0.00

0.00

25.00

33.00

Gross Margin (%)

100.0

100.0

100.0

100.0

100.0

100.0

EBITDA Margin (%)

9.8

10.1

5.6

2.4

7.1

9.7

Adjusted Operating Margin (%)

7.5

8.8

4.2

0.0

4.7

7.4

BALANCE SHEET

Fixed Assets

 

 

15,243

30,109

75,171

73,698

72,258

71,018

Intangible Assets

11,675

24,179

67,012

65,380

63,748

62,115

Tangible Assets

1,999

3,161

5,187

5,346

5,538

5,931

Other

1,570

2,769

2,972

2,972

2,972

2,972

Current Assets

 

 

29,996

58,424

78,614

78,485

80,167

84,723

Stocks

0

371

371

418

466

506

Debtors

16,084

25,652

43,781

44,346

49,348

53,579

Cash

13,769

31,914

33,877

33,135

29,768

30,053

Current Liabilities

 

 

(13,703)

(32,631)

(40,531)

(40,517)

(44,862)

(48,353)

Creditors

(11,101)

(14,523)

(29,295)

(29,281)

(33,626)

(37,117)

Short term borrowings

(2,602)

(18,108)

(11,236)

(11,236)

(11,236)

(11,236)

Long Term Liabilities

 

 

(15,513)

(7,327)

(53,157)

(45,583)

(40,583)

(35,583)

Long term borrowings

(12,344)

(5,531)

(49,487)

(44,487)

(39,487)

(34,487)

Other long term liabilities

(3,169)

(1,796)

(3,670)

(1,096)

(1,096)

(1,096)

Net Assets

 

 

16,024

48,575

60,097

66,083

66,980

71,805

CASH FLOW

Operating Cash Flow

 

 

1,879

1,005

(5,316)

2,686

10,148

15,362

Net Interest

(167)

53

(798)

(1,200)

(1,300)

(1,100)

Tax

(554)

(412)

(1,366)

321

(1,663)

(3,161)

Capex

(1,779)

(3,451)

(5,234)

(3,447)

(3,836)

(4,165)

Acquisitions/disposals

(3,228)

(5,923)

(28,783)

(11,701)

(1,716)

0

Shares issued

0

30,129

18,293

17,600

0

0

Dividends

(483)

(1,264)

(1,932)

0

0

(1,651)

Net Cash Flow

(4,332)

20,137

(25,136)

4,258

1,633

5,285

Opening net debt/(cash)

 

 

(3,431)

1,176

(8,275)

26,847

22,588

20,955

Other

(275)

(10,686)

(9,985)

0

0

0

Closing net debt/(cash)

 

 

1,176

(8,275)

26,847

22,588

20,955

15,671

Source: Company accounts, Edison Investment Research. Note: *Includes additional payments for Adepcon in FY18 and FY19, and final payments for RSP, Astrums/Hartung, Harlex and Innoplexia in FY18.

General disclaimer and copyright

This report has been commissioned by SNP Schneider-Neureither & Partner and prepared and issued by Edison, in consideration of a fee payable by SNP Schneider-Neureither & Partner. 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 Edison analyst 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 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd who holds an Australian Financial Services Licence (Number: 427484). 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

Neither this document and associated email (together, the "Communication") constitutes or form part of any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities, nor shall it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. Any decision to purchase shares in the Company in the proposed placing should be made solely on the basis of the information to be contained in the admission document to be published in connection therewith.

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 (nor will such persons be able to purchase shares in the placing).

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

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. 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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by SNP Schneider-Neureither & Partner and prepared and issued by Edison, in consideration of a fee payable by SNP Schneider-Neureither & Partner. 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 Edison analyst 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 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd who holds an Australian Financial Services Licence (Number: 427484). 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

Neither this document and associated email (together, the "Communication") constitutes or form part of any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities, nor shall it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. Any decision to purchase shares in the Company in the proposed placing should be made solely on the basis of the information to be contained in the admission document to be published in connection therewith.

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 (nor will such persons be able to purchase shares in the placing).

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

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. 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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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