Focusing on organic growth in FY18

SNP Schneider-Neureither & Partner 5 February 2018 Update
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SNP Schneider-Neureither & Partner

Focusing on organic growth in FY18

Preliminary results

Software & comp services

5 February 2018

Price

€34.90

Market cap

€191m

Net debt (€m) at 30 September 2017

7.5

Shares in issue

5.5m

Free float

53.0

Code

SHF

Primary exchange

Frankfurt (Xetra)

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

4.3

19.9

(24.6)

Rel (local)

5.0

26.1

(31.4)

52-week high/low

€49.1

€28.5

Business description

SNP Schneider-Neureither & Partner (SNP) 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 and applies and tracks changes in IT systems.

Next events

Annual report

28 March 2018

Q1 results

27 April 2018

AGM

30 May 2018

Q2 results

2 August 2018

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

SNP recorded c 14% organic growth in Q4 and a c 6% EBITDA margin. FY17 group revenue of around €122m was €2m ahead of our forecasts while EBITDA, at €2m, was €1m below our forecast. We have edged up our revenue forecasts while maintaining profit forecasts. After a hectic FY17, with multiple acquisitions, fund-raisings and significant corporate change, we understand that management intends to focus on organic growth in FY18. Given the attractive industry drivers and the potential for margin recovery, the shares look attractive on c 21x our FY19e earnings.

Year end

Revenue
(€m)

PBT*
(€m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

12/15

56.2

3.4

58.8

34.0

59.3

1.0

12/16

80.7

5.7

94.4

39.0

37.0

1.1

12/17e**

122.0

(1.7)

(27.5)

45.0

N/A

1.3

12/18e

151.2

6.4

76.9

52.0

45.4

1.5

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. **12/17e shown are preliminary results.

Record revenues in Q417, full year organic growth 8%

FY17 revenue was €122m, up c 51%, including 8% organic growth. This implies Q4 revenues of c €40m (Q416 €23.1m). FY17 EBITDA was c €2m, indicating that Q4 EBITDA was c €2.5m for a c 6% EBITDA margin. Excluding c €4.3m of one-off extraordinary costs, FY17 EBITDA was €6.3m, for an EBITDA margin of c 5.2%. Incoming orders were €130.7m in FY17 for a book-to-bill ratio of 1.07x. This implies that Q4 orders were €35.7m, equating to a book-to-bill ratio of 0.87x.

Strategy: Pushing out the new products

The immediate focus remains on integrating the recent acquisitions and harmonising group-wide process. Consultants from the acquired companies are being trained on transformation software. In January, SNP appointed a software industry veteran in the new role of chief revenue officer to head the global sales effort. The role is based in Philadelphia, US, supported by a small team. A key focus will be on pushing the new products CrystalBridge and Interface Scanner. The group’s acquisition strategy has shifted away from consulting businesses to acquiring businesses that will broaden the group’s technological expertise.

Forecasts: Revenues edge up, profits maintained

We have brought our FY17 revenues and EBITDA into line with the update. SNP forecasts FY18 revenues of €150-155m (we were forecasting €149.2m). We have increased FY18 and FY19 revenues by €2.0m and €2.2m respectively. We have broadly maintained our FY18 and FY19 profits and balance sheet forecasts. We are forecasting operating margins of 4.9% in FY18 rising to 8.4% in FY19.

Valuation: Strong growth play in the ERP space

The stock trades on c 45x our FY18e EPS, which falls to c 21x in FY19e. Our discounted cash flow valuation (based on c 7.8% organic revenue CAGR over 10 years, 10% WACC, 15.8% long-term margin and 2% terminal growth) is €43.30/share, 24% above the current share price.

Exhibit 1: Financial summary

€'000s

2014

2015

2016

2017e

2018e

2019e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

30,480

56,236

80,685

122,000

151,249

165,280

Cost of sales

0

0

0

0

0

0

Gross Profit

30,480

56,236

80,685

122,000

151,249

165,280

EBITDA*

 

 

862

5,484

8,524

2,000

10,967

17,924

Adjusted Operating Profit *

 

 

(66)

4,222

6,857

(500)

7,394

13,936

Amortisation of acquired intangibles

0

0

0

0

0

0

Exceptionals

1,505

356

0

0

0

0

Associates

0

(3)

8

0

0

0

Operating Profit

1,439

4,575

6,865

(500)

7,394

13,936

Net Interest

(66)

(828)

(1,137)

(1,200)

(1,000)

(800)

Profit Before Tax (norm)

 

 

(132)

3,394

5,720

(1,700)

6,394

13,136

Profit Before Tax (FRS 3)

 

 

1,373

3,747

5,728

(1,700)

6,394

13,136

Tax

(344)

(1,195)

(1,517)

510

(1,918)

(3,941)

Profit After Tax (norm)

(477)

2,198

4,203

(1,190)

4,476

9,195

Profit After Tax (FRS 3)

1,028

2,552

4,211

(1,190)

4,476

9,195

Minority interest

(40)

0

(147)

(248)

(267)

(289)

Adjustments for normalised earnings

0

0

0

0

0

0

Net income (norm)

(517)

2,198

4,056

(1,438)

4,208

8,906

Net income (FRS 3)

988

2,552

4,064

(1,438)

4,208

8,906

Average Number of Shares Outstanding (m)

3.7

3.7

4.3

5.2

5.5

5.5

EPS - normalised (c)

 

 

(13.9)

58.8

94.4

(27.5)

76.9

162.7

EPS - normalised & fully diluted (c)

 

 

(13.9)

58.8

94.4

(27.5)

76.9

162.7

EPS - FRS 3 (c)

 

 

26.6

68.3

94.6

(27.5)

76.9

162.7

Dividend per share (c)

13.00

34.00

39.00

45.00

52.00

60.00

Gross Margin (%)

100.0

100.0

100.0

100.0

100.0

100.0

EBITDA Margin (%)

2.8

9.8

10.6

1.6

7.3

10.8

Adjusted Operating Margin (%)

-0.2

7.5

8.5

-0.4

4.9

8.4

BALANCE SHEET

Fixed Assets

 

 

8,291

15,243

29,054

70,404

69,856

69,173

Intangible Assets

5,190

11,675

24,179

62,939

62,939

62,939

Tangible Assets

1,231

1,999

3,161

6,151

5,603

4,919

Other

1,871

1,570

1,714

1,314

1,314

1,314

Current Assets

 

 

17,882

29,996

59,478

84,155

79,359

83,841

Stocks

0

0

0

0

0

0

Debtors

11,286

16,084

27,201

41,129

50,990

55,720

Cash

5,681

13,769

31,914

42,663

28,006

27,758

Current Liabilities

 

 

(9,782)

(13,703)

(34,382)

(34,853)

(44,078)

(48,040)

Creditors

(9,182)

(11,101)

(21,583)

(32,753)

(41,978)

(45,940)

Short term borrowings

(600)

(2,602)

(12,799)

(2,100)

(2,100)

(2,100)

Long Term Liabilities

 

 

(2,501)

(15,513)

(5,576)

(52,440)

(40,366)

(32,792)

Long term borrowings

(1,650)

(12,344)

(434)

(40,434)

(35,434)

(30,434)

Other long term liabilities

(851)

(3,169)

(5,141)

(12,005)

(4,931)

(2,357)

Net Assets

 

 

13,890

16,024

48,575

67,267

64,771

72,183

CASH FLOW

Operating Cash Flow

 

 

2,579

1,879

1,005

(929)

10,211

17,098

Net Interest

(66)

(167)

53

(1,200)

(1,000)

(800)

Tax

(1,102)

(554)

(412)

476

(1,790)

(3,678)

Capex

(701)

(1,779)

(3,451)

(5,490)

(3,025)

(3,306)

Acquisitions/disposals**

(500)

(3,228)

(5,923)

(27,770)

(11,701)

(1,716)

Shares issued

0

0

30,129

18,293

0

0

Dividends

(335)

(483)

(1,264)

(1,932)

(2,352)

(2,847)

Net Cash Flow

(124)

(4,332)

20,137

(18,552)

(9,657)

4,751

Opening net debt/(cash)

 

 

(3,505)

(3,431)

1,176

(18,681)

(129)

9,528

HP finance leases initiated

0

0

0

0

0

0

Other

51

(275)

(281)

0

0

0

Closing net debt/(cash)

 

 

(3,431)

1,176

(18,681)

(129)

9,528

4,777

Source: Company accounts, Edison Investment Research. Note: Includes c €4.3m exceptional costs in FY17. **Includes additional payments for ADEPCON in FY18 and FY19, and final payments for RSP, Astrums/Hartung and Harlex in FY18.

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by SNP Schneider-Neureither & Partner and prepared and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and 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 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. This document is provided 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.
Edison has a restrictive policy relating to personal dealing. 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. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. 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. 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 (ie 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. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2018. “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.

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 12, 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 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by SNP Schneider-Neureither & Partner and prepared and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and 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 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. This document is provided 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.
Edison has a restrictive policy relating to personal dealing. 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. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. 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. 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 (ie 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. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2018. “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.

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 12, 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 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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