Esker |
On track; outlook maintained |
Q2 revenues |
Software & comp services |
20 July 2017 |
Share price performance
Business description
Next events
Analysts
Esker is a research client of Edison Investment Research Limited |
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Esker has reported H117 revenues in line with our forecasts, achieving 9% y-o-y organic constant currency growth. The e-integration acquisition is performing well and the company has maintained its guidance for double-digit organic revenue growth for 2017. Esker’s strong cash position provides resources for further M&A. We leave our forecasts unchanged, pending full H117 results on 14 September.
Year end |
Revenue (€m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/15 |
58.5 |
9.3 |
1.31 |
0.30 |
40.0 |
0.6 |
12/16 |
66.0 |
9.9 |
1.23 |
0.33 |
42.6 |
0.6 |
12/17e |
75.6 |
11.9 |
1.42 |
0.36 |
36.9 |
0.7 |
12/18e |
82.0 |
12.8 |
1.51 |
0.39 |
34.7 |
0.7 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
H1 revenues on track
Esker generated revenues of €19.1m in Q217, +13% y-o-y (+9% constant currency organic growth). H117 revenues of €37.8m were in line with our forecast, +14% y-o-y (+9% constant currency organic). The recent acquisition, e-integration, contributed revenues of €0.9m in Q217 (+24% y-o-y) and €1.8m in H117 (+20% y-o-y) – this is marginally better than expected. SaaS-based revenues grew 25% y-o-y (18% constant currency and organic) to make up 84% of revenues. The company closed H117 with cash of €23.4m and net cash of €9.7m.
Outlook maintained
The company continues to expect to achieve double-digit organic revenue growth in 2017. Clearly, H117 revenues were slightly below this rate, but as previously flagged, the legacy products business had a tough compare for H117 and this effect should diminish in H217. Recurring revenues made up 78% of the total in Q217 giving a high level of visibility. We leave our estimates unchanged. We note that with c 40% of revenues generated in the US, Esker’s reported revenues and earnings are sensitive to changes in the $/€ exchange rate. While the rate averaged $1.08:€ in H117, the euro has strengthened against the dollar since April and currently is trading at $1.15:€. We will revisit our currency assumptions when H117 results are reported in September.
Valuation: Premium rating warranted
On an EV/sales and P/E basis, Esker is trading at a premium to document process automation software companies and French small-cap software companies; in our view this is justified by forecast revenue growth and operating margins that are higher than both groups. In our view, the transition to SaaS is likely to suppress operating margins across the software sector (even after transition costs are taken into account). Esker is ahead of many peers in making this transition and is generating strong growth and margins. The company has recurring revenues approaching 80%, which provides a high level of revenue and cash flow predictability.
Exhibit 1: Financial summary
€'000s |
2012 |
2013 |
2014 |
2015 |
2016 |
2017e |
2018e |
||
Year end 31 December |
French GAAP |
French GAAP |
French GAAP |
French GAAP |
French GAAP |
French GAAP |
French GAAP |
||
PROFIT & LOSS |
|||||||||
Revenue |
|
|
40,260 |
41,116 |
46,061 |
58,457 |
65,990 |
75,597 |
82,009 |
EBITDA |
|
|
6,637 |
6,598 |
8,979 |
13,405 |
14,871 |
16,668 |
17,697 |
Operating Profit (before amort and except) |
|
|
4,265 |
3,883 |
5,700 |
9,257 |
9,934 |
11,668 |
12,597 |
Amortisation of acquired intangibles |
0 |
0 |
0 |
(302) |
(200) |
(200) |
(200) |
||
Exceptionals and other income |
(16) |
60 |
53 |
(245) |
(474) |
0 |
0 |
||
Other income |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
Operating Profit |
4,249 |
3,943 |
5,753 |
8,710 |
9,260 |
11,468 |
12,397 |
||
Net Interest |
38 |
6 |
220 |
(6) |
(108) |
100 |
100 |
||
Profit Before Tax (norm) |
|
|
4,303 |
3,889 |
5,920 |
9,312 |
9,949 |
11,891 |
12,820 |
Profit Before Tax (FRS 3) |
|
|
4,287 |
3,949 |
5,973 |
8,765 |
9,275 |
11,691 |
12,620 |
Tax |
(1,286) |
(761) |
(1,323) |
(2,292) |
(2,950) |
(3,858) |
(4,165) |
||
Profit After Tax (norm) |
3,012 |
3,140 |
4,609 |
6,877 |
6,785 |
7,967 |
8,589 |
||
Profit After Tax (FRS 3) |
3,001 |
3,188 |
4,650 |
6,473 |
6,325 |
7,833 |
8,455 |
||
Average Number of Shares Outstanding (m) |
4.7 |
4.7 |
4.8 |
5.0 |
5.1 |
5.3 |
5.4 |
||
EPS - normalised (c) |
|
|
64 |
67 |
97 |
138 |
132 |
150 |
159 |
EPS - normalised fully diluted (c) |
|
|
60 |
62 |
90 |
131 |
123 |
142 |
151 |
EPS - (GAAP) (c) |
|
|
64 |
68 |
97 |
130 |
123 |
148 |
157 |
Dividend per share (c) |
14.00 |
18.00 |
24.00 |
30.00 |
33.00 |
36.00 |
39.00 |
||
Gross margin (%) |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||
EBITDA Margin (%) |
16.5 |
16.0 |
19.5 |
22.9 |
22.5 |
22.0 |
21.6 |
||
Operating Margin (before GW and except) (%) |
10.6 |
9.4 |
12.4 |
15.8 |
15.1 |
15.4 |
15.4 |
||
BALANCE SHEET |
|||||||||
Fixed Assets |
|
|
8,764 |
9,437 |
12,552 |
25,184 |
28,324 |
36,352 |
38,125 |
Intangible Assets |
5,521 |
6,458 |
7,709 |
19,603 |
22,381 |
30,599 |
32,522 |
||
Tangible Assets |
2,835 |
2,450 |
4,470 |
4,985 |
5,158 |
4,968 |
4,818 |
||
Other |
408 |
529 |
373 |
596 |
785 |
785 |
785 |
||
Current Assets |
|
|
24,358 |
26,834 |
33,894 |
36,110 |
42,024 |
45,589 |
51,808 |
Stocks |
100 |
89 |
93 |
161 |
101 |
101 |
101 |
||
Debtors |
11,567 |
12,144 |
15,110 |
18,073 |
19,523 |
22,368 |
24,266 |
||
Cash |
11,393 |
13,411 |
17,559 |
16,295 |
21,338 |
22,058 |
26,379 |
||
Other |
1,298 |
1,190 |
1,132 |
1,581 |
1,062 |
1,062 |
1,062 |
||
Current Liabilities |
|
|
(15,551) |
(16,164) |
(19,827) |
(24,789) |
(28,299) |
(30,752) |
(32,390) |
Creditors |
(15,551) |
(16,164) |
(19,827) |
(24,789) |
(28,299) |
(30,752) |
(32,390) |
||
Short term borrowings |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
Long Term Liabilities |
|
|
(2,019) |
(1,450) |
(5,113) |
(7,317) |
(7,657) |
(9,757) |
(9,757) |
Long term borrowings |
(2,019) |
(1,450) |
(5,113) |
(7,317) |
(7,657) |
(7,657) |
(7,657) |
||
Other long term liabilities |
0 |
0 |
0 |
0 |
0 |
(2,100) |
(2,100) |
||
Net Assets |
|
|
15,552 |
18,657 |
21,506 |
29,188 |
34,392 |
41,432 |
47,786 |
CASH FLOW |
|||||||||
Operating Cash Flow |
|
|
6,163 |
6,539 |
9,245 |
14,307 |
16,303 |
16,276 |
17,437 |
Net Interest |
122 |
90 |
310 |
(27) |
(127) |
100 |
100 |
||
Tax |
(1,366) |
(645) |
(1,075) |
(1,165) |
(1,456) |
(3,858) |
(4,165) |
||
Capex |
(3,548) |
(3,434) |
(4,028) |
(3,909) |
(7,021) |
(6,718) |
(7,074) |
||
Acquisitions/disposals |
0 |
0 |
22 |
(11,700) |
(948) |
(3,300) |
0 |
||
Financing |
400 |
628 |
(694) |
1,324 |
(581) |
0 |
0 |
||
Dividends |
(550) |
(659) |
(877) |
(1,208) |
(1,550) |
(1,780) |
(1,978) |
||
Net Cash Flow |
1,221 |
2,519 |
2,903 |
(2,378) |
4,620 |
720 |
4,321 |
||
Opening net debt/(cash) |
|
|
(8,526) |
(9,354) |
(11,961) |
(12,446) |
(8,978) |
(13,681) |
(14,401) |
HP finance leases initiated |
(393) |
0 |
(2,293) |
(1,090) |
83 |
0 |
0 |
||
Other |
(0) |
88 |
(125) |
0 |
0 |
0 |
0 |
||
Closing net debt/(cash) |
|
|
(9,354) |
(11,961) |
(12,446) |
(8,978) |
(13,681) |
(14,401) |
(18,722) |
Source: Esker, Edison Investment Research
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