Record win highlights the effective new strategy

SNP Schneider-Neureither & Partner 27 September 2016 Update

SNP Schneider-Neureither & Partner

Record win highlights the effective new strategy

Contract win

Software & comp services

27 September 2016

Price

€33.00

Market cap

€164m

Net debt (€m) as at 30 June 2016
(pre-rights issue)

6.4

Shares in issue

4.98m

Free float

55%

Code

SHF

Primary exchange

Frankfurt (Xetra)

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

12.5

21.6

152.1

Rel (local)

14.6

11.8

135.0

52-week high/low

€33.0

€13.2

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 product called SNP Transformation Backbone with SAP Landscape Transformation software (T-B).

Next events

Q3 results

28 October 2016

German Equity Forum

21-23 November 2016

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 has won a record $10m+ contract to combine the IT landscapes of two US chemical companies (we assume Dow Chemical and DuPont) which are merging. The contract comes on the back of the landmark Hewlett-Packard carve-out contract that SNP delivered in record time in H215. The latest win is a further indication that the group’s growth strategy is paying off and underpins our forecasts. SNP has been experiencing strong demand for its products and services, particularly in the German and US markets. Earlier this year it significantly expanded its operations in Asia, and in July it raised €29m (net) via a rights issue. Headcount is expected to rise towards 700 by year end and there is no sign that the activity is slowing. Hence, we believe the shares are attractive on c 17x our cash-adjusted FY18e EPS.

Year
end

Revenue
(€m)

PBT*
(€m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

12/14

30.5

(0.1)

(13.9)

13.0

N/A

0.4

12/15

56.2

3.4

58.8

34.0

56.1

1.0

12/16e

75.2

6.9

106.5

40.0

31.0

1.2

12/17e

88.4

9.6

130.1

50.0

25.4

1.5

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

Contract win with Dow-DuPont combination

SNP says it has been “commissioned to combine the SAP system landscapes of two of the world's most significant US-based chemical companies, which are currently in the process of merging”. The contract was won against strong international competition. In December 2015, DuPont and Dow announced that they intended to combine in a merger of equals and, following the merger, intended to separate into three independent publicly traded companies – an agriculture company, a material science company and a speciality products company.

SNP is positioning itself as a specialist implementer of complex IT transformations utilising a software-supported analytical method, which enables optimum project planning and minimises project risk. SNP’s T-B software solution automates the process of combining, upgrading or carving out data from ERP systems and is the only “off-the-shelf” solution on the market. T-B improves the transformation quality and is the only solution that has been accredited by both E&Y and PwC, which means it can significantly reduce auditing costs. ERP landscapes grow more complex over time, partly driven by M&A, and there is an ongoing requirement for companies to improve/upgrade their systems.

Valuation: Strong growth play in the ERP space

The stock trades on c 31x our maintained FY16e EPS, falling to c 25x in FY17e and to c 19x in FY18e. However, following the recent capital-raising, the group is in a net cash position, and we forecast €26.3m net cash at end-FY16 (prior to adjusting for c €4.2m other financial liabilities – mainly acquisition liabilities and a small pension deficit). Adjusted for the net cash, the ratings fall to c 27x in FY16, c 22x in FY17 and c 17x in FY18. We believe the ratings continue to look attractive given the forecast strong growth and continued margin recovery potential.

Exhibit 1: Financial summary

€'000s

2013

2014

2015

2016e

2017e

2018e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

23,536

30,480

56,236

75,179

88,387

100,047

Cost of sales

0

0

0

0

0

0

Gross Profit

23,536

30,480

56,236

75,179

88,387

100,047

EBITDA

 

 

(1,972)

862

5,484

9,077

11,804

14,917

Adjusted Operating Profit

 

 

(2,714)

(66)

4,222

7,724

10,377

13,234

Amortisation of acquired intangibles

0

0

0

0

0

0

Exceptionals

0

1,505

356

0

0

0

Associates

0

0

(3)

0

0

0

Operating Profit

(2,714)

1,439

4,575

7,724

10,377

13,234

Net Interest

(85)

(66)

(828)

(775)

(775)

(775)

Profit Before Tax (norm)

 

 

(2,799)

(132)

3,394

6,949

9,602

12,459

Profit Before Tax (FRS 3)

 

 

(2,799)

1,373

3,747

6,949

9,602

12,459

Tax

477

(344)

(1,195)

(2,085)

(2,880)

(3,738)

Profit After Tax (norm)

(2,322)

(477)

2,198

4,864

6,721

8,721

Profit After Tax (FRS 3)

(2,322)

1,028

2,552

4,864

6,721

8,721

Minority interest

(84)

(40)

0

(225)

(248)

(267)

Adjustments for normalised earnings

0

0

0

0

0

0

Net income (norm)

(2,405)

(517)

2,198

4,639

6,474

8,454

Net income (FRS 3)

(2,405)

988

2,552

4,639

6,474

8,454

Average Number of Shares Outstanding (m)

3.7

3.7

3.7

4.4

5.0

5.0

EPS - normalised (c)

 

 

(64.7)

(13.9)

58.8

106.5

130.1

169.9

EPS - normalised & fully diluted (c)

 

 

(64.7)

(13.9)

58.8

106.5

130.1

169.9

EPS - FRS 3 (c)

 

 

(64.7)

26.6

68.3

106.5

130.1

169.9

Dividend per share (c)

8.00

13.00

34.00

40.00

50.00

60.00

Gross Margin (%)

100.0

100.0

100.0

100.0

100.0

100.0

EBITDA Margin (%)

-8.4

2.8

9.8

12.1

13.4

14.9

Adjusted Operating Margin (%)

-11.5

-0.2

7.5

10.3

11.7

13.2

BALANCE SHEET

Fixed Assets

 

 

7,759

8,291

15,243

25,394

25,734

26,052

Intangible Assets

5,194

5,190

11,675

21,675

21,675

21,675

Tangible Assets

1,070

1,231

1,999

2,149

2,489

2,807

Other

1,496

1,871

1,570

1,570

1,570

1,570

Current Assets

 

 

16,145

17,882

29,996

62,888

71,054

75,553

Stocks

0

0

0

0

0

0

Debtors

9,105

11,286

16,084

21,502

25,280

28,615

Cash

6,355

5,681

13,769

41,243

45,631

46,796

Current Liabilities

 

 

(5,804)

(9,782)

(13,703)

(18,925)

(22,387)

(25,333)

Creditors

(5,204)

(9,182)

(11,101)

(16,323)

(19,785)

(22,731)

Short term borrowings

(600)

(600)

(2,602)

(2,602)

(2,602)

(2,602)

Long Term Liabilities

 

 

(4,338)

(2,501)

(15,513)

(20,013)

(20,013)

(15,513)

Long term borrowings

(2,250)

(1,650)

(12,344)

(12,344)

(12,344)

(12,344)

Other long term liabilities

(2,088)

(851)

(3,169)

(7,669)

(7,669)

(3,169)

Net Assets

 

 

13,762

13,890

16,024

49,344

54,388

60,759

CASH FLOW

Operating Cash Flow

 

 

(2,110)

2,579

1,879

8,701

11,362

14,417

Net Interest

4

(66)

(167)

(775)

(775)

(775)

Tax

(1,062)

(1,102)

(554)

(1,946)

(2,688)

(3,488)

Capex

(230)

(701)

(1,779)

(1,504)

(1,768)

(2,001)

Acquisitions/disposals

(2,267)

(500)

(3,228)

(5,500)

0

(4,500)

Shares issued

(35)

0

0

29,768

0

0

Dividends

(937)

(335)

(483)

(1,271)

(1,743)

(2,488)

Net Cash Flow

(6,638)

(124)

(4,332)

27,474

4,388

1,164

Opening net debt/(cash)

 

 

(10,152)

(3,505)

(3,431)

1,176

(26,298)

(30,686)

HP finance leases initiated

0

0

0

0

0

0

Other

(10)

51

(275)

0

0

0

Closing net debt/(cash)

 

 

(3,505)

(3,431)

1,176

(26,298)

(30,686)

(31,850)

Source: Company accounts, Edison Investment Research

Edison, the investment intelligence firm, is the future of investor interaction with corporates. Our team of over 100 analysts and investment professionals work with leading companies, fund managers and investment banks worldwide to support their capital markets activity. We provide services to more than 400 retained corporate and investor clients from our offices in London, New York, Frankfurt, Sydney and Wellington. 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 Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2016 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 Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. 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 2016. “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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Edison, the investment intelligence firm, is the future of investor interaction with corporates. Our team of over 100 analysts and investment professionals work with leading companies, fund managers and investment banks worldwide to support their capital markets activity. We provide services to more than 400 retained corporate and investor clients from our offices in London, New York, Frankfurt, Sydney and Wellington. 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 Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2016 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 Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. 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 2016. “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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

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

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Share this with friends and colleagues

You may be interested in