Revenue guidance is cut by 9.8% at mid-points

SNP Schneider-Neureither & Partner 31 July 2018 Update
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SNP Schneider-Neureither & Partner

Revenue guidance is cut by 9.8% at mid-points

Preliminary H1 results

Software & comp services

31 July 2018

Price

€17.70

Market cap

€97m

Net debt (€m) at 31 March 2018

32.6

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

(35.3)

(49.8)

(47.2)

Rel (local)

(37.8)

(50.5)

(49.8)

52-week high/low

€37.4

€17.8

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 and applies and tracks changes in IT systems.

Next events

Full Q2/H1 results

2 August

Q3 results

31 October

German Equity Forum

26-28 November 201

Analysts

Richard Jeans

+44 (0)20 3077 5735

Katherine Thompson

+44 (0)20 3077 5730

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

SNP’s preliminary H118 results indicate that the strongly anticipated tsunami of SAP S/4HANA transformations has continued to shift out as enterprises await greater clarity on the technological transition to the new cloud platform. After the Q1 results in May we reported that there had been several S/4HANA project delays, as such transformations are highly complex to implement. We understand this trend has continued. Nevertheless, SNP remains extremely confident that the tsunami is just a matter of time. In preparation, SNP has established new partnership with IBM Services incorporating a novel ‘Bluefield’ approach to target the potentially substantial S/4HANA market. We have removed our forecasts and will review them after the full Q2/H1 results on Thursday.

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

12/16

80.7

6.4

109.7

39.0

16.1

2.2

12/17

122.3

0.2

(7.4)

0.0

N/A

0.0

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

Trading update: Delays in project completions

H1 revenue was c €65m, representing c 35% growth over H117 while there was an adjusted loss before interest and tax (LBIT) of c €3.6m and a statutory LBIT of c €6.0m. The performance was primarily affected by delays in project completions, resulting in temporarily lower capacity utilisation for Professional Services, particularly software licence revenue from SNP’s in-house products fell short of expectations. Management now expects FY18 group revenue to be €135–140m (previous guidance was €150–155m) with a slightly negative EBIT margin. This suggests the H2 EBIT margin will be in positive single digits.

Partnership with IBM Services to target S/4HANA

In May, SNP announced a partnership with IBM Services, a unit of the US tech giant, to accelerate SAP S/4HANA adoption. The partnership will broaden SNP's route to market in North America and across the globe. The partners have developed a highly automated ‘Bluefield’ approach to rival traditional ‘Greenfield’ and ‘Brownfield’ approaches. It leverages SNP’s data transformation engine along with S/4HANA project management, technical and functional expertise from IBM Services to provide a faster approach to SAP S/4HANA adoption. The partnership will generate software sales for SNP, while IBM Services gets the services work.

Forecasts and valuation: Review after H2 numbers

We will review our forecasts after the full Q2 results on Thursday. The share price has halved since April and based on management’s new guidance, SNP trades on just over 1x FY18 revenues. This is cheap if management can return the business to double-digit margins, which we believe is highly probable if the S/4HANA transformation tsunami does materialise and the group can successfully grow its high-margin software sales.

Exhibit 1: Financial summary

€'000s

2012

2013

2014

2015

2016

2017

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

27,157

23,536

30,480

56,236

80,685

122,343

Cost of sales

0

0

0

0

0

0

Gross Profit

27,157

23,536

30,480

56,236

80,685

122,343

EBITDA

 

 

3,714

(1,972)

862

5,484

8,524

3,268

Adjusted Operating Profit

 

 

2,951

(2,714)

(66)

4,222

7,514

1,513

Amortisation of acquired intangibles

0

0

0

0

(657)

(2,021)

Exceptionals

0

0

1,505

356

0

0

Associates

(107)

0

0

(3)

8

(24)

Operating Profit

2,845

(2,714)

1,439

4,575

6,865

(532)

Net Interest

20

(85)

(66)

(828)

(1,137)

(1,327)

Profit Before Tax (norm)

 

 

2,972

(2,799)

(132)

3,394

6,377

186

Profit Before Tax (FRS 3)

 

 

2,865

(2,799)

1,373

3,747

5,728

(1,859)

Tax

(947)

477

(344)

(1,195)

(1,517)

(807)

Profit After Tax (norm)

2,025

(2,322)

(477)

2,198

4,860

(620)

Profit After Tax (FRS 3)

1,918

(2,322)

1,028

2,552

4,211

(2,666)

Minority interest

(127)

(84)

(40)

0

(147)

234

Adjustments for normalised earnings

0

0

0

0

0

0

Net income (norm)

1,897

(2,405)

(517)

2,198

4,713

(386)

Net income (FRS 3)

1,791

(2,405)

988

2,552

4,064

(2,431)

Average Number of Shares Outstanding (m)

3.4

3.7

3.7

3.7

4.3

5.2

EPS - normalised (c)

 

 

55.7

(64.7)

(13.9)

58.8

109.7

(7.4)

EPS - normalised & fully diluted (c)

 

 

55.7

(64.7)

(13.9)

58.8

109.7

(7.4)

EPS - FRS 3 (c)

 

 

52.5

(64.7)

26.6

68.3

94.6

(46.8)

Dividend per share (c)

24.00

8.00

13.00

34.00

39.00

0.00

Gross Margin (%)

100.0

100.0

100.0

100.0

100.0

100.0

EBITDA Margin (%)

13.7

-8.4

2.8

9.8

10.6

2.7

Adjusted Operating Margin (%)

10.9

-11.5

-0.2

7.5

9.3

1.2

BALANCE SHEET

Fixed Assets

 

 

4,236

7,759

8,291

15,243

30,109

75,171

Intangible Assets

2,327

5,194

5,190

11,675

24,179

67,012

Tangible Assets

1,486

1,070

1,231

1,999

3,161

5,187

Other

422

1,496

1,871

1,570

2,769

2,972

Current Assets

 

 

18,316

16,145

17,882

29,996

58,424

78,614

Stocks

0

0

0

0

371

371

Debtors

7,309

9,105

11,286

16,084

25,652

43,781

Cash

10,152

6,355

5,681

13,769

31,914

33,877

Current Liabilities

 

 

(4,781)

(5,804)

(9,782)

(13,703)

(32,631)

(40,531)

Creditors

(4,781)

(5,204)

(9,182)

(11,101)

(14,523)

(29,295)

Short term borrowings

0

(600)

(600)

(2,602)

(18,108)

(11,236)

Long Term Liabilities

 

 

(772)

(4,338)

(2,501)

(15,513)

(7,327)

(53,157)

Long term borrowings

0

(2,250)

(1,650)

(12,344)

(5,531)

(49,487)

Other long term liabilities

(772)

(2,088)

(851)

(3,169)

(1,796)

(3,670)

Net Assets

 

 

16,998

13,762

13,890

16,024

48,575

60,097

CASH FLOW

Operating Cash Flow

 

 

3,022

(2,110)

2,579

1,879

1,005

(5,316)

Net Interest

42

4

(66)

(167)

53

(798)

Tax

(1,826)

(1,062)

(1,102)

(554)

(412)

(1,366)

Capex

(465)

(230)

(701)

(1,779)

(3,451)

(5,234)

Acquisitions/disposals

(107)

(2,267)

(500)

(3,228)

(5,923)

(28,783)

Shares issued

4,839

(35)

0

0

30,129

18,293

Dividends

(2,048)

(937)

(335)

(483)

(1,264)

(1,932)

Net Cash Flow

3,457

(6,638)

(124)

(4,332)

20,137

(25,136)

Opening net debt/(cash)

 

 

(6,695)

(10,152)

(3,505)

(3,431)

1,176

(8,275)

HP finance leases initiated

0

0

0

0

0

0

Other

0

(10)

51

(275)

(10,686)

(9,985)

Closing net debt/(cash)

 

 

(10,152)

(3,505)

(3,431)

1,176

(8,275)

26,847

Source: Company accounts

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 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 Limited (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 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 Limited (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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