Esker |
Strong order intake supports growth outlook |
Q420 revenue update |
Software & comp services |
13 January 2021 |
Share price performance
Business description
Next events
Analyst
Esker is a research client of Edison Investment Research Limited |
Esker has confirmed it is still generating revenue growth, despite the continued COVID-19 restrictions around the world, with constant currency (cc) growth of 11% for Q420 and 9% for FY20. Order intake was 17% higher in FY20, accelerating to 30% growth in Q4, providing support for the company’s double-digit revenue growth expectations for FY21. We have trimmed our forecasts to reflect FY20 revenues and the stronger euro, reducing normalised diluted EPS by 3.4% in FY20e and 5.1% in FY21e. In our view, Esker is well positioned to benefit from the accelerating adoption of digital automation solutions within the corporate world.
Year end |
Revenue (€m) |
PBT* |
Diluted EPS* |
DPS |
P/E |
Yield |
12/18 |
86.9 |
12.2 |
1.65 |
0.41 |
117.6 |
0.2 |
12/19 |
104.2 |
13.6 |
1.79 |
0.33 |
108.3 |
0.2 |
12/20e |
112.3 |
13.1 |
1.63 |
0.35 |
118.4 |
0.2 |
12/21e |
128.7 |
17.1 |
2.10 |
0.40 |
92.4 |
0.2 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Strong performance despite COVID-19 impact
Esker reported Q420 revenue of €30.9m, 8% higher year-on-year on a reported basis and 11% higher on a cc basis. For FY20, this resulted in revenues of €112.3m (+8% reported, +9% cc), in line with guidance for 9% cc growth and 0.5% below our forecast. SaaS-based revenues grew 13% y-o-y versus 14% in Q3 and 2% in Q2. For FY20 on a cc basis, SaaS-based revenues grew 12%, licence and maintenance revenues declined 14% and legacy products declined 31%. Net cash at year-end of €30.7m was ahead of our €25.7m forecast.
Double-digit growth expected in FY21
Order intake of €34m for FY20 was 17% higher y-o-y and Q4 order intake grew by 30% y-o-y. Esker expects double-digit revenue growth for FY21 (revenue of c €128m at current exchange rates) with operating margins of 10–15%. We have revised our forecasts to reflect FY20 revenues and the stronger euro versus the dollar, with FY20 revenue trimmed by 0.5% and FY21 by 1.4%. Our FY21e operating margin is at the mid-point of guidance. We reduce normalised diluted EPS by 3.4% for FY20 and 5.1% for FY21.
Valuation: Reflects high level of recurring revenues
The stock trades at a premium to DPA software and French software peers but at a discount to US SaaS peers. Esker has re-rated over the last year (the stock is up 96% over the last 12 months), with its P/E multiple moving more towards the US SaaS software peer group. We believe this is due to the value placed on businesses with high levels of recurring revenue, providing visibility through a period of economic uncertainty. Esker has the added advantage of a strong balance sheet to fund growth. Successful execution of Esker’s partner strategy could be a trigger for earnings and share price upside.
Exhibit 1: Financial summary
€'000s |
2016 |
2017 |
2018 |
2019 |
2020e |
2021e |
||
Year end 31 December |
French GAAP |
French GAAP |
French GAAP |
French GAAP |
French GAAP |
French GAAP |
||
PROFIT & LOSS |
||||||||
Revenue |
|
|
65,990 |
76,064 |
86,871 |
104,188 |
112,340 |
128,736 |
EBITDA |
|
|
14,871 |
16,399 |
18,279 |
20,054 |
21,253 |
25,295 |
Operating Profit (before amort and except) |
|
|
9,934 |
10,547 |
11,955 |
12,843 |
12,978 |
16,420 |
Amortisation of acquired intangibles |
(200) |
(300) |
(344) |
(425) |
(425) |
(425) |
||
Exceptionals and other income |
(474) |
(456) |
(88) |
(62) |
0 |
0 |
||
Other income |
0 |
0 |
0 |
0 |
0 |
0 |
||
Operating Profit |
9,260 |
9,791 |
11,523 |
12,356 |
12,553 |
15,995 |
||
Net Interest |
(108) |
(110) |
(57) |
268 |
(200) |
100 |
||
Profit Before Tax (norm) |
|
|
9,949 |
10,669 |
12,215 |
13,634 |
13,126 |
17,120 |
Profit Before Tax (FRS 3) |
|
|
9,275 |
9,913 |
11,783 |
13,147 |
13,553 |
16,695 |
Tax |
(2,950) |
(3,148) |
(2,940) |
(3,402) |
(3,659) |
(4,508) |
||
Profit After Tax (norm) |
6,785 |
7,281 |
9,168 |
10,106 |
9,582 |
12,498 |
||
Profit After Tax (FRS 3) |
6,325 |
6,765 |
8,843 |
9,745 |
9,894 |
12,187 |
||
Ave. Number of Shares Outstanding (m) |
5.3 |
5.3 |
5.4 |
5.4 |
5.7 |
5.8 |
||
EPS - normalised (c) |
|
|
128 |
138 |
170 |
186 |
169 |
217 |
EPS - normalised fully diluted (c) |
|
|
122 |
132 |
165 |
179 |
163 |
210 |
EPS - (GAAP) (c) |
|
|
120 |
128 |
164 |
180 |
175 |
212 |
Dividend per share (c) |
30 |
32 |
41 |
33 |
35 |
40 |
||
Gross margin (%) |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||
EBITDA Margin (%) |
22.5 |
21.6 |
21.0 |
19.2 |
18.9 |
19.6 |
||
Operating Margin (before GW and except) (%) |
15.1 |
13.9 |
13.8 |
12.3 |
11.6 |
12.8 |
||
BALANCE SHEET |
||||||||
Fixed Assets |
|
|
28,324 |
37,912 |
39,635 |
47,201 |
49,849 |
52,649 |
Intangible Assets |
22,381 |
26,673 |
28,096 |
29,323 |
31,723 |
34,223 |
||
Tangible Assets |
5,158 |
7,115 |
7,050 |
10,434 |
10,334 |
10,034 |
||
Other |
785 |
4,124 |
4,489 |
7,444 |
7,792 |
8,392 |
||
Current Assets |
|
|
42,024 |
42,823 |
49,016 |
52,022 |
67,760 |
63,941 |
Stocks |
101 |
176 |
147 |
185 |
185 |
185 |
||
Debtors |
19,523 |
21,253 |
25,551 |
30,015 |
30,778 |
35,976 |
||
Cash |
21,338 |
20,632 |
22,794 |
21,357 |
36,332 |
27,315 |
||
Other |
1,062 |
762 |
524 |
465 |
465 |
465 |
||
Current Liabilities |
|
|
(28,299) |
(26,206) |
(30,072) |
(34,300) |
(47,238) |
(38,631) |
Creditors |
(28,299) |
(26,206) |
(30,072) |
(34,300) |
(35,738) |
(38,631) |
||
Short term borrowings |
0 |
0 |
0 |
0 |
(11,500) |
0 |
||
Long Term Liabilities |
|
|
(7,657) |
(14,909) |
(10,810) |
(8,276) |
(5,776) |
(3,276) |
Long term borrowings |
(7,657) |
(13,716) |
(9,318) |
(6,516) |
(4,016) |
(1,516) |
||
Other long term liabilities |
0 |
(1,193) |
(1,492) |
(1,760) |
(1,760) |
(1,760) |
||
Net Assets |
|
|
34,392 |
39,620 |
47,769 |
56,647 |
64,595 |
74,683 |
CASH FLOW |
||||||||
Operating Cash Flow |
|
|
15,944 |
17,311 |
18,366 |
20,290 |
21,928 |
22,990 |
Net Interest |
(127) |
(75) |
63 |
352 |
(200) |
100 |
||
Tax |
(1,456) |
(2,053) |
(2,795) |
(3,329) |
(2,807) |
(4,508) |
||
Capex |
(7,021) |
(9,304) |
(7,789) |
(10,995) |
(11,000) |
(11,500) |
||
Acquisitions/disposals |
(935) |
(7,551) |
(225) |
(486) |
0 |
0 |
||
Financing |
467 |
(345) |
785 |
1,449 |
0 |
0 |
||
Dividends |
(1,550) |
(1,633) |
(1,756) |
(2,237) |
(1,946) |
(2,099) |
||
Net Cash Flow |
5,322 |
(3,650) |
6,649 |
5,044 |
5,975 |
4,983 |
||
Opening net debt/(cash) |
|
|
(8,978) |
(13,681) |
(10,016) |
(16,576) |
(21,018) |
(26,993) |
HP finance leases initiated |
(645) |
0 |
0 |
0 |
0 |
0 |
||
Other |
26 |
(15) |
(90) |
(602) |
0 |
0 |
||
Closing net debt/(cash) |
|
|
(13,681) |
(10,016) |
(16,576) |
(21,018) |
(26,993) |
(31,976) |
Source: Esker, Edison Investment Research
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