Strong Q4 trading prompts another upgrade

SNP Schneider-Neureither & Partner 15 December 2015 Update

SNP Schneider-Neureither & Partner

Strong Q4 trading prompts another upgrade

Trading update

Software & comp services

15 December 2015

Price

€23.51

Market cap

€87m

Net debt (€m) at 30 September 2015

1.1

Shares in issue

3.7m

Free float

58.4%

Code

SHF

Primary exchange

Frankfurt (Xetra)

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

11.6

64.7

78.8

Rel (local)

17.8

64.6

69.2

52-week high/low

€24.6

€12.3

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

Q4 results

29 January 2016

Annual report

30 March 2016

Q1 results

29 April 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 Schneider-Neureither & Partner (SNP) has announced that, due to continued healthy business activity in Q4, it has again raised guidance for FY15. Consequently, we have raised our EPS forecasts by 24% in FY15, by 5% in FY16 and by 2% in FY17. These numbers are before the inclusion of Astrums, the fast-growing, Singapore-based consulting and IT services company, which SNP announced it intended to acquire earlier this month. Given the continuing high level of activity, we believe the shares remain attractive on c 16x our FY17e earnings.

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

12/13

23.5

(2.8)

(64.7)

8.0

N/A

0.3

12/14

30.5

(0.1)

(13.9)

13.0

N/A

0.6

12/15e

56.0

3.7

68.8

20.0

34.2

0.9

12/16e

64.0

5.7

107.1

30.0

21.9

1.3

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

New guidance: €56m revenues and a 8% EBIT margin

SNP has increased its FY15 revenue guidance to c €56m (previously €51-53m, which was upgraded in October), while the EBIT margin is expected to be about 8% (previous guidance 6%). The new guidance does not take into account the impact of the proposed acquisition of Astrums, which has not yet been finalised. Astrums offers solutions around various ERP systems in the Malaysian and Singaporean markets. The group has had an extremely busy year, and completed a prestigious contract with Hewlett-Packard (HP) well ahead of schedule. The HP contract involved an ERP “carve-out” as part of the US technology giant’s plan to demerge into two separate companies in early November. The HP contract demonstrates the value and efficiency of the group’s SNP Transformation Backbone software, which is the only off-the-shelf software solution that automates the process of combining, upgrading or carving out data from ERP systems.

Forecasts: EPS goes up 24% in FY15 and 5% in FY16

We have brought our FY15 forecasts in line with management guidance, increasing revenues by 5% to €56m (previously we were above the guidance range), while operating profit (or EBIT) rises by 18% to €4.5m, for an 8% margin. Our revenue forecasts rise by 2% in each of FY16 and FY17, while operating profit goes up by 5% and 2 % respectively. Our EPS forecasts rise by 24% in FY15, 5% in FY16 and 2% in FY17. We will incorporate Astrums in our forecasts in early FY16, after we have more information on the acquisition. Given that Astrums generates healthy profits, we expect the deal to be immediately earnings enhancing.

Valuation: Strong growth play in the ERP space

The stock trades on c 34x our FY15e EPS, falling to c 22x in FY16e and to 16x in FY17. We believe the ratings continue to look attractive given the forecast strong growth and margin recovery potential. Our DCF (WACC of 11%) values the shares at €25.07 (previously €24.39), 7% above the current share price.

Exhibit 1: Financial summary

€000s

2012

2013

2014

2015e

2016e

2017e

Year-end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

27,157

23,536

30,480

56,010

64,006

73,264

Cost of sales

0

0

0

0

0

0

Gross Profit

27,157

23,536

30,480

56,010

64,006

73,264

EBITDA

 

 

3,714

(1,972)

862

5,585

7,630

9,723

Adjusted Operating Profit

 

 

2,951

(2,714)

(66)

4,469

6,496

8,590

Amortisation of acquired intangibles

0

0

0

0

0

0

Exceptionals

0

0

1,505

356

0

0

Associates

(107)

0

0

0

0

0

Operating Profit

2,845

(2,714)

1,439

4,825

6,496

8,590

Net Interest

20

(85)

(66)

(796)

(775)

(775)

Profit Before Tax (norm)

 

 

2,972

(2,799)

(132)

3,674

5,721

7,815

Profit Before Tax (FRS 3)

 

 

2,865

(2,799)

1,373

4,030

5,721

7,815

Tax

(947)

477

(344)

(1,102)

(1,716)

(2,344)

Profit After Tax (norm)

2,025

(2,322)

(477)

2,572

4,005

5,470

Profit After Tax (FRS 3)

1,918

(2,322)

1,028

2,928

4,005

5,470

Minority interest

(127)

(84)

(40)

0

0

0

Adjustments for normalised earnings

0

0

0

0

0

0

Net income (norm)

1,897

(2,405)

(517)

2,572

4,005

5,470

Net income (FRS 3)

1,791

(2,405)

988

2,928

4,005

5,470

Average No of Shares Outstanding (m)

3.4

3.7

3.7

3.7

3.7

3.7

EPS - normalised (c)

 

 

55.7

(64.7)

(13.9)

68.8

107.1

146.3

EPS - normalised & fully diluted (c)

 

 

55.7

(64.7)

(13.9)

68.8

107.1

146.3

EPS - FRS 3 (c)

 

 

52.5

(64.7)

26.6

78.3

107.1

146.3

Dividend per share (c)

24.00

8.00

13.00

20.00

30.00

40.00

Gross Margin (%)

100.0

100.0

100.0

100.0

100.0

100.0

EBITDA Margin (%)

13.7

-8.4

2.8

10.0

11.9

13.3

Adjusted Operating Margin (%)

10.9

-11.5

-0.2

8.0

10.1

11.7

BALANCE SHEET

Fixed Assets

 

 

4,236

7,759

8,291

14,257

14,404

14,735

Intangible Assets

2,327

5,194

5,190

11,151

11,151

11,151

Tangible Assets

1,486

1,070

1,231

1,236

1,382

1,714

Other

422

1,496

1,871

1,871

1,871

1,871

Current Assets

 

 

18,316

16,145

17,882

35,787

41,477

48,588

Stocks

0

0

0

0

0

0

Debtors

7,309

9,105

11,286

20,739

23,700

27,128

Cash

10,152

6,355

5,681

14,133

16,862

20,546

Current Liabilities

 

 

(4,781)

(5,804)

(9,782)

(19,334)

(22,098)

(25,382)

Creditors

(4,781)

(5,204)

(9,182)

(18,734)

(21,498)

(24,782)

Short term borrowings

0

(600)

(600)

(600)

(600)

(600)

Long Term Liabilities

 

 

(772)

(4,338)

(2,501)

(12,501)

(12,501)

(12,501)

Long term borrowings

0

(2,250)

(1,650)

(11,650)

(11,650)

(11,650)

Other long term liabilities

(772)

(2,088)

(851)

(851)

(851)

(851)

Net Assets

 

 

16,998

13,762

13,890

18,210

21,282

25,440

CASH FLOW

Operating Cash Flow

 

 

3,022

(2,110)

2,579

5,083

7,134

9,233

Net Interest

42

4

(66)

(796)

(775)

(775)

Tax

(1,826)

(1,062)

(1,102)

(1,029)

(1,602)

(2,188)

Capex

(465)

(230)

(701)

(1,120)

(1,280)

(1,465)

Acquisitions/disposals

(107)

(2,267)

(500)

(3,203)

0

0

Shares issued

4,839

(35)

0

0

0

0

Dividends

(2,048)

(937)

(335)

(483)

(748)

(1,121)

Net Cash Flow

3,457

(6,638)

(124)

(1,548)

2,729

3,683

Opening net debt/(cash)

 

 

(6,695)

(10,152)

(3,505)

(3,431)

(1,883)

(4,612)

HP finance leases initiated

0

0

0

0

0

0

Other

0

(10)

51

0

0

()

Closing net debt/(cash)

 

 

(10,152)

(3,505)

(3,431)

(1,883)

(4,612)

(8,296)

Source: SNP (historicals), Edison Investment Research (forecasts)

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 (www.fsa.gov.uk/register/firmBasicDetails.do?sid=181584). 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 2015 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 2015. “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