Esker |
Strong underlying growth drives upgrades |
FY15 revenue update |
Software & comp services |
27 January 2016 |
Share price performance
Business description
Next event
Analysts
Esker is a research client of Edison Investment Research Limited |
Esker’s FY15 revenue update confirmed that strong growth continued into Q415, with full year revenue growth of 27% and organic constant currency growth of 13%. The company expects strong growth to continue in FY16 – we have upgraded our forecasts to reflect this, with EPS upgrades of 10% in FY15e and 13% in FY16e.
Year end |
Revenue (€m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/13 |
41.1 |
3.9 |
0.62 |
0.18 |
46.8 |
0.6 |
12/14 |
46.1 |
5.9 |
0.90 |
0.24 |
32.2 |
0.8 |
12/15e |
58.5 |
10.3 |
1.47 |
0.26 |
19.7 |
0.9 |
12/16e |
64.4 |
11.7 |
1.59 |
0.28 |
18.2 |
1.0 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
FY15 revenue beat; positive FY16 outlook
Esker expects to report 27% revenue growth for FY15 (13% organic constant currency), compared to our forecast for 24% growth. Q415 revenues grew 23% (10% organic constant currency), representing a record quarter and year for revenues. SaaS-based revenues made up 72% of FY15 revenues, up from 66% in FY14. Net cash at year-end stood at €11.6m compared to our €6.0m forecast. The company expects to be able to generate double-digit revenue growth in FY16, which implies revenues of at least €64.3m versus our €60.8m forecast.
Revenue and EPS upgrades
We have upgraded our forecasts to reflect the strong performance in FY15 and the guidance for FY16. We upgrade FY16 revenue by 6% to €64m, equating to 10%
y-o-y growth. We assume the company continues to invest in growth and have increased our headcount assumptions for both years. We now forecast an EBITDA margin of 24.2% (up from 23.2%) and upgrade EPS by 10.3% in FY15; in FY16 we upgrade our EBITDA margin from 23.5% to 24.4% and upgrade EPS by 13.1%. We note that with c 40% of revenues but a smaller proportion of costs generated in the US, Esker’s profitability is sensitive to changes in the US$/€ exchange rate.
Valuation: Positive momentum supports upside
On our revised forecasts, Esker trades on a P/E of 18.2x FY16e EPS, at a discount to global software companies with DPA offerings (despite better profitability) and at a small premium to French small-cap software peers (consistent with its superior profitability). With nearly 80% recurring revenues, Esker has good visibility for FY16, and recent acquisitions have broadened the company’s product offering. The company has a strong balance sheet, providing funds for further acquisitions and product development, and supporting growth on a medium-term basis.
Exhibit 1: Financial summary
€'000s |
2010 |
2011 |
2012 |
2013 |
2014 |
2015e |
2016e |
||
Year end 31 December |
IFRS |
French GAAP |
French GAAP |
French GAAP |
French GAAP |
French GAAP |
French GAAP |
||
PROFIT & LOSS |
|||||||||
Revenue |
|
|
32,704 |
36,278 |
40,260 |
41,116 |
46,056 |
58,504 |
64,447 |
EBITDA |
|
|
3,819 |
6,041 |
6,637 |
6,598 |
8,979 |
14,187 |
15,748 |
Operating Profit (before amort and except) |
|
|
1,973 |
3,810 |
4,265 |
3,883 |
5,700 |
10,237 |
11,598 |
Amortisation of acquired intangibles |
0 |
0 |
0 |
0 |
0 |
(429) |
(500) |
||
Exceptionals and other income |
(123) |
(209) |
(16) |
60 |
53 |
0 |
0 |
||
Other income |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
Operating Profit |
1,850 |
3,601 |
4,249 |
3,943 |
5,753 |
9,808 |
11,098 |
||
Net Interest |
250 |
96 |
38 |
6 |
220 |
100 |
100 |
||
Profit Before Tax (norm) |
|
|
2,223 |
3,906 |
4,303 |
3,889 |
5,920 |
10,337 |
11,698 |
Profit Before Tax (FRS 3) |
|
|
2,100 |
3,697 |
4,287 |
3,949 |
5,973 |
9,908 |
11,198 |
Tax |
(219) |
(1,057) |
(1,286) |
(761) |
(1,323) |
(2,477) |
(2,800) |
||
Profit After Tax (norm) |
2,004 |
2,849 |
3,012 |
3,140 |
4,609 |
7,753 |
8,774 |
||
Profit After Tax (FRS 3) |
1,881 |
2,640 |
3,001 |
3,188 |
4,650 |
7,431 |
8,399 |
||
Average Number of Shares Outstanding (m) |
4.5 |
4.6 |
4.7 |
4.7 |
4.8 |
5.0 |
5.2 |
||
EPS - normalised (c) |
|
|
44 |
62 |
64 |
67 |
97 |
156 |
168 |
EPS - normalised fully diluted (c) |
|
|
42 |
60 |
60 |
62 |
90 |
147 |
159 |
EPS - (IFRS) (c) |
|
|
42 |
58 |
64 |
68 |
97 |
149 |
161 |
Dividend per share (c) |
8.00 |
12.00 |
14.00 |
18.00 |
24.00 |
26.00 |
28.00 |
||
Gross margin (%) |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
||
EBITDA Margin (%) |
11.7 |
16.7 |
16.5 |
16.0 |
19.5 |
24.2 |
24.4 |
||
Operating Margin (before GW and except) (%) |
6.0 |
10.5 |
10.6 |
9.4 |
12.4 |
17.5 |
18.0 |
||
BALANCE SHEET |
|||||||||
Fixed Assets |
|
|
6,190 |
7,667 |
8,764 |
9,437 |
12,552 |
25,073 |
25,523 |
Intangible Assets |
3,892 |
4,501 |
5,521 |
6,458 |
7,709 |
20,130 |
20,480 |
||
Tangible Assets |
2,017 |
2,769 |
2,835 |
2,450 |
4,470 |
4,570 |
4,670 |
||
Other |
281 |
397 |
408 |
529 |
373 |
373 |
373 |
||
Current Assets |
|
|
21,243 |
23,518 |
24,358 |
26,834 |
33,894 |
34,226 |
42,357 |
Stocks |
88 |
89 |
100 |
89 |
93 |
93 |
93 |
||
Debtors |
10,160 |
11,030 |
11,567 |
12,144 |
15,110 |
17,952 |
19,069 |
||
Cash |
9,213 |
10,847 |
11,393 |
13,411 |
17,559 |
15,049 |
22,063 |
||
Other |
1,782 |
1,552 |
1,298 |
1,190 |
1,132 |
1,132 |
1,132 |
||
Current Liabilities |
|
|
(14,664) |
(15,469) |
(15,551) |
(16,164) |
(19,827) |
(23,131) |
(24,708) |
Creditors |
(14,664) |
(15,469) |
(15,551) |
(16,164) |
(19,827) |
(23,131) |
(24,708) |
||
Short term borrowings |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
Long Term Liabilities |
|
|
(1,935) |
(2,321) |
(2,019) |
(1,450) |
(5,113) |
(8,113) |
(8,113) |
Long term borrowings |
(1,935) |
(2,321) |
(2,019) |
(1,450) |
(5,113) |
(8,113) |
(8,113) |
||
Other long term liabilities |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
Net Assets |
|
|
10,834 |
13,395 |
15,552 |
18,657 |
21,506 |
28,055 |
35,059 |
CASH FLOW |
|||||||||
Operating Cash Flow |
|
|
4,055 |
5,362 |
6,163 |
6,539 |
9,245 |
14,649 |
16,208 |
Net Interest |
295 |
138 |
122 |
90 |
310 |
100 |
100 |
||
Tax |
(451) |
(544) |
(1,366) |
(645) |
(1,075) |
(2,477) |
(2,800) |
||
Capex |
(2,159) |
(2,502) |
(3,548) |
(3,434) |
(4,028) |
(5,000) |
(5,100) |
||
Acquisitions/disposals |
(42) |
(116) |
0 |
0 |
22 |
(11,559) |
0 |
||
Financing |
369 |
378 |
400 |
628 |
(694) |
0 |
0 |
||
Dividends |
0 |
(365) |
(550) |
(659) |
(877) |
(1,223) |
(1,395) |
||
Net Cash Flow |
2,067 |
2,351 |
1,221 |
2,519 |
2,903 |
(5,510) |
7,014 |
||
Opening net debt/(cash) |
|
|
(5,609) |
(7,278) |
(8,526) |
(9,354) |
(11,961) |
(12,446) |
(6,936) |
HP finance leases initiated |
(463) |
(1,074) |
(393) |
0 |
(2,293) |
0 |
0 |
||
Other |
65 |
(29) |
(0) |
88 |
(125) |
0 |
0 |
||
Closing net debt/(cash) |
|
|
(7,278) |
(8,526) |
(9,354) |
(11,961) |
(12,446) |
(6,936) |
(13,950) |
Source: Esker, Edison Investment Research
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