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Trust worthy

Tinexta 16 April 2019 Initiation
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Tinexta

Trust worthy

Initiation of coverage

Professional services

16 April 2019

Price

€11.06

Market cap

€516m

Net debt (€m) at end December 2018

125

Shares in issue

46.6m

Free float

34%

Code

TNXT

Primary exchange

Borsa Italiana STAR

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

17.8

73.4

70.2

Rel (local)

13.5

52.6

81.6

52-week high/low

€11.1

€5.4

Business description

Tinexta has three business divisions: Digital Trust – solutions to improve digital security; Credit Information & Management – information services to help manage corporate credit; and Innovation & Marketing Services – consulting services to help clients develop and/or grow their businesses.

Next events

Q1 trading statement

15 May 2019

Analysts

Russell Pointon

+44 (0)20 3077 5757

Fiona Orford-Williams

+44 (0)20 3077 5739

Tinexta is a research client of Edison Investment Research Limited

Tinexta provides IT solutions, information and consulting services in niche markets predominantly to corporate clients. It has leading positions in its domestic markets. In aggregate, we believe these are capable of 6% organic revenue growth through our forecast period while expanding EBITDA margin, cash flow conversion and ROIC. There is likely to be further M&A in order to increase geographic coverage, client reach or expand the product offer. Our multiples-based SOTP and DCF valuations support a valuation of €13.5–14.2.

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/17

174.8

30.5

0.46

0.14

24.0

1.3

12/18

238.7

48.3

0.73

0.23

15.1

2.1

12/19e

256.5

52.5

0.78

0.25

14.2

2.3

12/20e

272.9

57.2

0.85

0.28

13.0

2.5

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

Favourable growth trends, internationalisation & M&A

Tinexta is exposed to favourable growth trends including the transition to a digital world and the requirement for enhanced online security. Starting from a purely domestic Italian focus, the company is exploiting these trends internationally. In particular, given recent regulatory changes, in Digital Trust the group is leveraging its Italian expertise to expand on an EU-wide basis with a unified legal base across the region. At the same time, Tinexta is likely to make acquisitions in Italy and Europe that will further expand its addressable markets, and seek cross-selling opportunities between the business units.

Good organic revenue and EBITDA growth potential

Based on the group’s current structure, we estimate it is capable of producing c 6% organic revenue growth through our forecast period, translating to high-single-digit EPS growth given a gradual increase in margin from modest operational gearing and changing business mix. The track record in improving cash flow generation (cash conversion above 90%) and ROIC while undertaking M&A should provide confidence that it can add further value as it seeks to expand the businesses. We understand that recurring revenue is c 70–80% across the divisions. Management has proven to be shareholder friendly with a dividend payout ratio that has increased to 33% of earnings.

Valuation: Scope for expansion

Tinexta’s EV/EBITDA multiples of 9.1x for FY19 and 8.5x for FY20 look low given our forecast of a 6%+ organic CAGR for EBITDA from FY19–21. The free cash flow yield is 6.3% in FY19. A sum-of-the-parts (SOTP) valuation suggests a valuation of €13.5/share. This is supported by our discounted cash flow (DCF) valuation of €14.2/share.

Investment summary

Company description: Professional information, security and consulting services

Tinexta has leading or strong market positons in its two largest business units. The greatest potential for long-term structural growth is in Digital Trust (40% of revenue and 34% of EBITDA) as it provides solutions that help companies transition to a digital world and streamline their internal operations. This business unit will expand through Europe to take advantage of recent EU regulatory changes that lay the base for a single, unified pan-European Digital Trust market, which will facilitate greater cross-border opportunities. The newest division, Innovation & Marketing Services (30% of revenue and 45% of EBITDA) provides consulting services that help clients develop and/or grow their businesses. The profile of this business unit is likely to change as M&A targets new niche services. The Credit Information & Management division (30% of revenue and 21% of EBITDA) is likely to produce the lowest growth given its key market, credit information, is the most competitive with more limited scope to differentiate the products and services.

Financials: Organic growth to be complemented by M&A

Driven by high-single-digit growth in Digital Trust we forecast a 6% CAGR in organic revenue through FY21. With greater growth coming from the businesses with the highest margins, we expect group EBITDA margin to increase and EPS to grow by 9–10% over the forecast period. These growth rates are likely to be enhanced by further M&A as management looks to expand the core businesses internationally and into new or contiguous niche areas. We expect cash flow generation to improve as working capital intensity (as a percentage of sales) stabilises and fixed capital intensity reduces modestly. The track record with respect to M&A has been good, as demonstrated by a ROIC that has improved from 10% in FY14 to 14% in FY18.

Valuation: SOTP and DCF support a valuation of €13.5–14.2

We value Tinexta using a combination of SOTP and sense checking this with a DCF valuation. Our SOTP using a blend of quoted peer multiples suggests a valuation of €13.5/share. This is supported by our DCF valuation of €14.2/share, which assumes a good fade in revenue growth from 6%+ growth through our forecast period to 3% thereafter, which could prove to be conservative. The free cash flow yield is 6.3% in FY19 and 7.1% in FY20.

Sensitivities: New products, economic sensitivity and M&A

We see the following sensitivities as key determinants of the company’s prospects:

Uptake of new products: The outlook for Digital Trust looks strong; however, it is dependent on its success in winning new enterprise clients and a greater part of the new revenue streams are more volume-based.

Economic sensitivity: Outside of the structural growth of Digital Trust, some of the group companies are vulnerable to changes in the macro environment. The greatest potential exposure is in Credit Information & Management, given the provision of services to the credit and real estate markets in Italy. Demand for other consulting services, in Innovation and Marketing Services, may be affected too.

M&A: Following a high level of M&A since 2014, this should be expected to continue. As the group moves into new international markets for the core businesses and potential new industries, these will expose management to new challenges beyond managing in a familiar geographic market and known industries.

Company description: Professional information, security and consulting services

Tinexta (named Tecnoinvestimenti until November 2018) has undergone significant change in recent years through a combination of M&A and improving organic growth. It is currently focused on three business units, which include 16 subsidiaries and one equity-accounted joint venture:

1.

Digital Trust – provides solutions that enable and enhance confidence, ie trust, in the security and validity of digital identities and transactions. We assume 9–10% organic revenue growth per annum in FY19–21 versus 7.7–9.4% from FY16–18.

2.

Credit Information & Management – predominantly provides information services that help financial institutions and corporates manage credit. We assume 3% organic revenue growth per annum in FY19–21 versus -6% to +2.3% from FY16–18.

3.

Innovation & Marketing Services – provides specialist consulting services that help businesses finance and develop their growth prospects. We assume 3–5% organic revenue growth per annum in FY19–21 versus -4% to +22% from FY17–18.

Exhibit 1: Revenue contribution by business unit

Exhibit 2: Clean EBITDA contribution by business unit (before central costs)

Source: Tinexta accounts, Edison Investment Research

Source: Tinexta accounts, Edison Investment Research

Exhibit 1: Revenue contribution by business unit

Source: Tinexta accounts, Edison Investment Research

Exhibit 2: Clean EBITDA contribution by business unit (before central costs)

Source: Tinexta accounts, Edison Investment Research

Tinexta’s evolution

Tinexta was founded in 2009 when Tecno Holding, owned by the main Italian Chambers of Commerce, contributed assets into the company, in exchange for a shareholding in Tinexta. Tecno Holding remains the reference shareholder with a stake of 56.1% of the company. The company’s free float is 34%.

These assets included the company InfoCert, which forms the base of the Digital Trust business unit, as well as other assets including parking lots, real estate and majority ownership of a construction company. From 2012, management began to manage the assets more proactively, ie non-core assets such as the parking lots were sold, and sought to invest in other professional services with a good growth profile. Management was confident of a strong long-term outlook for Digital Trust. Tinexta entered the Credit Information and Management business, a market that management knew well given the historical connection with the Chambers of Commerce, in 2012. In 2014, the company raised c €23m of equity and listed on AIM Italia, the Italian Stock Exchange market for SMEs. The Innovation & Marketing Services business unit (previously named Sales & Marketing Solutions) was created in 2016, again following an acquisition, and at the same time the company raised further equity as it moved to the STAR segment of the Italian Stock Exchange.

The transformation has been achieved with a significant level of M&A: a net €196m has been spent on acquisitions and disposals since 2014. Once Tinexta has established a foothold in a market, it typically follows up with smaller acquisitions that either expand the existing product or service offer or potential client base. In most acquisitions, Tinexta typically purchases a majority shareholding before buying out the minorities at a later date.

Future strategy and development

Before the end of June 2019, management has committed to buying out practically all of the remaining minority shareholdings of the existing group companies, at an estimated cost of €46.8m.

Beyond these, further M&A is expected, primarily in the Digital Trust and Innovation & Marketing Services business units, given the better growth prospects and margins. M&A in Digital Trust will continue to focus on geographic expansion away from Italy to the major economies of the EU. M&A in Innovation & Marketing Services is likely to be in contiguous or new niche markets, as has been the case since the business unit was created, and potentially new geographies. In addition to looking outward for growth, there is a new focus on opportunities to cross-sell services between the customers of the divisions given minimal overlap at present.

Exhibit 3: Tinexta’s corporate history

Source: Tinexta

Business units overview

Digital Trust (40% of FY18 revenue)

Exhibit 4: Segment financials

Exhibit 5: Segment financials including organic growth

€000s

2014

2015

2016

2017

2018

2019e

2020e

2021e

Revenue

41,492

47,065

59,218

82,738

94,466

104,178

114,596

126,055

Growth y-o-y %

13

26

40

14

10

10

10

o/w organic %

9

9

8

9

10

10

o/w M&A %

16

31

8

1

0

0

EBITDA

8,676

10,939

14,831

21,224

24,846

27,760

30,885

34,323

Margin %

20.9

23.2

25.0

25.7

26.3

26.6

27.0

27.2

Growth y-o-y %

26

36

43

17

12

11

11

o/w Organic %

18

18

11

10

11

11

o/w M&A %

0

25

5

1

0

0

Source: Tinexta accounts, Edison Investment Research

Source: Tinexta accounts, Edison Investment Research

Exhibit 4: Segment financials

Source: Tinexta accounts, Edison Investment Research

Exhibit 5: Segment financials including organic growth

€000s

2014

2015

2016

2017

2018

2019e

2020e

2021e

Revenue

41,492

47,065

59,218

82,738

94,466

104,178

114,596

126,055

Growth y-o-y %

13

26

40

14

10

10

10

o/w organic %

9

9

8

9

10

10

o/w M&A %

16

31

8

1

0

0

EBITDA

8,676

10,939

14,831

21,224

24,846

27,760

30,885

34,323

Margin %

20.9

23.2

25.0

25.7

26.3

26.6

27.0

27.2

Growth y-o-y %

26

36

43

17

12

11

11

o/w Organic %

18

18

11

10

11

11

o/w M&A %

0

25

5

1

0

0

Source: Tinexta accounts, Edison Investment Research

The Digital Trust business unit provides solutions that enable and increase the confidence, ie trust, of users when signing or sending documents electronically. They provide surety with respect to the validity of the identities of individuals and businesses online, ie digital identities; the authenticity of electronic documents such as contracts; and the secure storage of documents.

The Digital Trust business unit should be a beneficiary of the economy-wide transition from analogue to digital. This includes the enhanced requirement for online security including knowing who and what one is dealing with, so is well aligned with initiatives such as know your client and anti-money laundering. In addition, there are opportunities that subsequently follow in the streamlining of business processes and infrastructure change. Recent regulatory changes (see below) mean that Tinexta can take advantage of this trend across the whole of the EU, having been a purely domestic Italian business. Digital Trust should be the key growth driver of the group.

The business unit has two main operating companies: InfoCert (99.9% owned) and Visura (60% owned). In addition, there are three other operating companies: Sixtema (80% owned from 1 April 2017); Camerfirma (51% owned since 1 May 2018) and LuxTrust (50% owned), which form part of the operating structure.

InfoCert

InfoCert is the market leader in Italy for certified electronic mail, digital signature, electronic invoicing and digital documents storage. In order to provide these services, InfoCert is registered as a Certification Authority and is accredited by the AgID, the Italian government agency for digital identity.

InfoCert’s activities should be thought of as in two distinct areas.

First is the established core business of off-the-shelf certified email that is more suited to smaller clients, eg individuals, SMEs and firms of lawyers and accountants, etc. Clients pay an annual subscription for this service. Italy is one of three countries in the world that uses certified email, the others being Hong Kong and Switzerland. It was introduced in 2005 to enable citizens and businesses to communicate securely with local and central government. The aims were to modernise bureaucracy and to help combat corruption. Certified email has the same legal value as a letter sent by registered mail with advice of receipt. Over time, the requirements to use certified email have increased. Since, July 2013, all communications (including invoicing) between companies and public administration must take place via certified email. In addition, since 2019 all invoices between companies must be via certified electronic invoice. This market has been flat for the last five years, but InfoCert has grown a few percentage points above this every year as it has gained share, especially with corporate clients. Modest growth is expected to continue.

Secondly, the company has invested in R&D to address the digital trust market for enterprises. InfoCert has two key services that form the base of its enterprise trust services: Trusted Onboarding Platform and GoSign:

Trusted Onboarding Platform (TOP) is a patented solution that enables remote secure identification and onboarding of new clients and subsequent signing of legally binding contracts. Management believes there are no competitors with a similar service. A typical contract lasts for two to three years with an upfront free for installation, typically two to three months, and an annual maintenance fee. In addition, the majority of revenue is earned from a fee for each new client signed, so is geared into the success of the product. TOP is already used by 30 banks in Italy. A study by Forrester on behalf of InfoCert for one of its customers determined that TOP generated a risk-adjusted ROI of 174% and a payback period of 0.6 months.

Exhibit 6: TOP demonstration video

Source: InfoCert

GoSign enables companies to prepare, sign, authenticate and store documents that typically require being physically prepared and signed. It reduces the time required for these processes, guarantees full legal value of documents, and reduces the costs of archiving. The business model is similar to that of TOP above, with an upfront fee for installation of three to four months, an annual maintenance and then a fee per document signed and per page archived. A study by Forrester on behalf of InfoCert for one of its customers determined that GoSign generated a risk-adjusted ROI of 177% and a payback period of 18 months.

Exhibit 7: GoSign demonstration video

Source: InfoCert

InfoCert’s international aspirations and eiDAS

InfoCert’s aspiration is to create the leading pan-European digital trust provider by rolling out its services across other EU countries via M&A. This will be helped by the recent mandatory enforcement of the EU regulation, eIDAS (electronic Identification And trust Services). The regulation came into force in September 2014 but the recognition of a ‘notified eID’ became mandatory from September 2018.

eIDAS is a European regulation that establishes the framework to ensure electronic interactions between individuals, public authorities and businesses are safer and more efficient regardless of which country they take place within the EU. It introduces one single framework making it more straightforward to deliver business services across the EU by promoting interoperability ensuring that countries mutually recognise each other’s electronic identification and trust services. The intended benefits are less administrative burden and more convenience in transmitting and signing documents electronically; more efficient and innovative business processes; a significant reduction in costs and time through streamlined processes; safer electronic transmission of electronically signed transactions; enhanced document tracking; and increased security of cross-border legal contract execution or transmission of legally binding documents (including invoicing, procurement orders etc).

Electronic identification allows businesses and consumers to prove electronically that they are who they say they are and are then able to interact online securely. It enables them to carry out better checks on identities and allows easier expansion of customer bases.

Trust services covered by the regulation include:

Electronic signature – the expression in an electronic format of a person’s agreement to the content of a document. A qualified electronic signature has the same legal effect as a hand-written signature.

Electronic seal – the electronic equivalent of a business stamp that is applied to a physical document to guarantee its origin and integrity.

Electronic timestamp – provides evidence that the document existed at the stated time.

Website authentication certificates – electronic certificates that prove to customers that a website is trustworthy and reliable.

Electronic registered delivery service – allows digital transmission of documents, providing proof of sending and delivery, protecting against the risk of loss, theft and damage of unauthorised alterations.

To provide these trust services, the regulation requires providers to register as a qualified trust service provider (QTSP). Once registered, the QTSP can technically provide services in all EU countries, irrespective of country of incorporation. They are subject to annual audit by a national regulator to ensure compliance with the regulations. InfoCert is registered as a QTSP in Italy. In the EU there are 170 active QTSPs with a wide variation in numbers by country: 18 in Italy; two in Luxembourg; 21 in France; 11 in Germany; 26 in Spain; and one in Sweden.

Management expects to be a key driving force behind the consolidation and growth in these markets. In other words, management sees the need to operate locally to win business and adapt to national regulations that impact the business. Moreover, Tinexta/InforCert believes that there are often too many players for the market to become more efficient. Consequently, in 2018, InfoCert made its first move outside of Italy with the purchases of 51% of AC Camerfirma in Spain (fully consolidated) for €3.1m and 50% of LuxTrust (equity accounted) for €12m, which are both registered as QTSPs. These transactions are typical of the way that Tinexta likes to acquire businesses: initially acquiring a majority stake before subsequently buying out the minorities.

The Spanish market is claimed to be similar in nature to the Italian market and Camerfirma has a similar history to InfoCert, having been owned by Chambers of Commerce. Camerfirma also has activities in Latin America, principally in Chile, Colombia and Peru. LuxTrust will serve as the beach head into France, Belgium and the Netherlands. Despite being jointly owned with the founder since December 2018, the early signs are encouraging as the company is already in discussions with potential customers that are interested in the products. The next priority areas for M&A are the Nordic and DACH countries.

Visura

Roughly half of Visura’s business is the reselling of the core digital trust products and services of certified email, electronic signature and invoicing that InfoCert offers in its core mass-market business. The remainder is software solutions for lawyers (all civil court proceedings must be filed electronically with the Ministry of Justice) and accountants (mandatory filing of financial statements electronically with Chambers of Commerce). The key strategic rationale for the acquisition was to gain better access to the professional markets and lock-in a vertical market.

The initial 60% stake in Visura was acquired in July 2016 for €21.9m and a put/call was established for the remaining 40% at a valuation of 6x EBITDA for 2018, which will likely be exercised before the end of June 2019. We do not model the buyouts until they occur.

Forecast assumptions for Digital Trust

Digital Trust’s organic revenue growth for FY16–18 ranged from 7.7–9.4%, an average of 8.5%, with the majority of this growth being driven by the new services for larger enterprises, introduced from 2016. We assume 9–10% organic revenue growth for FY19–21 as the enterprise solutions continue their rate of growth and come to represent a greater part of the business.

Operational gearing (ie the proportion of incremental revenue that drops through to EBITDA) has averaged c 30%. We expect the same level of operational gearing going forward given the investment required to continue innovating in a rapidly changing environment. This produces organic EBITDA growth of 10% pa over our forecast period to FY21.

Credit Information & Management (30% of FY18 revenue)

Exhibit 8: Segment financials

Exhibit 9: Segment financials including organic growth

€000s

2014

2015

2016

2017

2018

2019e

2020e

2021e

Revenue

35,058

76,783

74,458

69,879

73,554

79,491

81,875

84,332

Growth y-o-y %

119

(3)

(6)

5

8

3

3

o/w organic %

(3)

(6)

2

3

3

3

o/w M&A %

0

0

3

5

0

0

EBITDA

4,677

14,822

13,466

13,446

15,562

17,707

18,661

19,643

Margin %

13.3

19.3

18.1

19.2

21.2

22.3

22.8

23.3

Growth y-o-y %

217

(9)

0

16

14

5

5

o/w Organic %

(9)

0

10

6

5

5

o/w M&A %

0

0

6

8

0

0

Source: Tinexta accounts, Edison Investment Research

Source: Tinexta accounts, Edison Investment Research

Exhibit 8: Segment financials

Source: Tinexta accounts, Edison Investment Research

Exhibit 9: Segment financials including organic growth

€000s

2014

2015

2016

2017

2018

2019e

2020e

2021e

Revenue

35,058

76,783

74,458

69,879

73,554

79,491

81,875

84,332

Growth y-o-y %

119

(3)

(6)

5

8

3

3

o/w organic %

(3)

(6)

2

3

3

3

o/w M&A %

0

0

3

5

0

0

EBITDA

4,677

14,822

13,466

13,446

15,562

17,707

18,661

19,643

Margin %

13.3

19.3

18.1

19.2

21.2

22.3

22.8

23.3

Growth y-o-y %

217

(9)

0

16

14

5

5

o/w Organic %

(9)

0

10

6

5

5

o/w M&A %

0

0

6

8

0

0

Source: Tinexta accounts, Edison Investment Research

The Credit Information & Management business unit has two main operating businesses: Innolva (100% owned) and REValuta (83.1% owned). Three smaller businesses – Comas, Webber (both acquired in July 2018) and Promozioniservizi (acquired 30 October 2018) – are within Innolva’s management sphere.

Innolva

Innolva offers data services that help banks and SMEs with the granting, ongoing assessment and recovery of credit in Italy. Innolva was created in 2017 with the merger of two group companies, Assicom (acquired in 2014) and Ribes (initial stake acquired in 2012) in response to tough market conditions, consolidation of the customer base and aggressive pricing from competition.

Prior to their merger, Assicom and Ribes had very similar databases, albeit both covered c 80–90% of what was required to be competitive. Also, each had a different customer focus: Assicom’s being SMEs and Ribes’ being banks. The companies were merged and the databases received investment in order to get to full coverage, become competitive and realise cost synergies.

The foundation of Innolva’s database is the financial statements of all companies in Italy from the Chambers of Commerce. For about 20 years, all companies in Italy have been required to file their financial statements in digital form via certified email with the Chambers of Commerce. The data is available to everyone for a cost, therefore by itself has limited added value. To this, Innolva adds other information including data on debts, judicial and corporate actions and legal notices regarding bankruptcy, etc, in order to provide data that is more valuable. For example, with respect to debts, every month all banks in Italy report credits over €30k and non-performing loans to the Bank of Italy.

Innolva’s data services are typically sold as an annual subscription but larger customers will have three-year deals. The churn rate for larger corporate clients is low but higher for smaller corporates where competitors have increased commercial pressure.

In addition to the provision of the data, Innolva offers debt recovery services via c 50 internal lawyers.

The credit information market overall is highly competitive with three players: Cerved is the market leader in this specific sector, with Innolva and Crif roughly the same size. Market demand is described as stable but pricing pressure is high so this is an industry in which consolidation would help to stabilise the competitive tensions. Unlike in the other business units, international growth options are low.

Innolva’s subsidiaries

Promozioniservizi is a consultancy that helps SMEs apply for long-term lower cost financing to banks but accessing guarantees from the Guarantee Fund of Mediocredito Centrale, owned by Invitalia, which is owned by the Ministry of the Economy and Finance. It helps the SMEs determine whether they are likely to qualify for the credit and then complete the application process. The Guarantee Fund has been in existence since 2000. Promozioniservizi was acquired in 2018 for €4.5m, equivalent to 2.4x historical sales and 6.4x historical EBITDA, which had grown by 35% and 15%, respectively. Management expects good growth given the possibilities of scaling up the activities on a national scale (currently focused on the local market around Vicenza) and there are opportunities for cross-selling, most notably with Warrant Group (see later).

Comas and Webber, acquired in 2018 for a combined €9m, are effectively resellers of Innolva’s services. The businesses have a much lower margin, but these should ramp up quickly as the cost structures are rationalised.

REValuta

The majority of REValuta’s revenue is from the provision of residential property valuation services to banks. As well as on the initial application for a mortgage, in Italy, any property with a mortgage must have its value re-appraised every year. The reappraisal involves a general assessment of the area and market rather than a detailed survey of the mortgaged property. Management believes it is the largest provider of this service.

REValuta has multi-year contracts with banks, although these may not be exclusive, under which there is a fixed fee per appraisal. Market share gains have ensured that REValuta has tended to grow faster than GDP. Economic cyclicality may affect new mortgage volumes but the requirement for annual re-appraisals should cushion any cyclicality. Management is looking to expand the business by winning contracts with new banks, adding appraisers as required and M&A.

Tinexta is likely to exercise the put/call options that will take the shareholding from 83% to 95% before the end of June 2019.

Forecast assumptions for Credit Information & Management

Over the medium term, management believes this division is capable of low-single-digit organic revenue growth. The core Innolva business is likely to be below average and the other businesses above average. We assume 3% organic revenue growth from FY19–21. The consolidation of Promozioniservizi, Comas and Webber add c 5 % to revenue growth in 2019.

The business has fought hard to hold and grow EBITDA margin during the last few years through cost cutting. The consolidation of the recent acquisitions, with lower margins, would suppress reported numbers but they represent a good source of cost synergies.

Innovation & Marketing Services (30% of FY18 revenue)

Exhibit 10: Segment financials

Exhibit 11: Segment financials including organic growth

€000s

2014

2015

2016

2017

2018

2019e

2020e

2021e

Revenue

0

0

13,053

22,170

70,681

72,801

76,442

80,264

Growth y-o-y%

70

219

3

5

5

o/w Organic %

(4)

22

3

5

5

o/w M&A %

74

197

0

0

0

EBITDA

0

0

5,231

9,247

33,139

32,677

34,497

36,408

Margin %

40.1

41.7

46.9

44.9

45.1

45.4

Growth y-o-y%

77

258

(1)

6

6

o/w Organic %

(10)

36

(1)

6

6

o/w M&A %

87

224

(1)

6

6

Source: Tinexta accounts, Edison Investment Research

Source: Tinexta accounts, Edison Investment Research

Exhibit 10: Segment financials

Source: Tinexta accounts, Edison Investment Research

Exhibit 11: Segment financials including organic growth

€000s

2014

2015

2016

2017

2018

2019e

2020e

2021e

Revenue

0

0

13,053

22,170

70,681

72,801

76,442

80,264

Growth y-o-y%

70

219

3

5

5

o/w Organic %

(4)

22

3

5

5

o/w M&A %

74

197

0

0

0

EBITDA

0

0

5,231

9,247

33,139

32,677

34,497

36,408

Margin %

40.1

41.7

46.9

44.9

45.1

45.4

Growth y-o-y%

77

258

(1)

6

6

o/w Organic %

(10)

36

(1)

6

6

o/w M&A %

87

224

(1)

6

6

Source: Tinexta accounts, Edison Investment Research

The Innovation & Marketing Services business unit has two main operating businesses: Co.Mark and Warrant Hub. The business unit was created on the acquisition of Co.Mark in March 2016 as Tinexta sought new areas of growth outside the more mature Credit Information & Management business unit described above. Warrant was acquired in November 2017. In addition to buying out the minorities of the two core businesses, it is likely there will be further M&A in this business unit as Tinexta looks to expand to contiguous industries in Italy and to take the existing offers overseas.

Co.Mark

Tinexta acquired its original 70% holding in Co.Mark in March 2016 for €32.5m and negotiated put/call options for the remaining 30% at c €15m to give a total implied valuation of c €45m given the net cash position of c €2m. In 2015, Co.Mark’s revenue was €15.1m and EBITDA was €5.2m therefore historical acquisition multiples were 3.0x sales and 8.7x EBITDA. The company has grown revenues mid-single-digits in the period 2016-18. In the February Plan Presentation management stated that the put/call options for the remaining 10% shareholding will likely be exercised before the end of June 2019.

The bulk of Co.Mark’s revenue is from consulting to help SMEs to identify, develop and grow export markets. The typical client is an SME that lacks the required skills to internationalise its business. The services offered include an end-to-end service from a strategic analysis of products and positioning, identification of customers/end markets, negotiation of contracts and managing interactions with customers.

The services are provided by temporary export specialists (TES™) who have linguistic, strategic and commercial expertise in operating in overseas markets. The service is delivered both by back-office and front-office presence that is generally on a weekly basis. The contract is typically annual and paid in monthly installments and a success fee is calculated on the actual sales boost delivered. For a flat fee of €30k pa (paid monthly), each client receives a weekly half-day visit from the TES. To ensure efficient utilisation of a TES’s time, each covers an area of roughly 35sqkm to minimise travelling time between the half-day appointments.

Management believes that Co.Mark is the market leader, the original founder having effectively created the market, and then grown the business leveraging on strong brand reputation, acquisition of talent, constant training (in-house academy) and data analytics. A typical competitor is a small local and unstructured business.

Since acquisition, Co.Mark has grown the business by increasing geographic coverage on a national basis, the number of TESs to c 100 and the number of active clients. With respect to geographic coverage, management believes it is well represented in the key northern industrial triangle formed by Turin/Milan, Bologna and Venice.

The average tenure of a Co.Mark client is c two years, which has increased since acquired by Tinexta in 2016. As well as increasing the revenue visibility, this helps reduce customer acquisition costs. New clients are targeted by the company’s marketing department. In addition, local word of mouth is important given the customers are typically well connected in the local communities.

The Italian government has been supportive of this industry, with a view to boosting exports, by offering a ‘voucher’ scheme, ie a subsidy in 2015 and 2017. The voucher scheme contributes marginally to total revenue (less than 10%) and generally does not produce recurring revenues.

Under the new CEO, Co.Mark is rolling out the business strategy that will be based on service differentiation and in cross-selling opportunities within Tinexta and through indirect channels. Management is looking for M&A opportunities within Italy to enter into highly complementary markets. It should be noted that Co.Mark opened a subsidiary in Spain in 2016, which in 2018 reported revenues of c €1m.

Warrant Hub

The initial 70% stake in Warrant Hub (originally Warrant Group) was acquired in November 2017 for €33.9m, implying a valuation for the whole company of €48.4m.

The majority (c 80%) of Warrant’s revenue is derived from consulting to help companies gain tax credits and other incentives or contributions principally from governmental institutions (Italian Ministry of Economic Development, EU) to subsidise their R&D and their investment and development projects. The company employs c 100 consultants of whom more than half are engineers who have expertise in R&D and in government requirements in order to be more successful in gaining the subsidies.

There are two revenue sources: the upfront fee for the work prior to application, which is relatively small; and the success fee (a percentage calculated on the tax credit/benefit awarded, the percentage generally decreases as the size of the benefit increases), which is much more significant.

There are a number of smaller activities in Warrant including consultancies that help entrepreneurs/innovators industrialise/organise the process of innovation: how to develop an idea into a commercially viable product. These have grown strongly too and are expected to continue doing so.

Warrant performed strongly in 2018. On acquisition, Warrant was reported as having revenue of c €21m and EBITDA of €6.3m and was expected to close 2017 with revenue exceeding €30m (growing over 50% versus 2016) and EBITDA growing even more than revenue. It ended 2018 with revenue of €53.8m and EBITDA of €26.8m, the put and call options have been renegotiated so the final total consideration will be c €72m. The growth was driven by exceeding expectations with respect to success fees on larger applications, and the consultants were effectively operating beyond what is viewed as sustainable. This rate of growth is unlikely to repeat in 2019 given that the Italian economy is slowing, so some clients are less likely to invest in R&D, and assuming the work rate of the consultants normalises. The company has a short-term capacity constraint with respect to the number of consulting engineers. Warrant is looking to train and add 10–15 engineers but they will take c 12 months to train and become revenue generators.

Forecast assumptions for Innovation & Marketing Services

Over the medium term, management believes this business unit is capable of 3–5% organic revenue growth. Following a strong 2018, especially at Warrant Group, growth is likely to be at the low end of this range in 2019 before recovering thereafter. We assume 3% organic revenue growth in 2019 and 5% growth thereafter.

We assume the EBITDA margin falls by 2pp in 2019 due to lower success fees and incremental investment in new consultants. This produces a modest EBITDA decline in 2019 before a gradual recovery thereafter.

Management

Chairman: Enrico Salza. Enrico Salza is chairman of Tecno Holding, the majority shareholder of Tinexta. He is also chairman of Intesa San Paolo Highline (and past chairman of Intesa San Paolo), a member of the board of Italian Banking Association, Assonime (association of Italian joint stock companies), the Venice Cini Foundation. He has held positions on the boards of companies including Banca Fideuram (Intesa San Paolo Group), Swedish Match, UBS Italia and Il Sole 24 Ore. He has also been president of the Chambers of Commerce of Turin, national vice president of the Chambers of Commerce and a member of the Board of Confindustria.

Chief Executive Officer: Pier Andrea Chevallard. Pier Andrea Chevallard has been the managing director of Tecno Holding from 2009. In 2015 he became the chief executive officer and general manager of Tinexta (ex Tecnoinvestimenti). From 2001–14 he served as secretary general of the Milan Chamber of Commerce. He was also director of Promos (Special Export Promotion Company of the Chambers of Commerce of Milan), managing director of Parcam and a member of the board of directors of Fiero Milan SpA.

Chief Executive Officer, General Manager, InfoCert SpA: Danilo Cattaneo. Danilo Cattaneo has been at InfoCert since 2010 and is chairman of Sixtema, Camerfirma and board member of LuxTrust. From 1998-2010 he held sales and account management positions at Oracle Corporation and from 1995-98 that he was a consultant at Andersen Consulting, Sintel Consulting and Magaldi Research Division. Prior to that he was a researcher and associate lecturer at Middlesex University in London.

Sensitivities

We believe the key sensitivities for Tinexta are as follows:

The extent and phasing of the acceptance of new products: The outlook for Digital Trust looks favourable given the structural growth driven by the importance of online security. However, the growth rate is dependent on the speed of adoption of digital trust activities in new countries and account wins in new enterprise solutions. In addition, a significant percentage of revenue for these solutions varies with volume growth at the clients.

Economic sensitivity: Some of the group companies are vulnerable to an economic slowdown. The greatest direct sensitivity is in Credit Information & Management given the exposure to credit and real estate markets. Elsewhere, such as in Innovation & Management Services, the exposure is more subtle: eg a slowing economy may inspire companies to be less willing to invest in growing their businesses temporarily.

Government financial support: The Italian government provides financial support in the form of tax credits or subsidies that help drive market growth for a number of the group businesses. Many of these are longstanding and are not considered to be at risk at present. In addition, some of these initiatives, eg the voucher scheme to subsidise the services provided by Co.Mark, can affect short-term demand as clients may defer spend in anticipation of the arrival of a new scheme.

Competitive pressures: In many businesses Tinexta has leading positions, but notably in Credit Information & Management its market position is weaker and makes it more reliant on the activities of its larger competitor.

Equity raises: Tinexta has raised equity on two occasions since 2014 in order to fund acquisitions. The balance sheet is in a stronger position with net debt/EBITDA of 1.9x at the end of December 2018, compared to 2.6x in 2017.

Tecno Holding’s shareholding: The Chambers of Commerce, via Tecno Holding, have been long-term shareholders of Tinexta, and currently hold 56.1% of the company. They have been diluted down on each equity raise.

Acquisitions: Tinexta has a good track record with respect to acquisitions, as evidenced by the improvement in ROIC, as it has diversified the business into new growth industries or into complementary products and services. Management continues to seek exposure in new and contiguous niche markets.

Growing international presence: Tinexta has aspirations to grow the business quickly outside Italy, notably in the Digital Trust business unit. This opens it to the fresh challenges of managing businesses overseas and these new countries having different growth rates and prospects. Tinexta has traditionally managed the former by buying majority shareholdings and incentivising key staff to remain.

Financials

Earnings outlook

Exhibit 12: Group financials

Exhibit 13: Group financials business split

€000s

2014

2015

2016

2017

2018

2019e

2020e

2021e

Revenue

Digital Trust

41,492

47,065

59,218

82,738

94,466

104,178

114,596

126,055

C&IM

35,058

76,783

74,458

69,879

73,554

79,491

81,875

84,332

I&MS

0

0

13,053

22,170

70,681

72,801

76,442

80,264

Total

76,550

123,848

146,729

174,787

238,701

256,470

272,913

290,650

EBITDA

Digital Trust

8,676

10,939

14,831

21,224

24,846

27,760

30,885

34,323

C&IM

4,677

14,822

13,466

13,446

15,562

17,707

18,661

19,643

I&MS

0

0

5,231

9,247

33,139

32,677

34,497

36,408

Central costs

(2,300)

(2,442)

(3,281)

(5,065)

(7,333)

(7,920)

(8,553)

(9,237)

Total

11,053

23,319

30,247

38,852

66,214

70,224

75,490

81,137

Source: Tinexta accounts, Edison Investment Research

Source: Tinexta accounts, Edison Investment Research

Exhibit 12: Group financials

Source: Tinexta accounts, Edison Investment Research

Exhibit 13: Group financials business split

€000s

2014

2015

2016

2017

2018

2019e

2020e

2021e

Revenue

Digital Trust

41,492

47,065

59,218

82,738

94,466

104,178

114,596

126,055

C&IM

35,058

76,783

74,458

69,879

73,554

79,491

81,875

84,332

I&MS

0

0

13,053

22,170

70,681

72,801

76,442

80,264

Total

76,550

123,848

146,729

174,787

238,701

256,470

272,913

290,650

EBITDA

Digital Trust

8,676

10,939

14,831

21,224

24,846

27,760

30,885

34,323

C&IM

4,677

14,822

13,466

13,446

15,562

17,707

18,661

19,643

I&MS

0

0

5,231

9,247

33,139

32,677

34,497

36,408

Central costs

(2,300)

(2,442)

(3,281)

(5,065)

(7,333)

(7,920)

(8,553)

(9,237)

Total

11,053

23,319

30,247

38,852

66,214

70,224

75,490

81,137

Source: Tinexta accounts, Edison Investment Research

Company guidance

With the release of FY18 results, management provided new guidance for FY19 and the new three-year business plan to FY21. From the FY18 base revenue of €238.7m and EBITDA ex one-offs of €66.2m, at constant perimeter, the guidance for 2019 is 5% revenue growth to greater than €250m and for EBITDA ex one-offs of €68–70m. In FY21, guidance is for revenue to be greater than €290m and EBITDA ex one-offs to grow faster than revenue over that period. The guidance for FY19–21 implies a CAGR in total revenue of 6.7% pa, therefore management is anticipating an acceleration in revenue growth after the 5% in FY19, which follows from ongoing growth in Digital Trust and an improved outlook for Innovation & Marketing Services after a pause in FY19. Our forecasts for revenue are roughly in line in FY19 and FY21.

Revenue: c 6% organic growth

Tinexta’s organic revenue growth was -1.8% in FY16, -0.1% in FY17 and +7.4% in FY18. Through this period total revenue growth has been much stronger due to M&A, adding 17–30% growth in any year. The good consistent organic growth profile of Digital Trust in FY16 and FY17 was offset by weakness in Credit Information & Management.

Our forecasts for the business units are highlighted in the individual sections above. In aggregate, these generate organic revenue growth of 5.4–6.5% in FY19–21. FY19 will benefit from some flow through from the acquisitions made in FY18, which we estimate will add just over 2% to revenue growth.

Profitability: Margin expansion

We expect EBITDA ex one-offs to grow between 6% and 7% pa in FY19–21, ahead of revenue growth, with the steady margin progression of Digital Trust initially offset by the FY19 decline of Innovation & Marketing Services.

Due to the relative organic revenue growth rates above and the different margins in the business units, group EBITDA margin ex one-offs has increased from 20.6% in FY16 to 27.7% in FY19. Organic clean EBITDA growth was -0.8% in FY16, 1.3% in FY17 and 12.2% in FY18. As with the revenue growth above, the weakness of Credit Information & Management offset the consistent margin improvement of Digital Trust. FY18 growth was helped by the very strong performance in Innovation & Marketing Services.

Associate income should see strong growth due to the first-time inclusion of LuxTrust and organic growth thereafter.

We forecast 9–10% pa EPS growth in FY19–21.

Tinexta’s ROIC (defined as taxed clean EBIT/average shareholders’ funds and net debt) has increased from 10% in FY15 to 14% in FY18.

Dividend: Constant payout ratio

As the company has grown, the dividend payout ratio has increased from 23% in FY15 to 33% in FY18. The stated dividend policy is to maintain this payout ratio. The cash cost of the dividend, c EU12m is covered 3.7x by FCF in FY19.

Improving cash flow generation

Tinexta’s cash flow conversion (operating cash flow/EBITDA) has varied between 93% and 98% since FY16. We expect it to improve modestly from 96% in FY18 to 98% in FY21. Its operating cash flow (OCF) generation (OCF/sales) has been on an improving trajectory, from 13% in FY16 to 18% in FY19. Mainly, this has been due to the improving operating margin from organic revenue growth and the changes in business mix. Free cash flow (FCF) generation (FCF/sales) has been a bit more variable than operating cash flow, although it has increased over time from 11.6% in FY16 to 12.6% in FY18, as investment in capex and intangibles has been variable, ranging from 2.0–5.5% of sales.

We expect operating cash flow to improve relative to sales (from 18% in FY18 to 21% in FY21) given the improvements to EBITDA margin and we assume no significant change in working capital intensity. The absolute spend on capex and intangibles is forecast to decline modestly, and, hence free cash flow generation relative to sales should improve to over 17% by FY21.

Balance sheet

At the end of FY18, Tinexta had net debt of €125m, which represented net debt/EBITDA of 1.9x. This has trended down from 2.4x in FY16 and we forecast it to trend to 1.5x by the end of FY19 and 1.0x by the end of FY20 in the absence of the well-flagged buying out of minorities, which we do not model until they happen. On 29 March 2019, Tinexta announced that it has signed a loan for up to €50m (representing 0.7x our 2019 EBITDA forecast) to finance these acquisitions. The net debt at the end of December 2018 comprised of cash and financial investments of €43m and gross debt of €168m.

The combined value of goodwill and intangibles on the balance sheet is €270m, roughly 80% of which is goodwill. This compares with the total asset base of €448m and shareholders’ funds of €145m.

Valuation

We have looked at Tinexta’s valuation in comparison to other quoted companies with similar exposure. We have also carried out a DCF analysis.

Peer group comparison

The table below includes the growth estimates and valuations of companies with similar industry exposure as Tinexta. Some caution is warranted given many are not direct peers as they do not compete head to head, and have different business mixes and geographic exposure.

Exhibit 14: Peer group valuations

Price - reporting

Market cap

Year-end

Sales growth (%)

EBITDA growth (%)

EPS growth (%)

EBITDA margin %

EV/EBITDA (x)

P/E (x)

ccy

(m)

FY1

FY2

FY1

FY2

FY1

FY2

FY1

FY2

Last

FY1

FY2

Last

FY1

FY2

Tinexta

€11.06

516

Dec

7

6

6

7

12

9

27.4

27.7

9.8

9.1

8.5

15.1

14.2

13.1

DocuSign

U$55.8

9390

Jan

30

24

N/M

37

106

92

8.5

10.1

N/M

116.4

79.2

N/M

283.9

147.9

Zix

U$7.5

410

Dec

135

24

234

52

10

45

19.4

23.7

20.7

11.9

7.9

19.8

23.9

16.4

Gemalto

€ 51.05

4,600

Dec

4

4

20

9

318

13

17.1

17.8

11.6

9.8

9.1

76.3

18.9

16.3

Average - Digital Trust peers

56

17

127

33

145

50

15.0

17.2

16.2

46.0

32.1

48.1

108.9

60.2

Cerved

€ 8.85

1,680

Dec

9

4

9

3

32

4

44.7

44.5

9.5

10.3

10.0

16.3

15.2

14.6

Equifax

U$125.9

15,180

Dec

2

6

55

9

130

10

33.9

35.0

17.9

14.9

13.6

37.7

22.0

20.0

Experian

£21.92

19,910

Mar

4

8

4

8

27

12

34.3

34.5

14.2

17.6

16.2

27.4

28.7

25.7

Fair Isaac

U$277.7

8,110

Sep

9

7

42

12

35

17

30.5

31.2

31.0

25.7

23.4

44.5

39.7

34.2

Transunion

U$70.6

13,130

Dec

12

9

24

10

77

14

39.2

39.7

17.7

16.8

15.2

38.3

26.7

23.4

Average - CI&M peers

7

7

27

8

60

11

36.5

37.0

18.1

17.1

15.7

32.8

26.5

23.6

Reply

€ 57.15

2,140

Dec

13

9

14

12

5

11

14.0

14.2

11.2

12.7

11.5

16.5

20.6

18.5

Gruppo Be

€ 1.12

147

Dec

14

10

7

5

95

0

15.8

15.8

8.2

6.0

5.7

21.2

14.0

14.0

Average - I&MS peers

14

10

11

9

50

6

14.9

15.0

9.7

9.4

8.6

18.9

17.3

16.3

Source: Edison Investment Research, Refinitiv. Note: Prices at 15 April 2019.

Relative to its closest peer and direct competitor Cerved, Tinexta’s growth is expected to be more consistent, yet it trades at lower EV/EBITDA and P/E multiples. Some discount may be warranted given the limited free float and market value.

To take account of Tinexta’s business mix we have performed a SOTP valuation, which uses the average multiples for the different peers above, and applies them to our forecasts for the three business units. We exclude the high outlier valuations of DocuSign for the Digital Trust multiple and Fair Isaac for the Credit Information & Management multiple. Our SOTP valuation suggests a fair value for Tinexta of c €14 across both FY19 and FY20.

Exhibit 15: SOTP valuation

Clean EBITDA

EBITDA multiple

Valuation

Comments

2019e

€000

2020e

€000

2019e

x

2020e

x

2019e

€000

2020e

€000

2019e

€/share

2020e

€/share

Digital Trust

27,760

30,885

10.9

8.5

301,191

262,522

6.4

5.6

Excludes DocuSign

Credit Information & Management

17,707

18,661

14.9

13.8

263,835

256,588

5.6

5.4

Excludes Fair Isaac

Innovation & Marketing Services

32,677

34,497

9.4

8.6

305,531

296,676

6.5

6.3

Total/average

78,144

84,043

11.7

10.3

870,557

815,785

18.4

17.3

Central costs

(7,920)

(8,553)

9.4

8.2

(74,128)

(70,364)

(1.6)

(1.5)

20% discount to average

70,224

75,490

11.3

9.9

796,430

745,421

16.9

15.8

Associate

770

847

7.7

6

12,000

13,200

0.3

0.3

Purchase price and grow at 10%

Minorities

(46,800)

(46,800)

Value of puts and contingent liabilities

Net (debt)

(97,988)

(67,587)

(2.1)

(1.4)

MV

663,642

644,234

14.1

13.6

Shares

47,207

47,207

Implied share price €

14.1

13.6

Source: Edison Investment Research

DCF

While recognising the high sensitivity to the key assumptions, we have valued Tinexta using a DCF model and include a sensitivity analysis.

Our near-term forecasts to FY22 are detailed in the Financials section above. To summarise, these are:

1.

a CAGR of 6.5% for revenue and steady EBITDA margin progress from 27.7% in FY18 to 28.1% in FY22;

2.

the absolute level of spend on capex and intangibles reduces in line with management guidance; and

3.

working capital intensity, ie as a percentage of sales, remains stable.

Beyond FY22, we assume a quick reduction in organic revenue growth to 3% and then keep this stable until FY30. The EBITDA margin increases by 20bp per annum so that by FY30 it is 29.7% (vs 27.5% in FY18). The investment in working capital and fixed assets grows in line with sales. These assumptions, with a WACC of 8.5% and terminal growth of 2%, suggest a valuation of €14.2/share.

Exhibit 16: DCF sensitivity analysis

Terminal growth rate

1.00%

2.00%

3.00%

4.00%

5.00%

WACC

11.00%

8.4

9.0

9.7

10.6

11.9

10.50%

9.1

9.8

10.6

11.7

13.2

10.00%

9.9

10.7

11.7

13.0

14.9

9.50%

10.8

11.7

12.9

14.6

17.0

9.00%

11.7

12.8

14.3

16.4

19.5

8.50%

12.8

14.2

16.0

18.7

22.8

8.00%

14.1

15.8

18.1

21.5

27.3

7.50%

15.6

17.6

20.6

25.2

33.5

7.00%

17.4

19.9

23.7

30.1

42.8

6.50%

19.4

22.7

27.8

36.9

58.3

Source: Edison Investment Research

Exhibit 17: Financial summary

€000s

2017

2018

2019e

2020e

2021e

2022e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

174,790

238,702

256,470

272,913

290,650

309,799

Cost of Sales

0

0

0

0

0

0

Gross Profit

174,790

238,702

256,470

272,913

290,650

309,799

EBITDA

 

 

40,610

65,657

70,224

75,490

81,137

87,198

Normalised operating profit

 

 

28,939

50,697

54,588

59,311

64,353

69,490

Amortisation of acquired intangibles

(1,841)

(2,546)

0

0

0

0

Exceptionals

0

0

0

0

0

0

Share-based payments

0

0

0

0

0

0

Reported operating profit

27,098

48,151

54,588

59,311

64,353

69,490

Net Interest

1,523

(2,520)

(2,811)

(2,950)

(2,725)

(2,455)

Joint ventures & associates (post tax)

4

106

770

847

1,016

1,220

Exceptionals

0

0

0

0

0

0

Profit Before Tax (norm)

 

 

30,466

48,283

52,547

57,208

62,644

68,255

Profit Before Tax (reported)

 

 

28,625

45,737

52,547

57,208

62,644

68,255

Reported tax

(8,420)

(12,629)

(15,239)

(16,590)

(18,167)

(19,794)

Profit After Tax (norm)

21,504

34,951

37,309

40,618

44,478

48,461

Profit After Tax (reported)

20,205

33,108

37,309

40,618

44,478

48,461

Minority interests

(78)

(588)

(663)

(721)

(790)

(861)

Discontinued operations

0

0

0

0

0

0

Net income (normalised)

21,426

34,363

36,646

39,898

43,690

47,603

Net income (reported)

20,127

32,520

36,646

39,897

43,688

47,600

Basic average number of shares outstanding (m)

46

47

47

47

47

47

EPS - basic normalised (€)

 

 

0.46

0.74

0.78

0.85

0.93

1.01

EPS - diluted normalised (€)

 

 

0.46

0.73

0.78

0.85

0.93

1.01

EPS - basic reported (€)

 

 

0.43

0.70

0.78

0.85

0.93

1.01

Dividend (€)

0.14

0.23

0.25

0.28

0.30

0.33

Revenue growth (%)

19.0

36.6

7.4

6.4

6.5

6.6

Gross Margin (%)

100.0

100.0

100.0

100.0

100.0

100.0

EBITDA Margin (%)

23.2

27.5

27.4

27.7

27.9

28.1

Normalised Operating Margin

16.6

21.2

21.3

21.7

22.1

22.4

BALANCE SHEET

Fixed Assets

 

 

275,773

305,579

302,943

298,765

292,981

286,273

Intangible Assets

260,630

270,536

267,899

263,721

257,937

251,229

Tangible Assets

8,287

8,232

8,233

8,233

8,233

8,233

Investments & other

6,856

26,811

26,811

26,811

26,811

26,811

Current Assets

 

 

121,533

135,220

168,430

204,782

245,825

290,850

Stocks

2,072

1,344

1,444

1,537

1,636

1,744

Debtors

80,285

86,321

92,746

98,692

105,107

112,032

Cash & cash equivalents

36,987

35,136

61,821

92,134

126,662

164,655

Other

2,189

12,419

12,419

12,419

12,419

12,419

Current Liabilities

 

 

(102,868)

(194,356)

(198,288)

(201,866)

(205,736)

(209,925)

Creditors

(75,020)

(96,269)

(100,201)

(103,779)

(107,649)

(111,838)

Tax and social security

(6,125)

(704)

(704)

(704)

(704)

(704)

Short term borrowings

(21,723)

(97,380)

(97,380)

(97,380)

(97,380)

(97,380)

Other

0

(3)

(3)

(3)

(3)

(3)

Long Term Liabilities

 

 

(155,535)

(109,085)

(109,085)

(109,085)

(109,085)

(109,085)

Long term borrowings

(123,800)

(70,667)

(70,667)

(70,667)

(70,667)

(70,667)

Other long term liabilities

(31,735)

(38,418)

(38,418)

(38,418)

(38,418)

(38,418)

Net Assets

 

 

138,903

137,358

164,001

192,596

223,984

258,113

Minority interests

537

3,757

4,420

5,141

5,931

6,792

Shareholders' equity

 

 

139,440

141,115

168,420

197,737

229,915

264,904

CASH FLOW

Net operating cash flow

 

 

32,151

43,406

53,162

57,285

61,342

65,781

Capex

(6,486)

(13,095)

(13,000)

(12,000)

(11,000)

(11,000)

Acquisitions/disposals

(61,072)

(33,182)

0

0

0

0

Net interest

(1,526)

(1,441)

(2,811)

(2,950)

(2,725)

(2,455)

Equity financing

1,078

1,080

0

0

0

0

Dividends

(6,977)

(12,067)

(10,669)

(12,023)

(13,089)

(14,333)

Other

4,219

(3,866)

0

0

0

0

Net Cash Flow

(38,613)

(19,165)

26,682

30,313

34,528

37,993

Opening net debt/(cash)

 

 

71,003

104,225

124,725

98,043

67,730

33,202

FX

0

0

0

0

0

0

Other non-cash movements

5,391

(1,335)

0

0

0

0

Closing net debt/(cash)

 

 

104,225

124,725

98,043

67,730

33,202

(4,791)

Source: Tinexta accounts, Edison Investment Research

Contact details

Revenue by geography

Piazza Sallustio, 9
Roma
00187
Italy
+39 06 4201 2631
www.tinexta.com

Contact details

Piazza Sallustio, 9
Roma
00187
Italy
+39 06 4201 2631
www.tinexta.com

Revenue by geography

Management team

Chairman: Enrico Salza

CEO: Pier Andrea Chevallard

Enrico Salza is also chairman of Intesa Sanpaola, and a member of the board of the Italian Banking Association, Assonime (association of Italian joint stock companies) and the Venice Cini Foundation.

Pier Andrea Chevallard was the managing director of Tecno Holding from 2009 until 2015 when he became the managing director and general manager of Tecnoinvestimenti. From 2001–14 he served as secretary general of the Milan Chamber of Commerce.

Management team

Chairman: Enrico Salza

Enrico Salza is also chairman of Intesa Sanpaola, and a member of the board of the Italian Banking Association, Assonime (association of Italian joint stock companies) and the Venice Cini Foundation.

CEO: Pier Andrea Chevallard

Pier Andrea Chevallard was the managing director of Tecno Holding from 2009 until 2015 when he became the managing director and general manager of Tecnoinvestimenti. From 2001–14 he served as secretary general of the Milan Chamber of Commerce.

Principal shareholders

(%)

Tecno Holding

56.1

Quaestio Capital Management

9.8

Mediolanum

2.2

Norges Bank

2.2

Kairos Partners

2.0

Companies named in this report

DocuSign (DOCU.O), Zix (ZIX.O), Gemalto (GTO.AS), Cerved (CERV.MI), Equifax (EFX), Experian (EXPN.L), Fair Isaac (FICO.N), Transunion (TRU.N), Reply (REY.MI), Be Think Solve Execute (BET.MI)

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This report has been commissioned by Tinexta and prepared and issued by Edison, in consideration of a fee payable by Tinexta. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: 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 and have not sought for this information to be independently verified. Opinions contained in this report represent those of the Edison analyst at the time of publication. 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.

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Copyright: Copyright 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “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.

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United Kingdom

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Frankfurt +49 (0)69 78 8076 960

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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

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Tinexta and prepared and issued by Edison, in consideration of a fee payable by Tinexta. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: 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 and have not sought for this information to be independently verified. Opinions contained in this report represent those of the Edison analyst at the time of publication. 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.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, 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 securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. 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, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “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.

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New Zealand

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. 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 (i.e. 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.

United Kingdom

Neither this document and associated email (together, the "Communication") constitutes or form part of any offer for sale or subscription of, or solicitation of any offer to buy or subscribe for, any securities, nor shall it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. Any decision to purchase shares in the Company in the proposed placing should be made solely on the basis of the information to be contained in the admission document to be published in connection therewith.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document (nor will such persons be able to purchase shares in the placing).

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. Edison 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. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

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

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, 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

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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