Two acquisitions completed

SNP Schneider-Neureither & Partner 5 January 2016 Update

SNP Schneider-Neureither & Partner

Two acquisitions completed

Acquisitions completed

Software & comp services

5 January 2016

Price

€26.4

Market cap

€98m

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

15.3

89.3

97.6

Rel (local)

22.2

79.4

84.3

52-week high/low

€29.2

€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 has acquired Hartung Consult, along with Astrums (which was announced separately in early December), to target the Asian market. The pricing details have not been disclosed. Hartung and Astrums know each other well, having worked together as partners, with Hartung focused on China and Astrums on Singapore and Malaysia. Together they boost the group’s technical skills, expanding SNP’s reach into China and Asia more broadly while strengthening the group’s office infrastructure in Germany. Group headcount rises to c 580, up from c 260 a year earlier. We believe that both deals will be immediately earnings enhancing.

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

0.5

12/15e

56.0

3.7

68.8

20.0

37.9

0.8

12/16e

64.0

5.7

107.1

30.0

24.4

1.1

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

Acquisition of Hartung Consult

SNP has acquired 51% of Berlin-based Hartung Consult, along with its majority-owned Shanghai subsidiary Hartung Informational Systems Co. SNP intends to acquire the remaining 49% of Hartung Consult on 1 January 2018 and on the same date it also intends to increase its Astrums stake from 51% to 70%. Hartung has c 80 employees of which c 70 are IT and software specialists with advanced SAP expertise. Established in 1998 by Dr Oswin Hartung, most of Hartung’s customers are Germany-based businesses with global operations. Around 20 of Hartung’s employees are based in Berlin while much of its business is in China, where it has been operating since 1995. Hartung generated revenue of €6.6m in FY14, and we understand its EBIT margins are lower than Astrums' (Astrums' FY14 revenues were €5m with 18% margins). As with Astrums, the deal pricing information has not been disclosed. The Hartung and Astrums acquisitions are both effective from 1 January 2016, and hence will be incorporated into SNP’s Q116 accounts. Astrums also brings a small development team, which is important for the group strategy as management wants to boost the software part of the business in FY16.

Forecasts

We will update our forecasts for the acquisitions following the finals on 29 January. Based on sector deals, we estimate the initial consideration of the combined Hartung and Astrums deals at c €10m (SNP had €14.2m cash at 30 September 2015). Assuming a further €7m of acquisition liabilities, this would suggest that the pro forma adjusted net debt would rise to c €21m from c €4m in September.

Valuation: Strong growth play in the ERP space

Before including the acquisitions, the stock trades on c 38x our FY15e EPS, falling to c 24x in FY16e and to c 18x in FY17e. We believe the ratings continue to look attractive given the forecast strong growth and margin recovery potential.

Exhibit 1: Financial summary

€000s

2013

2014

2015e

2016e

2017e

Year-end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

23,536

30,480

56,010

64,006

73,264

Cost of sales

0

0

0

0

0

Gross Profit

23,536

30,480

56,010

64,006

73,264

EBITDA

 

 

(1,972)

862

5,585

7,630

9,723

Adjusted Operating Profit

 

 

(2,714)

(66)

4,469

6,496

8,590

Amortisation of acquired intangibles

0

0

0

0

0

Exceptionals

0

1,505

356

0

0

Associates

0

0

0

0

0

Operating Profit

(2,714)

1,439

4,825

6,496

8,590

Net Interest

(85)

(66)

(796)

(775)

(775)

Profit Before Tax (norm)

 

 

(2,799)

(132)

3,674

5,721

7,815

Profit Before Tax (FRS 3)

 

 

(2,799)

1,373

4,030

5,721

7,815

Tax

477

(344)

(1,102)

(1,716)

(2,344)

Profit After Tax (norm)

(2,322)

(477)

2,572

4,005

5,470

Profit After Tax (FRS 3)

(2,322)

1,028

2,928

4,005

5,470

Minority interest

(84)

(40)

0

0

0

Adjustments for normalised earnings

0

0

0

0

0

Net income (norm)

(2,405)

(517)

2,572

4,005

5,470

Net income (FRS 3)

(2,405)

988

2,928

4,005

5,470

Average No of Shares Outstanding (m)

3.7

3.7

3.7

3.7

3.7

EPS - normalised (c)

 

 

(64.7)

(13.9)

68.8

107.1

146.3

EPS - normalised & fully diluted (c)

 

 

(64.7)

(13.9)

68.8

107.1

146.3

EPS - FRS 3 (c)

 

 

(64.7)

26.6

78.3

107.1

146.3

Dividend per share (c)

8.00

13.00

20.00

30.00

40.00

Gross Margin (%)

100.0

100.0

100.0

100.0

100.0

EBITDA Margin (%)

-8.4

2.8

10.0

11.9

13.3

Adjusted Operating Margin (%)

-11.5

-0.2

8.0

10.1

11.7

BALANCE SHEET

Fixed Assets

 

 

7,759

8,291

14,257

14,404

14,735

Intangible Assets

5,194

5,190

11,151

11,151

11,151

Tangible Assets

1,070

1,231

1,236

1,382

1,714

Other

1,496

1,871

1,871

1,871

1,871

Current Assets

 

 

16,145

17,882

35,787

41,477

48,588

Stocks

0

0

0

0

0

Debtors

9,105

11,286

20,739

23,700

27,128

Cash

6,355

5,681

14,133

16,862

20,546

Current Liabilities

 

 

(5,804)

(9,782)

(19,334)

(22,098)

(25,382)

Creditors

(5,204)

(9,182)

(18,734)

(21,498)

(24,782)

Short term borrowings

(600)

(600)

(600)

(600)

(600)

Long Term Liabilities

 

 

(4,338)

(2,501)

(12,501)

(12,501)

(12,501)

Long term borrowings

(2,250)

(1,650)

(11,650)

(11,650)

(11,650)

Other long term liabilities

(2,088)

(851)

(851)

(851)

(851)

Net Assets

 

 

13,762

13,890

18,210

21,282

25,440

CASH FLOW

Operating Cash Flow

 

 

(2,110)

2,579

5,083

7,134

9,233

Net Interest

4

(66)

(796)

(775)

(775)

Tax

(1,062)

(1,102)

(1,029)

(1,602)

(2,188)

Capex

(230)

(701)

(1,120)

(1,280)

(1,465)

Acquisitions/disposals

(2,267)

(500)

(3,203)

0

0

Shares issued

(35)

0

0

0

0

Dividends

(937)

(335)

(483)

(748)

(1,121)

Net Cash Flow

(6,638)

(124)

(1,548)

2,729

3,683

Opening net debt/(cash)

 

 

(10,152)

(3,505)

(3,431)

(1,883)

(4,612)

HP finance leases initiated

0

0

0

0

0

Other

(10)

51

0

0

()

Closing net debt/(cash)

 

 

(3,505)

(3,431)

(1,883)

(4,612)

(8,296)

Source: Company accounts, Edison Investment Research

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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

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

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