Well positioned for further strong growth

SNP Schneider-Neureither & Partner 1 February 2017 Update

SNP Schneider-Neureither & Partner

Well positioned for further strong growth

Preliminary results

Software & comp services

1 February 2017

Price

€43.50

Market cap

€216m

Net debt (€m) as at 30 June 2016
(pre €30m rights issue)

6.4

Shares in issue

4.98m

Free float

66.5%

Code

SHF

Primary exchange

Frankfurt (Xetra)

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

12.4

27.6

63.3

Rel (local)

11.9

18.0

38.7

52-week high/low

€44.6

€22.1

Business description

SNP Schneider-Neureither & Partner 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.

Next events

Annual report

30 March 2017

Q1 results

28 April 2017

AGM

31 May 2017

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

FY16 was a hectic year for SNP Schneider-Neureither & Partner (SNP), with three acquisitions successfully integrated, a €30m capital increase and a mammoth contract win announced in Q3 to combine the IT landscapes of two US chemical companies (we assume Dow Chemical and DuPont) that are merging. Preliminary figures show FY16 revenues growing by c 42% to c €80m (we forecast €77m) and adjusted operating profit rose by c 66% to c €7m, for a c 8.8% operating margin. We are reviewing our forecasts and would expect to edge FY17 revenues higher towards the middle of the guidance, with the operating margin maintained at c 12%. Given SNP’s strong market position in software-based transformation projects, and the sustained high level of activity, we believe the shares remain attractive on c 22x our existing cash-adjusted FY18e EPS forecast.

Year
end

Revenue
(€m)

PBT*
(€m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

12/14

30.5

(0.1)

(13.9)

13.0

N/A

0.3

12/15

56.2

3.4

58.8

34.0

74.0

0.8

12/16e

77.0

7.3

111.4

40.0

39.1

0.9

12/17e

95.9

10.9

148.2

50.0

29.3

1.1

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

Q4 results: Growth both organic and via acquisitions

Based on the FY16 preliminary numbers, Q4 revenues grew by c 51% to c €22.5m while adjusted operating profit more than doubled to c €1.8m, generating a margin of c 8.1%. Incoming orders were slightly below Q3, though we note they benefited from the record $10m+ contract win that is expected to be delivered over the next c 18 months. In wake of the €30m capital increase, Dr Andreas Schneider-Neureither saw his shareholding dip from c 20.6% to 18.3%, as he reserved some of his subscription rights for senior employees. Dr Andreas Schneider-Neureither has recently lifted his shareholding back to 19.5% through on market purchases.

Initial management revenue guidance for FY17

Management expects the group to generate revenues of €95-100m in FY17. The guidance is underpinned by the record €39.3m order backlog, which was 95% higher than a year earlier. No guidance has been given yet on margins. The guidance numbers only include organic growth, while fresh acquisitions are highly likely to be made in 2017. We note that the group has a strong net cash position, and combined with a c €30m proposed debt financing SNP has considerable firepower to make acquisitions.

Valuation: Strong growth play in the ERP space

The stock trades on c 39x our current FY16e EPS, falling to c 29x in FY17 and to c 23x in FY18. Adjusted for the net cash, the ratings fall to c 34x in FY16e, c 27x in FY17e and c 22x in FY18e. We believe the ratings continue to look attractive given the forecast strong growth and continued margin recovery potential.

Quarterly analysis

Based on the FY16 preliminary numbers, Q4 revenues grew by c 51% to c €22.5m while adjusted operating profit more than doubled to c €1.8m, generating a margin of c 8.1%. Incoming orders rose by 81% to €23.3m, though were slightly below Q1 and Q3 levels. This generated a book-to-bill ratio of 1.04x. For the full year, incoming orders were €95.6m, generating a book-to-bill ratio of 1.19x.

The complete audited FY16 numbers are scheduled to be released on 30 March.

Exhibit 1: Quarterly analysis

2015

2015

2015

2015

2015

2016

2016

2016

2016

2016

€'000

Q1

Q2

Q3

Q4

FY

Q1

Q2

Q3

Q4*

FY*

Professional services

9,495

12,909

12,200

12,264

46,868

15,516

16,558

15,953

 

 

Licences

1,820

1,406

1,957

2,254

7,437

2,216

2,425

3,258

 

 

Maintenance

863

368

350

350

1,931

742

457

416

 

 

Total revenue

12,178

14,683

14,507

14,868

56,236

18,474

19,440

19,627

22,459

80,000

Other operating income*

638

(95)

(25)

 

 

200

148

150

 

 

Cost of materials

(1,428)

(1,929)

(1,652)

 

 

(1,928)

(2,037)

(1,965)

 

 

Personnel costs

(7,257)

(7,887)

(7,834)

 

 

(10,604)

(11,382)

(11,399)

 

 

Other operating expenses

(2,855)

(3,344)

(3,355)

 

 

(4,174)

(3,986)

(4,209)

 

 

Other taxes

(13)

(13)

(14)

 

 

(22)

(27)

(21)

 

 

Op costs (before depreciation)

(10,915)

(13,268)

(12,880)

(13,689)

(50,752)

(16,528)

(17,284)

(17,444)

 

 

Adjusted EBITDA

1,263

1,415

1,627

1,179

5,484

1,946

2,156

2,183

 

 

Depreciation

(249)

(334)

(280)

(399)

(1,262)

(323)

(372)

(399)

 

 

Adjusted operating profit (EBIT)

1,014

1,081

1,347

780

4,222

1,623

1,784

1,784

1,809

7,000

Operating Margin

8.3%

7.4%

9.3%

5.2%

7.5%

8.8%

9.2%

9.1%

8.1%

8.8%

Net interest

(109)

(204)

(271)

(244)

(828)

(191)

(268)

(141)

 

 

Edison profit before tax (norm)

905

877

1,076

536

3,394

1,432

1,516

1,643

 

 

Associates

0

0

0

(3)

(3)

0

(1)

0

 

 

Exceptionals - earnout adjustments*

0

0

356

0

356

0

0

0

 

 

Profit before tax (FRS 3)

905

877

1,432

533

3,747

1,432

1,515

1,643

 

 

New orders and backlog

2015

2015

2015

2015

2015

2016

2016

2016

2016

2016

€'000

Q1

Q2

Q3

Q4

FY

Q1

Q2

Q3

Q4*

FY*

Incoming orders

16,600

12,700

17,000

12,900

59,200

26,200

19,900

26,200

23,300

95,600

Quarterly revenues

12,178

14,683

14,507

14,868

56,236

18,474

19,440

19,627

22,459

80,000

Book-to-bill ratio

1.36

0.86

1.17

0.87

1.05

1.42

1.02

1.33

1.04

1.19

Backlog

18,900

18,200

20,000

20,200

 

28,700

29,300

36,200

39,300

 

Source: Company accounts. Note: *Based on the preliminary FY16 figures.

Exhibit 2: Financial summary

€'000s

2013

2014

2015

2016e

2017e

2018e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

23,536

30,480

56,236

76,979

95,862

108,494

Cost of sales

0

0

0

0

0

0

Gross Profit

23,536

30,480

56,236

76,979

95,862

108,494

EBITDA

 

 

(1,972)

862

5,484

9,383

13,106

16,094

Adjusted Operating Profit

 

 

(2,714)

(66)

4,222

8,030

11,666

14,349

Amortisation of acquired intangibles

0

0

0

0

0

0

Exceptionals

0

1,505

356

0

0

0

Associates

0

0

(3)

0

0

0

Operating Profit

(2,714)

1,439

4,575

8,030

11,666

14,349

Net Interest

(85)

(66)

(828)

(775)

(775)

(775)

Profit Before Tax (norm)

 

 

(2,799)

(132)

3,394

7,255

10,891

13,574

Profit Before Tax (FRS 3)

 

 

(2,799)

1,373

3,747

7,255

10,891

13,574

Tax

477

(344)

(1,195)

(2,177)

(3,267)

(4,072)

Profit After Tax (norm)

(2,322)

(477)

2,198

5,079

7,624

9,502

Profit After Tax (FRS 3)

(2,322)

1,028

2,552

5,079

7,624

9,502

Minority interest

(84)

(40)

0

(225)

(248)

(267)

Adjustments for normalised earnings

0

0

0

0

0

0

Net income (norm)

(2,405)

(517)

2,198

4,854

7,376

9,235

Net income (FRS 3)

(2,405)

988

2,552

4,854

7,376

9,235

Average Number of Shares Outstanding (m)

3.7

3.7

3.7

4.4

5.0

5.0

EPS - normalised (c)

 

 

(64.7)

(13.9)

58.8

111.4

148.2

185.6

EPS - normalised & fully diluted (c)

 

 

(64.7)

(13.9)

58.8

111.4

148.2

185.6

EPS - FRS 3 (c)

 

 

(64.7)

26.6

68.3

111.4

148.2

185.6

Dividend per share (c)

8.00

13.00

34.00

40.00

50.00

60.00

Gross Margin (%)

100.0

100.0

100.0

100.0

100.0

100.0

EBITDA Margin (%)

-8.4

2.8

9.8

12.2

13.7

14.8

Adjusted Operating Margin (%)

-11.5

-0.2

7.5

10.4

12.2

13.2

BALANCE SHEET

Fixed Assets

 

 

7,759

8,291

15,243

25,430

25,907

26,332

Intangible Assets

5,194

5,190

11,675

21,675

21,675

21,675

Tangible Assets

1,070

1,231

1,999

2,185

2,663

3,087

Other

1,496

1,871

1,570

1,570

1,570

1,570

Current Assets

 

 

16,145

17,882

29,996

57,579

68,121

72,852

Stocks

0

0

0

0

0

0

Debtors

9,105

11,286

16,084

22,017

27,418

31,031

Cash

6,355

5,681

13,769

35,419

40,561

41,679

Current Liabilities

 

 

(5,804)

(9,782)

(13,703)

(19,448)

(24,550)

(27,741)

Creditors

(5,204)

(9,182)

(11,101)

(16,847)

(21,948)

(25,140)

Short term borrowings

(600)

(600)

(2,602)

(2,602)

(2,602)

(2,602)

Long Term Liabilities

 

 

(4,338)

(2,501)

(15,513)

(20,013)

(20,013)

(15,513)

Long term borrowings

(2,250)

(1,650)

(12,344)

(12,344)

(12,344)

(12,344)

Other long term liabilities

(2,088)

(851)

(3,169)

(7,669)

(7,669)

(3,169)

Net Assets

 

 

13,762

13,890

16,024

43,547

49,466

55,930

CASH FLOW

Operating Cash Flow

 

 

(2,110)

2,579

1,879

8,998

12,626

15,552

Net Interest

4

(66)

(167)

(775)

(775)

(775)

Tax

(1,062)

(1,102)

(554)

(2,031)

(3,050)

(3,801)

Capex

(230)

(701)

(1,779)

(1,540)

(1,917)

(2,170)

Acquisitions/disposals

(2,267)

(500)

(3,228)

(11,500)

0

(5,200)

Shares issued

(35)

0

0

29,768

0

0

Dividends

(937)

(335)

(483)

(1,271)

(1,743)

(2,488)

Net Cash Flow

(6,638)

(124)

(4,332)

21,649

5,142

1,118

Opening net debt/(cash)

 

 

(10,152)

(3,505)

(3,431)

1,176

(20,474)

(25,615)

HP finance leases initiated

0

0

0

0

0

0

Other

(10)

51

(275)

0

0

()

Closing net debt/(cash)

 

 

(3,505)

(3,431)

1,176

(20,474)

(25,615)

(26,733)

Source: Company accounts, Edison Investment Research

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 and Sydney. Edison is authorised and regulated by the Financial Conduct Authority. 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 2017 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 2017. “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

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

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 and Sydney. Edison is authorised and regulated by the Financial Conduct Authority. 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 2017 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 2017. “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

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

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