Last close As at 05/08/2026
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Research: TMT
DATAGROUP’s business model is relatively resilient to the COVID-19 crisis with a recurring revenue base of over 75%, mostly from its service-as-a-product contracts with German SMEs. In its reported H120 results to April 2020, the company announced organic revenue growth of 4%. COVID-19 has affected the acquisition of new projects and the integration of recently acquired companies, which prompted DATAGROUP to withdraw guidance in April. However, as mentioned during the results call, management does not expect a year-on-year decrease in EBITDA in FY20. Trading at 30.8x FY20e P/E and 22.9x FY21e P/E on consensus estimates, DATAGROUP is trading at a premium to peers.
DATAGROUP |
Absorbing acquisitions with a robust model
IT services |
Scale research report - Update
29 May 2020 |
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DATAGROUP’s business model is relatively resilient to the COVID-19 crisis with a recurring revenue base of over 75%, mostly from its service-as-a-product contracts with German SMEs. In its reported H120 results to April 2020, the company announced organic revenue growth of 4%. COVID-19 has affected the acquisition of new projects and the integration of recently acquired companies, which prompted DATAGROUP to withdraw guidance in April. However, as mentioned during the results call, management does not expect a year-on-year decrease in EBITDA in FY20. Trading at 30.8x FY20e P/E and 22.9x FY21e P/E on consensus estimates, DATAGROUP is trading at a premium to peers.
Earnings driven by M&A; business model robust
DATAGROUP reported 23% revenue growth in H120, driven by the acquisition of Portavis this year, and IT-informatik and UBL in 2019. Organic revenue growth was 4%, which demonstrates the robustness of the model with over 75% of recurring service revenues, mainly from CORBOX, its cloud-enabling platform targeted at German SMEs. Acquisition-related P&L items had a large influence on results. EBITDA increased by almost 16% to €23.6m, driven by negative goodwill (badwill) from Portavis, partly offset by €5.5m in risk provisions for possible restructuring. EBIT decreased by 6%, while net profit increased 45% to €8.9m due to a one-off low tax rate as a result of limited taxation on badwill.
Absorbing acquisitions takes longer
DATAGROUP’s business model is to acquire companies with a low valuation or in insolvency proceedings (IT-informatik), which it subsequently integrates into its efficient service platform. COVID-19 made it more difficult to transfer contracts from acquired companies and to win additional business, prompting it to withdraw guidance of EBITDA of at least €55m in FY20 provided at the March AGM. However, CEO Max Schaber indicated during the results conference call that he does not expect EBITDA to decline in FY20, implying a figure of at least €47m.
Valuation: Large premium to peers on FY20e P/E
DATAGROUP is trading at a premium to peers of 12% on FY20e P/E. Compared to peers that are more dependent on selling time or projects, DATAGROUP has a much more resilient business model. Furthermore, it has a solid track record of integrating acquisitions, creating cross-selling synergies from upselling additional services and a clear focus on the large German SME sector.
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Consensus estimates
Source: DATAGROUP, Refinitiv |
Edison Investment Research provides qualitative research coverage on companies in the Deutsche Börse Scale segment in accordance with section 36 subsection 3 of the General Terms and Conditions of Deutsche Börse AG for the Regulated Unofficial Market (Freiverkehr) on Frankfurter Wertpapierbörse (as of 1 March 2017). Two to three research reports will be produced per year. Research reports do not contain Edison analyst financial forecasts.
H120 results affected by M&A
On 14 May 2020, DATAGROUP reported its H120 results, which were severely affected by the effects of the acquisition of Portavis announced in January and closed early March. In addition to a small regular business impact of the acquisition, there was a significant €10m impact on other income related to the badwill recognised as a result of the transaction. The other two acquisitions completed in 2019 (IT-informatik and UBL) also had an impact. All in all, DATAGROUP reported 23% revenue growth, of which roughly 4% was organic according to the CEO’s comment during the post-results conference call.
EBITDA increased almost 16% to €23.6m, driven by the badwill from Portavis, partly offset by €5.5m in risk provisions for possible restructuring. EBIT decreased by nearly 6% to €9.6m as a result of the negative EBIT contributions from Portavis and DATAGROUP Ulm (formerly IT-informatik). Like most technology companies, COVID-19 has only had a small impact on DATAGROUP’s results for the quarter to April, as the lockdown effects only appeared in March. However, DATAGROUP needed extra temporary holding staff to match the growing organisation, while signing contracts with large customers, especially from Portavis, were subject to delays and led to higher launch costs.
Net profit increased 45% to €8.9m, mostly because of the limited taxation of badwill. Although only 68% of Portavis was acquired, it is fully included in DATAGROUP’s net results. DATAGROUP is able to consolidate 100% of Portavis, because the sale of the participations of minority shareholders Sparkasse Bremen (holding 7% of Portavis shares) and Hamburger Sparkasse (holding 25%) to DATAGROUP is likely and it has therefore been accounted for as a purchase liability.
In the balance sheet, the acquisition of Portavis resulted in an expansion of the balance sheet by roughly €80m. This is the effect of higher cash and finance leases balanced by higher provisions, for both pensions (€30m) and the purchase obligation of the minority stakes in Portavis. The size of pension liabilities will vary with changes in interest rates and mortality tables. DATAGROUP’s net debt came down from €66m to €61m at end H120.
Exhibit 1: Key H120 figures
€000s |
H119 |
H120 |
Change % |
Revenues |
138,722 |
170,010 |
22.6 |
Services & maintenance |
114,674 |
143,039 |
24.7 |
Trade |
23,977 |
26,794 |
11.7 |
Other |
71 |
177 |
149.3 |
Own work capitalised |
302 |
633 |
109.6 |
Total revenues |
139,024 |
170,643 |
22.7 |
Material expenses/purchased services |
(39,184) |
(53,476) |
36.5 |
Gross profit |
99,840 |
117,167 |
17.4 |
Personnel expenses |
(70,577) |
(89,017) |
26.1 |
Other income |
2,630 |
15,028 |
471.4 |
Other expenses |
(11,478) |
(19,539) |
70.2 |
EBITDA |
20,415 |
23,639 |
15.8 |
Depreciation from PPA |
(1,852) |
(2,036) |
9.9 |
Other depreciation |
(8,335) |
(11,967) |
43.6 |
EBIT |
10,228 |
9,636 |
(5.8) |
Financial result |
(1,122) |
(1,160) |
3.4 |
EBT |
9,106 |
8,476 |
(6.9) |
Taxation |
(2,946) |
449 |
(115.2) |
Net income |
6,160 |
8,925 |
44.9 |
Average number of shares (000's) |
8,331 |
8,331 |
0.0 |
EPS (€) |
0.74 |
1.07 |
44.9 |
Source: Company data
Guidance withdrawn, but business model is resilient
At the AGM on 3 March, DATAGROUP guided for revenue to grow to more than €375m (previous year €307m) and EBITDA to over €55m (previous year €46.9m) in FY20. However, this guidance was withdrawn on 27 April on the back of the coronavirus pandemic.
Although DATAGROUP’s existing business is relatively resilient to the COVID-19 crisis, with over 75% of revenues being contract-based recurring service contracts, there is some negative impact on winning new business. We have seen this for other companies in the sector as well.
DATAGROUP’s recurring revenue base is founded on its fully outsourced offering of cloud-enabling service-as-a-product contracts for German SMEs with 250–5,000 workstations. Its core product, CORBOX, offers companies a modular portfolio of nine groups of IT services ranging from service desk services to managed and private cloud solutions. Within CORBOX, third-party cloud solutions such as Microsoft, Amazon Web Services and SAP can be integrated with additional services and combined with DATAGROUP’s own cloud and outsourcing services. DATAGROUP has access to and owns data centres (colocation centres) in Germany with an ISO security certification.
With the COVID-19 situation, demand for these services has been stable; demand for these types of services will probably increase in the medium term due to the trend for working at home, which increases the demand for workstations and cloud solutions.
However, organic revenue growth is limited, as winning new business is difficult in current market conditions. On the other hand, the impact of the acquisition of IT-Informatik (now DATAGROUP Ulm) and UBL Informationssysteme in 2019, and especially Portavis in FY20, will be significant. Portavis has major customers like Sparkasse Hamburg and Sparkasse Bremen, and DATAGROUP expects it to contribute c €30m to FY20 revenues and c €60m in revenues on an annualised basis (roughly 10% of group turnover).
DATAGROUP has a successful M&A track record, acquiring companies with a low valuation or even in insolvency proceedings (eg IT-informatik), which it subsequently integrates into its efficient service platform. Over the last four years, organic growth was 4–6% and inorganic growth 8–12%, while profit margins increased. All in all, consensus expectations are for 23% revenue growth to €378m for FY20, which seems realistic, given the acquisitions combined with limited organic growth.
In terms of profitability, according to the company, DATAGROUP Ulm has been loss making at the EBITDA level, but is nearing break-even now. In FY21, DATAGROUP Ulm will contribute positively to EBITDA, according to management’s comment during the analyst conference call. However, there are project postponements at the robotics software specialist Almato (acquired in 2018) and some negative effects in the very large contract with NRW Bank. Partly caused by and combined with extraordinary factors from the COVID-19 crisis, these factors could lead to delayed project start-ups, affecting both revenues and profitability. This has prompted DATAGROUP to withdraw the guidance for EBITDA of over €55m for FY20. However, during the analyst conference call, CEO Max Schaber mentioned that he does not expect a decline in EBITDA in FY20, which implies a figure of at least €47m. On the longer-term ambition of reaching an EBIT margin of 9%, he said it might take longer than previously envisaged, now likely in FY23.
Valuation
DATAGROUP is trading at a premium of 12% on FY20e P/E and a discount of 21% on FY20e EV/EBITDA vs its peers. Compared to peers that are more dependent on selling time or projects, DATAGROUP has a much more resilient business model, with a recurring revenue base of over 75%. Furthermore, it has a solid track record of integrating acquisitions, creating cross-selling synergies from upselling additional services and a clear focus on the large German SME sector.
Exhibit 2: Peer group comparison
Market cap |
P/E (x) |
EV/EBITDA (x) |
|||||
(local CCY m) |
2019 |
2020e |
2021e |
2019 |
2020e |
2021e |
|
Allgeier |
€333 |
20.7 |
15.7 |
11.9 |
7.1 |
6.2 |
5.4 |
ATOS |
€6896 |
N/A |
9.4 |
8.3 |
N/A |
6.5 |
6.1 |
Bechtle |
€6497 |
38.0 |
37.0 |
31.8 |
20.7 |
20.1 |
17.9 |
Cancom |
€2079 |
39.6 |
32.8 |
26.1 |
13.0 |
12.4 |
10.9 |
CENIT |
€76 |
11.0 |
27.4 |
12.1 |
4.7 |
7.2 |
4.3 |
GFT |
€224 |
11.2 |
16.6 |
12.3 |
7.0 |
8.7 |
7.3 |
QSC |
€159 |
N/A |
N/A |
N/A |
0.8 |
N/A |
19.2 |
S&T |
US$1498 |
30.6 |
32.1 |
23.9 |
13.7 |
13.4 |
11.0 |
SNP Schneider |
€274 |
N/A |
53.3 |
27.6 |
20.8 |
20.4 |
13.4 |
USU Software |
€183 |
24.9 |
31.6 |
21.9 |
18.8 |
22.2 |
14.8 |
All for One Steeb |
€182 |
11.1 |
18.0 |
12.9 |
5.6 |
4.9 |
4.2 |
Peer average |
|
23.4 |
27.4 |
18.9 |
11.2 |
12.2 |
10.4 |
DATAGROUP |
€447 |
30.8 |
30.8 |
23.0 |
11.3 |
9.6 |
8.6 |
Premium/(discount) |
|
32% |
12% |
22% |
1% |
-21% |
-17% |
Source: Refinitiv. Note: Priced at 22 May 2020. Valuation multiples for Datagroup are not calendarised.
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Research: TMT
Ebiquity’s FY19 results (delayed by the COVID-19 lockdown) were in line with expectations. The impact of the pandemic on the advertising sector is harsh, but is far from uniform, with some verticals notably more resilient than others. Ebiquity’s leading market position equips it with the data to benchmark and advise. Careful cost management should mitigate some of the COVID-19 related trading difficulties, as reflected in our tentative FY20 forecast, with the balance sheet remaining sound. Management guidance remains withdrawn. The New CEO, Nick Waters, joins on 1 July (see our April flash note).