Last close As at 05/08/2026
—
— 0.00 (0.00%)
Market capitalisation
—
Research: TMT
Expert System has sold its 60.8% stake in ADmantX for cash proceeds of €7m. ADmantX is a spin-off that has adapted Expert’s Cogito technology for the advertising industry. The disposal price reflects a trailing EV/sales multiple of 8x, well ahead of Expert’s trailing multiple of 4.1x. In our view, the deal highlights the value of Expert’s technology as well as providing welcome funds to support the growth of the business.
Expert System |
ADmantX stake sold for €7m |
Sale of non-core business |
Software & comp services |
9 December 2019 |
Share price performance
Business description
Next events
Analyst
Expert System is a research client of Edison Investment Research Limited |
|||||||||||||||||||||||||||||||||||||||||||||
Expert System has sold its 60.8% stake in ADmantX for cash proceeds of €7m. ADmantX is a spin-off that has adapted Expert’s Cogito technology for the advertising industry. The disposal price reflects a trailing EV/sales multiple of 8x, well ahead of Expert’s trailing multiple of 4.1x. In our view, the deal highlights the value of Expert’s technology as well as providing welcome funds to support the growth of the business.
Year end |
Revenue (€m) |
EBITDA* |
EPS* |
DPS |
P/E |
EV/EBITDA |
12/17 |
27.8 |
1.7 |
(18.3) |
0.0 |
N/A |
72.4 |
12/18 |
30.5 |
4.6 |
(1.4) |
0.0 |
N/A |
26.7 |
12/19e |
34.5 |
5.6 |
(1.9) |
0.0 |
N/A |
22.2 |
12/20e |
38.5 |
7.6 |
1.6 |
0.0 |
190.5 |
16.4 |
Note: *EBITDA and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
ADmantX sold to US adtech company
In 2010, Expert System decided to create a separate business, ADmantX, to commercialise its technology within the advertising industry. ADmantX uses Cogito software to help advertisers understand the content on the pages on which they wish to serve ads. By understanding this better, advertisers can improve ad targeting and increase click-through rates. In November 2019, the entire share capital of ADmantX was sold to Integral Ad Science, a US-based adtech company, for an enterprise value of €16m.
Proceeds reduce net debt position
Expert has received proceeds of €7.1m for its 60.8% stake in ADmantX. This stake has always been accounted for as an equity investment as it was deemed to be non-core. We estimate that the company will report a profit on disposal of c €2.3m and by the end of FY19 will shift from a previously forecast net debt position of €6.6m to a net debt position of €1.4m. The valuation equates to a trailing EV/sales multiple of 8x for a business that was substantially break-even at the EBITDA level in FY18.
Valuation: Stronger balance sheet supports upside
The share price has performed well since the fund-raising in April, as the proceeds allowed the company to reduce its debt burden and accelerate investment in growth. The ADmantX disposal should provide further support, strengthening the balance sheet and highlighting the value to a third party of Expert’s IP. Compared to a diverse set of peers, Expert is forecast to grow faster but is less profitable. On an EV/sales basis, Expert is trading at 3.6x FY19 and 3.2x FY20, at a premium to Italian peers and at a discount to all other peer groups, with forecast revenue growth towards the upper end of the group. Evidence that recent investment is accelerating revenue growth would be a key driver of share price upside. Progress towards operating profitability and cash generation should also provide further upside potential.
ADmantX stake disposal
Background to ADmantX investment
The ADmantX subsidiary was created to make use of Expert’s natural language processing capability in the advertising industry. It provides software to advertisers, in 29 languages, that enables them to automatically determine which ads are most suitable for advertising on a given website, based on the content on that website.
In 2010, it was decided that this business needed further investment to develop its full potential, and at that time, management decided to accept external investment. Expert retained a 69.4% stake, Atlante Ventures Mezzogiorno (AVM) took a 20.7% stake and private investors bought the remaining 9.9%. In 2015, the business raised further investment of €2.16m, reducing Expert’s stake to 60.7%, AVM to 18.1% and private investors to 21.2%. This investment was at a pre-money valuation of €15m. By the end of H119, Expert’s stake had increased marginally to 60.8%.
Disposal to Integral Ad Science
On 20 November, Expert announced that ADmantX had been sold to Integral Ad Science, a US-based adtech business owned by Vista Equity Partners. We understand that Integral Ad Science and ADmantX had worked together prior to this deal. The transaction is subject to a price adjustment to be determined by the end of Q120, depending on possible changes in net working capital and the net financial position.
The deal values ADmantX at an enterprise value of €16m, implying a €9.73m valuation for Expert’s stake. After adjustments, Expert received cash proceeds of €7.098m (of which €0.2m is in escrow pending final price adjustments). Expert noted that the enterprise value was at an 8x multiple to FY18 revenues, implying that ADmantX generated revenues of €2m in FY18. The company also noted that ADmantX was substantially break-even at the EBITDA level in FY18.
This investment has been accounted for by the equity method since 2010 as it was deemed to be non-core. At the end of H119, ADmantX was reported as a current investment at a book value of €4.775m, which implies a profit on disposal of €2.323m.
Revision to forecasts
We have reflected the disposal in our forecasts. We have treated the gain on disposal as an exceptional item. We reduce our end FY19 net debt forecast from €6.6m to €1.4m.
Exhibit 1: Changes to estimates
Year end 31 December (€m) |
FY19e old |
FY19e new |
Change |
y-o-y |
FY20e old |
FY20e new |
Change |
y-o-y |
Sales |
33.0 |
33.0 |
0.0% |
14.9% |
37.0 |
37.0 |
0.0% |
12.4% |
Other income & grants |
1.5 |
1.5 |
0.0% |
(14.7%) |
1.5 |
1.5 |
0.0% |
0.0% |
Total revenues |
34.5 |
34.5 |
0.0% |
13.2% |
38.5 |
38.5 |
0.0% |
11.8% |
Capitalised development costs & changes in WIP |
5.1 |
5.1 |
0.0% |
0.9% |
5.2 |
5.2 |
0.0% |
2.0% |
Production value |
39.6 |
39.6 |
0.0% |
11.4% |
43.7 |
43.7 |
0.0% |
10.6% |
EBITDA |
5.6 |
5.6 |
0.0% |
20.2% |
7.6 |
7.6 |
0.0% |
35.5% |
EBITDA margin |
16.2% |
16.2% |
0.0% |
0.9% |
19.6% |
19.6% |
0.0% |
3.4% |
D&A |
(5.7) |
(5.7) |
0.0% |
(6.0) |
(6.0) |
0.0% |
||
Normalised operating profit |
(0.1) |
(0.1) |
0.0% |
(84.4%) |
1.5 |
1.5 |
0.0% |
N/A |
Normalised operating margin |
-0.3% |
-0.3% |
0.0% |
1.9% |
4.0% |
4.0% |
0.0% |
4.3% |
Amortisation of acquired intangibles |
(2.6) |
(2.6) |
0.0% |
(0.9) |
(0.9) |
|||
Exceptional items |
0.0 |
2.3 |
0.0% |
0.0 |
0.0 |
|||
Reported operating profit |
(2.7) |
(0.3) |
(87.0%) |
89.2% |
0.7 |
0.7 |
0.0% |
N/A |
Normalised net income |
(0.8) |
(0.8) |
(3.7%) |
(48.2%) |
0.6 |
0.7 |
(187%) |
|
Reported net income |
(3.1) |
(1.0) |
(68.5%) |
74.3% |
(0.2) |
(0.1) |
88.7% |
|
Diluted normalised EPS (c) |
(2.0) |
(1.9) |
(3.7%) |
(37.3%) |
1.5 |
1.6 |
9.6% |
184.6% |
Net debt |
6.6 |
1.4 |
(78.2%) |
(88.6%) |
6.5 |
2.2 |
(65.2%) |
56.6% |
Source: Edison Investment Research
Exhibit 2: Financial summary
€'000s |
2015 |
2016 |
2017 |
2018 |
2019e |
2020e |
||
31-December |
IT GAAP |
IT GAAP |
IT GAAP |
IT GAAP |
IT GAAP |
IT GAAP |
||
PROFIT & LOSS |
||||||||
Revenue |
|
|
19,368 |
25,057 |
27,783 |
30,457 |
34,463 |
38,545 |
EBITDA |
|
|
1,463 |
(2,245) |
1,711 |
4,638 |
5,575 |
7,554 |
Operating Profit (before amort. and except.) |
(1,226) |
(5,941) |
(3,189) |
(662) |
(103) |
1,545 |
||
Intangible Amortisation |
(2,549) |
(2,608) |
(2,608) |
(2,567) |
(2,567) |
(854) |
||
Exceptionals |
0 |
0 |
(700) |
0 |
2,322 |
0 |
||
Other |
0 |
0 |
0 |
0 |
0 |
0 |
||
Operating Profit |
(3,775) |
(8,549) |
(6,496) |
(3,229) |
(347) |
691 |
||
Net Interest |
213 |
(156) |
(2,191) |
97 |
(734) |
(814) |
||
Profit Before Tax (norm) |
|
|
(1,013) |
(6,097) |
(5,380) |
(565) |
(837) |
731 |
Profit Before Tax (reported) |
|
|
(3,562) |
(8,705) |
(8,687) |
(3,131) |
(1,081) |
(123) |
Tax |
277 |
579 |
348 |
(650) |
108 |
12 |
||
Profit After Tax (norm) |
(934) |
(5,692) |
(5,164) |
(508) |
(753) |
658 |
||
Profit After Tax (reported) |
(3,284) |
(8,126) |
(8,339) |
(3,781) |
(973) |
(110) |
||
Average Number of Shares Outstanding (m) |
22.8 |
25.8 |
28.1 |
35.8 |
38.6 |
39.9 |
||
EPS - normalised (c) |
|
|
(4.1) |
(22.0) |
(18.3) |
(1.4) |
(1.9) |
1.6 |
EPS - normalised and fully diluted (c) |
|
(4.1) |
(22.0) |
(18.3) |
(1.4) |
(1.9) |
1.6 |
|
EPS - (IFRS) (c) |
|
|
(14.4) |
(31.5) |
(29.6) |
(10.6) |
(2.5) |
(0.3) |
Dividend per share (c) |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
EBITDA Margin (%) |
7.6 |
-9.0 |
6.2 |
15.2 |
16.2 |
19.6 |
||
Adj Operating Margin (%) |
-6.3 |
-23.7 |
-11.5 |
-2.2 |
-0.3 |
4.0 |
||
BALANCE SHEET |
||||||||
Fixed Assets |
|
|
20,301 |
20,379 |
18,864 |
16,655 |
13,719 |
12,556 |
Intangible Assets |
18,539 |
18,372 |
16,944 |
14,734 |
12,102 |
10,967 |
||
Tangible Assets |
916 |
915 |
792 |
715 |
702 |
675 |
||
Investments |
846 |
1,092 |
1,128 |
1,206 |
915 |
915 |
||
Current Assets |
|
|
42,588 |
37,012 |
37,634 |
38,004 |
52,022 |
53,384 |
Stocks |
1,797 |
627 |
99 |
109 |
609 |
609 |
||
Debtors |
10,228 |
10,233 |
12,384 |
15,792 |
18,003 |
20,163 |
||
Cash |
11,249 |
9,063 |
11,235 |
7,883 |
24,037 |
23,226 |
||
Other |
19,314 |
17,088 |
13,916 |
14,220 |
9,373 |
9,386 |
||
Current Liabilities |
|
|
(20,517) |
(22,679) |
(19,480) |
(21,170) |
(21,451) |
(21,760) |
Creditors |
(15,082) |
(16,459) |
(14,104) |
(15,511) |
(15,792) |
(16,101) |
||
Short term borrowings |
(5,435) |
(6,219) |
(5,376) |
(5,659) |
(5,659) |
(5,659) |
||
Long Term Liabilities |
|
|
(22,227) |
(18,275) |
(17,742) |
(18,411) |
(23,411) |
(23,411) |
Long term borrowings |
(18,240) |
(15,252) |
(14,683) |
(14,811) |
(19,811) |
(19,811) |
||
Other long term liabilities |
(3,987) |
(3,023) |
(3,060) |
(3,600) |
(3,600) |
(3,600) |
||
Net Assets |
|
|
20,145 |
16,437 |
19,276 |
15,077 |
20,880 |
20,769 |
CASH FLOW |
||||||||
Operating Cash Flow |
|
|
2,738 |
2,088 |
(1,921) |
2,583 |
3,121 |
5,679 |
Net Interest |
(324) |
(155) |
(626) |
(441) |
(710) |
(790) |
||
Tax |
(1,576) |
0 |
0 |
0 |
0 |
0 |
||
Capex |
(20,045) |
(6,378) |
(6,321) |
(5,830) |
(5,446) |
(5,700) |
||
Acquisitions/disposals |
3,045 |
46 |
1,275 |
(76) |
7,189 |
0 |
||
Financing |
6,573 |
4,418 |
11,178 |
0 |
7,000 |
0 |
||
Dividends |
0 |
0 |
0 |
0 |
0 |
0 |
||
Net Cash Flow |
(9,588) |
18 |
3,585 |
(3,764) |
11,154 |
(811) |
||
Opening net debt/(cash) |
|
|
2,839 |
12,426 |
12,408 |
8,824 |
12,587 |
1,433 |
HP finance leases initiated |
0 |
0 |
0 |
0 |
0 |
0 |
||
Other |
0 |
0 |
0 |
0 |
0 |
0 |
||
Closing net debt/(cash) |
|
|
12,426 |
12,408 |
8,824 |
12,587 |
1,433 |
2,244 |
Source: Expert System accounts, Edison Investment Research
|
|
A narrower focus on core business strengths driven with greater operational intensity is an appealing proposition under a revised strategy and new senior management team. More detail will emerge here, but an intention to regain revenue momentum will be a clear marker to watch. H120 results were in line with pre-close comments and our earnings estimates are unchanged at this stage. They – and we suspect the company valuation – have yet to fully factor in renewed strategic impetus.