CENIT
Written by
CENIT |
Q3 results win on bottom-line growth |
Q315 results |
Software & comp services |
10 November 2015 |
Share price performance
Business description
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Cenit has reported Q3 results showing 12.8% y-o-y growth in EBIT after a 2.9pp gross margin gain that offset the impact of a 4.5% sales decline. The results support the company’s full-year guidance of stable revenues and an 8-10% increase in EBIT, and have led us to increase our 2016 EBIT forecast by 1.5%. We believe that the recently announced acquisition of Coristo, a SAP product structure management specialist, should add value to the group by strengthening Cenit’s product offering and potentially leading to the creation of new proprietary software.
Year end |
Revenue (€m) |
PBT* |
EPS* |
DPS |
EV/EBITDA |
Yield |
12/13 |
120.1 |
8.4 |
0.7 |
0.4 |
12.7 |
2.0 |
12/14 |
124.0 |
9.4 |
0.8 |
0.9 |
11.5 |
4.5 |
12/15e |
122.6 |
10.2 |
0.9 |
0.5 |
11.0 |
2.5 |
12/16e |
128.4 |
11.1 |
0.9 |
0.5 |
10.2 |
2.5 |
Note: *PBT and EPS are normalised, excluding intangible amortisation, exceptional items and share-based payments.
Operating profit up 12.8% on wider margins
PLM revenues, which make up 81% of total sales, rose 0.8% y-o-y in Q315 but a greater than expected 22% fall-back in EIM revenues resulted in total sales contracting 4.5%, which undershot our revenue estimate by 5.3%. Management’s focus on the bottom line, which has seen it avoid taking on some low-margin business, was reflected in the 2.9pp expansion in the gross margin to 61.5% in Q315, which flowed down to a 1.4pp gain at the EBIT margin.
Coristo acquisition broadens the palette
Cenit recently announced the planned acquisition of Coristo, a small German software house that has expertise in SAP product structure management – broadening Cenit’s product range. The company will bring seven professional staff and Cenit is looking at the potential to develop some of its existing components into proprietary software to expand the group’s existing range.
Order inflows poor, but earnings outlook better
Cenit’s order inflows during the third quarter fell 33% to €21.2m, but the company finished the quarter with a €33.2m order book, down 3.7% y-o-y. We have cut our revenue expectations for this year (3.5%) and next (1.9%) on this slowdown and the likely more difficult German auto sector in 2016. Nevertheless, we have left our 2015 EBIT forecast broadly unchanged and increased the 2016 number by 1.5% on the recent positive margin trends and the Coristo acquisition.
Valuation: Coristo acquisition helps boost case
On a current-year prospective EV/EBITDA multiple of 11.0x, Cenit trades above the median multiple of its sector at 10.0x. Potential upside catalysts are the ongoing growth of own software sales and further potential acquisitions while staff shortages and difficult conditions in the German auto sector are potential downside catalysts.
Q315 results summary
Improving margins offsetting weaker revenues
Cenit has reported a 4.5% y-o-y decline in Q315 revenues on the back of weaker consulting services and third-party software sales. The decline was concentrated in the EIM segment, where revenues fell 21.7%. Although proprietary software remains a bright spot for the business, the third quarter also saw a slowing in revenue growth to 7.8% y-o-y (vs 19.6% for the nine months to September 2015). Helped by a consistent concentration on margin improvements (and similar focus when taking new orders), the group was able to increase the gross margin by 2.9pp resulting in a 0.3% increase in gross profit, which flowed through to an 8.4% increase in EBITDA and a 12.8% increase in EBIT.
In Q3 the group order backlog fell 3.7% y-o-y to €33.2m, reflecting a 2.8% decline in order intake over the first nine months of the year. Third-quarter order inflows were 33% down y-o-y at €21.2m.
Exhibit 1: Cenit Q315 results summary
€000s |
9M15 |
9M14 |
Change |
Change (%) |
Q315e |
Q315 |
Q314 |
Change |
Change (%) |
Q115 |
Q215 |
Consulting services |
38505 |
40422 |
(1,917) |
(4.7) |
13,355 |
13,137 |
13,490 |
(353) |
(2.6) |
12,676 |
12,692 |
Third-party software |
39695 |
41360 |
(1,665) |
(4.0) |
15,299 |
13,711 |
14,999 |
(1,288) |
(8.6) |
13,414 |
12,570 |
CENIT Software |
11027 |
9220 |
1,807 |
19.6 |
3,264 |
3,320 |
3,079 |
241 |
7.8 |
4,264 |
3,443 |
Sales* |
89,424 |
91,364 |
(1,940) |
(2.1) |
31,918 |
30,241 |
31,664 |
(1,423) |
(4.5) |
30,426 |
28,757 |
Sales (% change) |
(2.1) |
2.4 |
0.8 |
(4.5) |
10.1 |
2.5 |
(3.4) |
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PLM revenues |
71,962 |
71,603 |
359 |
0.5 |
25,534 |
24,419 |
24,226 |
193 |
0.8 |
24,077 |
23,466 |
EIM revenues |
17,462 |
19,761 |
(2,299) |
(11.6) |
6,384 |
5,822 |
7,438 |
(1,616) |
(21.7) |
6,349 |
5,291 |
Gross Profit |
56,762 |
55,520 |
1,242 |
2.2 |
19,470 |
18,608 |
18,560 |
48 |
0.3 |
19,793 |
18,361 |
Gross Margin (%) |
63.5 |
60.8 |
2.7 pp |
61.0 |
61.5 |
58.6 |
2.9 pp |
63.5 |
62.6 |
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Personnel |
36,600 |
36,453 |
147 |
0.4 |
12,703 |
11,821 |
11,863 |
(42) |
(0.4) |
12,750 |
12,029 |
EBITDA |
9,203 |
8,524 |
679 |
8.0 |
3,114 |
3,299 |
3,044 |
255 |
8.4 |
2,901 |
3,003 |
EBITDA margin (%) |
10.3 |
9.3 |
1.0 pp |
9.8 |
10.9 |
9.6 |
1.3 pp |
9.3 |
10.2 |
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D&A |
1,570 |
1,805 |
(235) |
(13.0) |
638 |
530 |
589 |
(59) |
(10.0) |
499 |
541 |
EBIT |
7,633 |
6,719 |
914 |
13.6 |
2,475 |
2,769 |
2,455 |
314 |
12.8 |
2,402 |
2,462 |
EBIT Margin (%) |
8.5 |
7.4 |
1.2 pp |
7.8 |
9.2 |
7.8 |
1.4 pp |
7.7 |
8.4 |
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EBT |
7,661 |
6,838 |
823 |
12.0 |
2,475 |
2,771 |
2,492 |
279 |
11.2 |
2,425 |
2,465 |
Net income |
5,490 |
4,748 |
742 |
15.6 |
1,733 |
1,909 |
1,700 |
209 |
12.3 |
1,882 |
1,699 |
EPS |
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Basic |
0.66 |
0.57 |
0.09 |
15.8 |
0.21 |
0.23 |
0.20 |
0.03 |
14.1 |
0.22 |
0.20 |
Diluted |
0.66 |
0.57 |
0.09 |
15.8 |
0.21 |
0.23 |
0.20 |
0.03 |
14.1 |
0.22 |
0.20 |
Key data |
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Order intake |
87,774 |
90,261 |
(2,487) |
(2.8) |
N/A |
21,173 |
31,440 |
(10,267) |
(32.7) |
39,250 |
27,351 |
Order book |
33,193 |
34,458 |
(1,265) |
(3.7) |
N/A |
33,193 |
34,458 |
(1,265) |
(3.7) |
35,884 |
39,216 |
Employees at EOP |
632 |
657 |
(25) |
(3.8) |
N/A |
632 |
657 |
(25) |
(3.8) |
640 |
629 |
Investment |
1,378 |
1,449 |
(71) |
(4.9) |
N/A |
215 |
255 |
(40) |
(15.7) |
252 |
911 |
Source: Cenit, Edison Investment Research. Note: *Excludes other income.
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Exhibit 2: Segmental revenue trend |
Exhibit 3: Order book and quarterly order intake |
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Source: Cenit |
Source: Cenit |
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Exhibit 2: Segmental revenue trend |
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Source: Cenit |
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Exhibit 3: Order book and quarterly order intake |
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Source: Cenit |
North American sales performed strongly in the third quarter, up 46.4% y-o-y, and in Germany Cenit slowed the revenue decline to 7.2% in the third quarter.
Exhibit 4: International sales breakdown
€000s |
9M15 |
9M14 |
Chg (%) |
Q315 |
Q314 |
Chg (%) |
Germany |
67,371 |
73,935 |
(8.9) |
22,924 |
24,690 |
(7.2) |
Switzerland |
9,003 |
8,386 |
7.4 |
3,006 |
4,012 |
(25.1) |
North America |
10,662 |
7,644 |
39.5 |
3,579 |
2,445 |
46.4 |
Romania |
1,241 |
626 |
98.2 |
425 |
226 |
88.1 |
France |
344 |
286 |
20.3 |
146 |
92 |
58.7 |
Japan |
803 |
487 |
64.9 |
161 |
200 |
(19.5) |
Total |
89,424 |
91,364 |
(2.1) |
30,241 |
31,665 |
(4.5) |
Source: Cenit
Forecasts review
We have trimmed our FY15 and FY16 revenue expectations following the relatively weak Q3 revenue numbers and the slowdown in order inflows. We have reduced group revenues by 3.5% and 1.9% for FY15e and FY16e, respectively.
Helped by the stronger margin expectations (in part boosted by the group taking a more margin-oriented approach to new business), we have nevertheless left our 2015 EBIT forecast broadly unchanged. We have increased our 2016 EBIT forecast by 1.5% on the recent positive gross margin trends, lower than expected growth in staff costs and the acquisition of Coristo, a SAP product structure management specialist.
Exhibit 5: Cenit forecast revisions
€000s |
2015e old |
2015e new |
Var |
Var (%) |
2016e old |
2016e new |
Var |
Var (%) |
2014 |
Consulting services |
52,333 |
51,661 |
(672) |
(1.3) |
49,856 |
52,235 |
2,380 |
4.8 |
53,943 |
Third-party software |
60,751 |
53,990 |
(6,761) |
(11.1) |
65,611 |
57,230 |
(8,381) |
(12.8) |
56,251 |
CENIT Software |
14,001 |
15,166 |
1,166 |
8.3 |
15,401 |
16,683 |
1,282 |
8.3 |
12,728 |
Sales |
127,085 |
121,068 |
(6,017) |
(4.7) |
130,868 |
126,403 |
(4,464) |
(3.4) |
123,394 |
Other income |
0 |
1,523 |
1,523 |
0 |
1,953 |
1,953 |
634 |
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Total revenues |
127,085 |
122,591 |
(4,494) |
(3.5) |
130,868 |
128,356 |
(2,512) |
(1.9) |
123,939 |
Gross profit |
77,268 |
76,128 |
(1,140) |
(1.5) |
79,567 |
78,811 |
(757) |
(1.0) |
75,200 |
Personnel |
50,365 |
49,280 |
(1,085) |
(2.2) |
40,768 |
50,342 |
9,574 |
23.5 |
49,129 |
EBITDA |
12,501 |
12,289 |
(212) |
(1.7) |
13,313 |
13,225 |
(88) |
(0.7) |
11,663 |
D&A |
2,334 |
2,100 |
(234) |
(10.0) |
2,451 |
2,205 |
(246) |
(10.0) |
2,334 |
EBIT |
10,167 |
10,189 |
22 |
0.2 |
10,862 |
11,020 |
158 |
1.5 |
9,329 |
EBT |
10,195 |
10,226 |
32 |
0.3 |
10,626 |
11,058 |
432 |
4.1 |
9,406 |
Net income |
6,932 |
7,209 |
276 |
4.0 |
7,226 |
7,519 |
294 |
4.1 |
6,359 |
EPS |
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Basic |
0.83 |
0.86 |
0.86 |
0.90 |
0.76 |
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Diluted |
0.83 |
0.86 |
0.86 |
0.90 |
0.76 |
Source: Cenit, Edison Investment Research
Exhibit 6: Financial summary
€m |
2012 |
2013 |
2014 |
2015e |
2016e |
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Year-end 31 December |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
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PROFIT & LOSS |
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Revenue |
|
|
119.6 |
120.1 |
124.0 |
122.6 |
128.4 |
Cost of Sales |
(46.0) |
(46.9) |
(48.8) |
(46.5) |
(49.5) |
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Gross Profit |
73.6 |
73.2 |
75.2 |
76.1 |
78.8 |
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EBITDA |
|
|
11.0 |
10.6 |
11.7 |
12.3 |
13.2 |
Operating Profit (before amort. and except.) |
8.0 |
8.3 |
9.3 |
10.2 |
11.0 |
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Intangible Amortisation |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Exceptionals |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Operating Profit |
8.0 |
8.3 |
9.3 |
10.2 |
11.0 |
||
Net Interest |
0.1 |
0.0 |
0.1 |
0.0 |
0.0 |
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Profit Before Tax (norm) |
|
|
8.1 |
8.4 |
9.4 |
10.2 |
11.1 |
Profit Before Tax (FRS 3) |
|
|
8.1 |
8.4 |
9.4 |
10.2 |
11.1 |
Tax |
(2.7) |
(2.5) |
(3.0) |
(3.0) |
(3.5) |
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Profit After Tax (norm) |
5.4 |
5.9 |
6.4 |
7.2 |
7.5 |
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Profit After Tax (FRS 3) |
5.4 |
5.9 |
6.4 |
7.2 |
7.5 |
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Average Number of Shares Outstanding (m) |
8.4 |
8.4 |
8.4 |
8.4 |
8.4 |
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EPS - normalised (EUR) |
|
|
0.65 |
0.70 |
0.76 |
0.86 |
0.90 |
EPS - normalised and fully diluted (EUR) |
|
0.65 |
0.70 |
0.76 |
0.86 |
0.90 |
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EPS - (IFRS) (EUR) |
|
|
0.65 |
0.70 |
0.76 |
0.86 |
0.90 |
Dividend per share (EUR) |
0.55 |
0.35 |
0.90 |
0.50 |
0.50 |
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Gross Margin (%) |
61.5 |
61.0 |
60.6 |
62.1 |
61.4 |
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EBITDA Margin (%) |
9.2 |
8.9 |
9.4 |
10.0 |
10.3 |
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Operating Margin (before GW and except.) (%) |
6.7 |
6.9 |
7.5 |
8.3 |
8.6 |
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BALANCE SHEET |
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Fixed Assets |
|
|
9.7 |
8.7 |
7.0 |
6.7 |
6.8 |
Intangible Assets |
4.1 |
3.6 |
3.9 |
3.7 |
3.9 |
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Tangible Assets |
5.5 |
5.1 |
3.0 |
3.0 |
3.0 |
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Investments |
0.1 |
0.1 |
0.1 |
0.0 |
0.0 |
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Current Assets |
|
|
49.3 |
51.6 |
59.9 |
57.9 |
62.5 |
Stocks |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
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Debtors |
20.1 |
18.4 |
20.8 |
18.5 |
19.4 |
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Cash |
23.8 |
26.6 |
33.3 |
33.5 |
37.2 |
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Other |
5.5 |
6.6 |
5.9 |
5.9 |
5.9 |
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Current Liabilities |
|
|
(16.0) |
(16.1) |
(17.3) |
(17.4) |
(17.7) |
Creditors |
(16.0) |
(16.1) |
(17.3) |
(17.4) |
(17.7) |
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Short term borrowings |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
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Long Term Liabilities |
|
|
(2.3) |
(2.3) |
(2.9) |
(2.7) |
(2.8) |
Long term borrowings |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
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Other long term liabilities |
(2.3) |
(2.3) |
(2.9) |
(2.7) |
(2.8) |
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Net Assets |
|
|
40.7 |
42.0 |
46.7 |
44.4 |
48.8 |
CASH FLOW |
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Operating Cash Flow |
|
|
12.7 |
12.6 |
13.0 |
12.6 |
13.2 |
Net Interest |
0.1 |
0.0 |
0.1 |
0.0 |
0.0 |
||
Tax |
(2.3) |
(3.8) |
(3.7) |
(3.0) |
(3.5) |
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Capex |
(2.3) |
(1.2) |
(1.7) |
(1.9) |
(1.8) |
||
Acquisitions/disposals |
0.0 |
0.0 |
(0.6) |
0.0 |
0.0 |
||
Financing |
0.0 |
0.0 |
2.0 |
(0.0) |
0.0 |
||
Dividends |
(2.5) |
(4.6) |
(2.9) |
(7.5) |
(4.2) |
||
Net Cash Flow |
5.7 |
3.0 |
6.2 |
0.2 |
3.7 |
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Opening net debt/(cash) |
|
|
(18.1) |
(23.8) |
(26.6) |
(33.3) |
(33.5) |
HP finance leases initiated |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other |
0.0 |
-0.2 |
0.4 |
0.0 |
0.0 |
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Closing net debt/(cash) |
|
|
(23.8) |
(26.6) |
(33.3) |
(33.5) |
(37.2) |
Source: Cenit, Edison Investment Research
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