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Research: TMT
mic’s “remarkable change of course” looks to be proceeding well with greatly improved financials and a sharpened focus on three business areas with good potential. Newly reported unqualified accounts for 2017 show a return to profit which, however minimal (€0.1m at the net level), is welcome after the previous year’s substantial loss (c €30m), marked by significant write-downs. Restructuring is apparently largely completed, with management confident that its portfolio focus is “very much on track”. Ahead of the annual report with likely management commentary/ guidance, immediate financial prospects are necessarily hard to assess.
mic |
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Scale research report - Update
10 August 2018 |
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mic’s “remarkable change of course” looks to be proceeding well with greatly improved financials and a sharpened focus on three business areas with good potential. Newly reported unqualified accounts for 2017 show a return to profit which, however minimal (€0.1m at the net level), is welcome after the previous year’s substantial loss (c €30m), marked by significant write-downs. Restructuring is apparently largely completed, with management confident that its portfolio focus is “very much on track”. Ahead of the annual report with likely management commentary/ guidance, immediate financial prospects are necessarily hard to assess.
2017 turnaround
2017 was notably free of business write-downs in contrast to the previous year’s total of €27m, which more than halved the size of the balance sheet. While this accounts predominantly for the recovery in profit at the net level (€0.1m vs €29.7m negative in 2016), there was also encouraging progress in gross profit (€1.3m vs €1.3m negative) and in efficiencies – specifically labour costs, which were down by over one-third. Individual business or subsidiary performances have not been disclosed. Despite restructuring, company finances have remained comfortable with €0.5m cash and negligible financial liabilities (excluding creditors) at year-end.
Management upbeat
In the absence of financial guidance, we may rely only on management’s recent comment that products and services are “selling well” and that customers are “very satisfied.” The company regards last year’s outturn as a turning-point and is confident that it is now on a promising footing. Management has been further stabilised with the extension of the contract of the sole board member, Andreas Empl, until 2021. mic’s areas of focus are now large-scale data retrieval (big data); digital factory and Industry 4.0, in particular automated optical inspection; and fibre-optic sensing within the context of monitoring infrastructure systems.
Valuation: Time to deliver
Given the scale of uncertainties about the refocusing, it is difficult to make firm assertions about mic’s valuation. Also, in terms of comparing the price with the NAV, full 2017 accounts will offer only a rudimentary guide to the value of operating companies, as publication is in line with HGB and thus at written-down cost price. mic does not pay a dividend, so earnings-based measures are of limited value.
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Historical financials
Source: mic accounts. Note: *Including €5.1m from capital increase in progress at year-end. |
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.
Review of 2017 results
mic conducts its operations through distinct business units, each focused on a specific area of technology and application, and incorporated in discrete corporate entities: micData (large-scale data handling), Smarteag (fibre-optic infrastructure monitoring) and 4industries (industrial applications). One of these – micData – has a stock market quotation in its own right.
However, mic publishes accounts in line with German HGB solely for the parent company. While the presence of intermediate holding companies dilutes the impact of trading performance at the operating subsidiaries, general trends may be derived from the figures.
Exhibit 1: Financial summary
Year-end December (€m), HGB |
2014 |
2015 |
2016 |
2017 |
Income statement |
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Gross profit |
4.4 |
3.4 |
(1.3) |
1.3 |
Net profit |
1.3 |
1.4 |
(29.7) |
0.1 |
Balance sheet |
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Equity in related companies |
26.7 |
31.1 |
7.5 |
5.4 |
Loans to related companies |
9.7 |
13.7 |
10.2 |
10.0 |
Investments |
2.8 |
2.8 |
1.1 |
0.7 |
Equity |
39.0 |
45.4 |
20.9* |
21.9 |
Total assets |
47.3 |
51.9 |
23.7 |
23.0 |
Source: mic accounts Note: *Including €5.1m from capital increase in progress at year-end.
After a phase of ambitious expansion that increased total assets by 78% to €51.9m in the five years to 2015, which appears to have overstretched the company, mic has now refocused and pared back its activities. This has involved extensive disposals (largely completed) with significant balance sheet implications, particularly on investments, which have been written down sharply across the board. There has also been a programme of overhead cost-cutting.
Exhibit 2: Gross and net profit evolution

Source: mic accounts
H217 saw continued recovery with gross profit moving firmly into the black y-o-y at €0.4m (€1.5m negative) and net profit at break-even versus €14.5m negative in H216.
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 295 Madison Avenue, 18th Floor 10017, New York US |
Sydney +61 (0)2 8249 8342 Level 12, Office 1205 95 Pitt Street, Sydney NSW 2000, Australia |
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Research: Investment Companies
Deutsche Beteiligungs (DBAG) reported an eighth consecutive quarter of positive underlying NAV progress in Q318, taking its dividend-adjusted NAV return for the first nine months of FY18 to 6.8%. This contrasts with the significant de-rating of DBAG’s shares during the period, which saw its share price premium to NAV decline from over 70% to below 20%. A change in accounting policy to bring forward the recognition of carried interest provision had a small negative impact on NAV and also on management’s earnings guidance for FY18, but arguably this has increased future upside. DBAG had a busy third quarter, agreeing three new investments alongside DBAG Fund VII and DBAG ECF I and II for a total €39.2m, with expressions of interest from potential buyers received for two portfolio companies.