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Research: TMT
Mensch und Maschine (M+M) saw business revert to pre-COVID trading patterns and a return to revenue growth in FY21. This translated to EPS growth of 13.1% and a dividend per share increase of 20%. The strategy of organic revenue growth combined with careful cost control supports management’s targets for a doubling in EPS over the next four to five years.
Mensch und Maschine |
Long-term growth targets unveiled
Software |
Scale research report - Update
16 March 2022 |
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Mensch und Maschine (M+M) saw business revert to pre-COVID trading patterns and a return to revenue growth in FY21. This translated to EPS growth of 13.1% and a dividend per share increase of 20%. The strategy of organic revenue growth combined with careful cost control supports management’s targets for a doubling in EPS over the next four to five years.
FY21: Another year of double-digit earnings growth
M+M reported robust results for FY21, with revenue growth of 9.1% y-o-y, EBIT growth of 11.8% and EPS growth of 13.1% y-o-y. We note that this follows a year when revenue declined 0.8% but EPS grew 12.5%. Trading has reverted to pre-COVID seasonality and both divisions reported growth. The Software division grew revenue 11.3% y-o-y (8.5% organic) and achieved an EBIT margin of 25.4% (up 0.1pp y-o-y). The VAR division grew revenue 8.1% y-o-y and expanded the EBIT margin by 0.3pp to 7.3%. Net debt reduced from €14.6m at the end of FY20 to €3.4m by the end of FY21 and, excluding leases, M+M had net cash of €8.2m at year-end. Founder and 45%-shareholder Adi Drotleff has stepped back from the CEO role but remains as managing director and chair of the supervisory board.
Outlook: Steady, profitable growth
The company has maintained its guidance for FY22, introduced guidance for FY23 and set targets for a doubling in revenue by FY28/29 and EPS by FY25/26. This implies a CAGR of 14.7–18.7% for EPS over this timeframe. Consensus forecasts are within the guidance range for FY22 and FY23.
Valuation: Reflects track record
The stock trades at a discount to peers on EV-based valuation metrics and at a small premium on a P/E basis. The stock is supported by a dividend yield approaching 3%, which is at the top end of its peer group. With strong performance through the pandemic (EPS growth in FY20 despite a small revenue decline) and the goal of doubling EPS by FY25/26, in our view the valuation reflects the company’s track record of profitable growth.
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Consensus estimates
Source: Mensch und Maschine investor relations pages (as at 13 March) |
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 FY21 results
Mensch und Maschine (M+M) reported a robust set of results for FY21. The company reported revenue growth of 9.1% y-o-y and, due to good cost control, this translated to operating profit growth of 11.8% and EPS growth of 13.1%. The company moved from a net debt position (before finance leases) to a net cash position by the end of the year and increased the dividend per share by 20% y-o-y. The company noted that seasonality in FY21 was more like FY19, reverting to pre-COVID patterns of trading.
Exhibit 1: FY21 results highlights
€m |
FY21 |
FY20 |
y-o-y |
Revenues |
266.2 |
244.0 |
9.1% |
Gross profit |
138.4 |
128.0 |
8.2% |
EBITDA |
44.4 |
40.3 |
10.2% |
Operating profit |
34.7 |
31.0 |
11.8% |
Net income after minority interest |
21.3 |
18.7 |
13.9% |
EPS (€) |
1.26 |
1.12 |
13.1% |
Net cash (excluding leases)/(net debt) |
8.2 |
(3.2) |
N/A |
Dividend per share (€) |
1.2 |
1.0 |
20.0% |
Gross margin |
52.0% |
52.4% |
-0.4% |
EBITDA margin |
16.7% |
16.5% |
0.2% |
Operating margin |
13.0% |
12.7% |
0.3% |
Source: M+M
Divisional performance
The Software division grew revenue 11.3% y-o-y, after 0.7% growth in FY20. Compared to FY19, revenue was 12.1% higher. EBIT grew 11.6% y-o-y and the EBIT margin expanded by 0.1pp to 25.4%. The company noted that it acquired a Dutch OPEN MIND reseller at the start of FY21 for €2.6m. The acquired business contributed revenue of €2.16m and PBT of €0.62m, which implies divisional organic revenue growth of 8.5% y-o-y and EBIT growth of c 8.3% y-o-y in FY21.
The VAR division grew revenue 8.1% y-o-y after a 1.5% decline in FY20; growth versus FY19 was 6.5%. EBIT grew 12.1% y-o-y resulting in margin expansion of 0.3pp to 7.3%.
Exhibit 2: Divisional performance
€m |
FY21 |
FY20 |
y-o-y |
FY21 |
FY20 |
y-o-y |
|
Revenue |
EBIT |
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Software |
84.2 |
75.6 |
11.3% |
Software |
21.4 |
19.1 |
11.6% |
VAR |
182.0 |
168.4 |
8.1% |
VAR |
13.3 |
11.9 |
12.1% |
Total |
266.2 |
244.0 |
9.1% |
Total |
34.7 |
31.0 |
11.8% |
Gross profit |
EBIT margin |
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Software |
76.1 |
68.8 |
10.6% |
Software |
25.4% |
25.3% |
0.1% |
VAR |
62.3 |
59.1 |
5.4% |
VAR |
7.3% |
7.1% |
0.3% |
Total |
138.4 |
128.0 |
8.2% |
Total |
13.0% |
12.7% |
0.3% |
Gross margin |
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Software |
90.5% |
91.1% |
-0.6% |
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VAR |
34.2% |
35.1% |
-0.9% |
||||
Total |
52.0% |
52.4% |
-0.4% |
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Source: M+M
While 55% of gross profit was generated by the Software division and 45% by the VAR division, the company also provided further detail on how gross profit was distributed by vertical:
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55% from manufacturing: this includes the Software division’s hyperMILL CAM software (c 40%) and the VAR division’s digitisation and training based on eXs, customX and PDM booster for a variety of manufacturing applications.
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35% from architecture/construction/engineering (AEC): this includes the Software division’s DATAflor software for gardening/landscaping/earthworks and SOFiSTiK software for civil engineering, bridge, tunnel and building design, as well as the VAR division’s BIM booster solution and BIM Ready training for structural and civil engineering, building services and facilities management.
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10% hybrid manufacturing and AEC: this includes MapEdit, eXs and customX solutions.
Management change
Adi Drotleff, founder of M+M and 45% shareholder, has stepped back from the CEO role with effect from the start of the year. This formalises his transition from the operational side of the business to a more strategic role. He continues to hold the role of managing director and chairman of the supervisory board. The company will be managed by the COO Christoph Aschenbrenner and CFO Markus Pech.
Outlook and estimates
The company outlined its targets in the short and longer term. The expectations for FY22 are unchanged; for FY23, the company has introduced targets for 20–30c growth in EPS and 15–25c growth in DPS. Management also expects to double revenue by FY28/29 and to double EPS more quickly, by FY25/26. This implies a revenue CAGR of 8.2–9.4% and an EPS CAGR of 14.7–18.7% within those timeframes.
Exhibit 3: Management guidance
FY22 |
FY23 |
FY25/26 |
FY28/29 |
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Revenue |
Growth 8-12% pa |
>€500m |
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Gross profit |
Growth 8-12% pa |
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EBIT |
Growth 14-20% pa |
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EPS |
+18–24c |
+20–30c |
>250c |
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Dividend per share (DPS) |
+15–20c |
+15–25c |
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Source: M+M
Prior to the full FY21 results being announced, consensus forecasts were in line with current company guidance.
Exhibit 4: Consensus forecasts
€m |
FY22e |
FY23e |
Revenues |
294.8 |
327.7 |
Revenue growth |
10.8% |
11.2% |
EBITDA |
50.4 |
59.4 |
EBITDA margin |
17.1% |
18.1% |
EBIT |
40.3 |
48.9 |
EBIT margin |
13.7% |
14.9% |
EPS (€) |
1.46 |
1.75 |
DPS (€) |
1.40 |
1.60 |
Source: Company investor relations pages, as at 13 March (prior to publication of FY21 results)
Valuation
The stock is essentially flat over the last 12 months, having reached a peak of €68.5 in September before the market started shifting from growth to value stocks and the war in Ukraine further weighed on share prices. The shares trade at a discount to peers on EV-based valuation metrics and at a small premium on a P/E basis, in our view reflecting the fact that the company’s operating margins are at the lower end of its peer group due to the VAR side of the business. The stock is supported by a dividend yield approaching 3%, which is at the top end of its peer group.
Exhibit 5: Peer valuation metrics
Company |
Quoted |
Share |
Market |
EV (m) |
EV/Sales (x) |
EV/EBIT (x) |
P/E (x) |
Div yield |
EBIT margin |
|||||
ccy |
price |
cap (m) |
CY |
NY |
CY |
NY |
CY |
NY |
CY |
NY |
CY |
NY |
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MENSCH UND MASCHINE* |
EUR |
54.3 |
921 |
913 |
3.1 |
2.8 |
22.6 |
18.7 |
37.2 |
31.0 |
2.6% |
2.9% |
13.7% |
14.9% |
AVEVA GROUP |
GBp |
2529 |
7,626 |
8,260 |
6.8 |
6.2 |
22.7 |
20.4 |
24.2 |
22.0 |
1.5% |
1.6% |
30.0% |
30.6% |
CENIT |
EUR |
11.5 |
96 |
79 |
0.5 |
0.5 |
9.7 |
8.8 |
20.3 |
14.9 |
3.9% |
4.4% |
5.0% |
5.2% |
NEMETSCHEK |
EUR |
73.6 |
8,558 |
8,471 |
11.2 |
10.0 |
45.9 |
39.3 |
59.2 |
51.0 |
0.5% |
0.5% |
24.5% |
25.6% |
AUTODESK |
USD |
192.3 |
42,303 |
43,167 |
8.5 |
7.4 |
23.4 |
19.4 |
28.4 |
23.5 |
0.0% |
0.0% |
36.2% |
38.1% |
DASSAULT SYSTEMES |
EUR |
41.6 |
55,807 |
56,335 |
10.5 |
9.5 |
34.4 |
30.9 |
42.3 |
38.5 |
0.4% |
0.5% |
30.5% |
30.8% |
HEXAGON |
SEK |
124.6 |
325,088 |
32,899 |
6.7 |
6.2 |
22.9 |
20.8 |
27.7 |
25.1 |
1.0% |
1.2% |
29.2% |
29.8% |
PTC |
USD |
103.9 |
12,156 |
13,300 |
6.9 |
6.2 |
19.2 |
17.5 |
24.0 |
20.6 |
0.0% |
0.0% |
36.0% |
35.4% |
Average |
7.3 |
6.6 |
25.5 |
22.4 |
32.9 |
28.7 |
1.1% |
1.2% |
27.3% |
27.9% |
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Median |
6.9 |
6.2 |
22.9 |
20.4 |
27.7 |
23.5 |
0.5% |
0.5% |
30.0% |
30.6% |
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Source: Refinitiv (as at 14 March). Note: *M+M forecasts are on a reported basis, whereas peer forecasts may contain adjustments for items such as share-based payments and exceptional items that result in higher EBIT margins and EPS.
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Research: TMT
Centaur’s FY21 results are ahead of our forecasts, showing 21% revenue growth and adjusted EBITDA margin of 16.4%. This constitutes good progress towards management’s MAP23 goals for FY23 revenues of £45m and adjusted EBITDA margins of 23%, both of which should be achieved under our modelled scenario, despite potential headwinds of rising costs. Iterative improvements in the client offering and a greater emphasis on cross-selling underpin the forecast top-line growth, funded from the cash-positive balance sheet. The valuation remains at a marked discount to peers.