Last close As at 05/08/2026
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Research: TMT
TXT reported strong organic revenue growth in Q117, with 14% growth for TXT Retail and 8% growth for TXT Next. Our forecasts are substantially unchanged. TXT continues to internationalise both businesses and we believe it could make further bolt-on acquisitions in the TXT Next business. In Italy, the recently introduced individual savings account scheme (PIR) is driving up demand for TXT’s shares, and in our view this is the main driver of the share price outperformance year-to-date.
TXT e-solutions |
Making progress in North America and Asia |
Q117 results |
Software & comp services |
11 May 2017 |
Share price performance
Business description
Next events
Analysts
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TXT reported strong organic revenue growth in Q117, with 14% growth for TXT Retail and 8% growth for TXT Next. Our forecasts are substantially unchanged. TXT continues to internationalise both businesses and we believe it could make further bolt-on acquisitions in the TXT Next business. In Italy, the recently introduced individual savings account scheme (PIR) is driving up demand for TXT’s shares, and in our view this is the main driver of the share price outperformance year-to-date.
Year |
Revenue (€m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/15 |
61.5 |
5.7 |
0.40 |
0.25 |
32.5 |
1.9 |
12/16 |
69.2 |
8.1 |
0.55 |
0.30 |
23.6 |
2.3 |
12/17e |
75.2 |
8.0 |
0.53 |
0.32 |
24.5 |
2.5 |
12/18e |
78.5 |
8.8 |
0.59 |
0.33 |
22.0 |
2.5 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Q1 results show good organic growth
TXT reported Q1 revenue growth of 25% y-o-y, of which 11% was organic. TXT Retail grew 14% y-o-y, with software revenues +20% and services revenues +11%. TXT Next grew 38% or 8% excluding the €1.9m contributed by PACE. International revenues made up 59.0% of the total, up from 51.5% a year ago and flat versus Q416. Adjusted EBITDA of €1.6m was 11.5% higher than a year ago, with a margin of 8.8%. The company ended Q117 with net cash of €8.8m (end FY16 €5.4m). TXT Retail continues to make good progress in North America and Asia, with a significant licence sale in the US to The Finish Line (a sports retailer) and a contract with a Hong Kong retailer.
Positive outlook; forecasts substantially unchanged
For Q217, the company expects a positive development in revenues and profits. We have revised our revenue forecasts up marginally in FY17 and FY18 to reflect the Q1 performance. With a slight mix shift toward services, this results in substantially unchanged gross profits and EPS.
Valuation: Technical issues drive share price
The stock has performed exceptionally well in recent months, up 72% year-to-date and 28% in the last month. The recent introduction of the PIR individual savings scheme in Italy, which allows mutual funds held for five years to earn returns tax free, has boosted investment in Italian small and mid-cap stocks. We believe that the combination of growth, profitability, dividend payout and strong cash position has made TXT an attractive proposition, boosting liquidity in the stock and driving up the share price. The stock is now trading more in line with its software peers, despite the significant services business in both divisions. To bring the stock price more in line with fundamentals, we would need to see strong growth in licensing in North America and Asia for TXT Retail and good cross-selling to PACE’s customer base within in TXT Next.
Exhibit 1: Financial summary
€'000s |
2012 |
2013 |
2014 |
2015 |
2016 |
2017e |
2018e |
||
Year end 31 December |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
|||||||||
Revenue |
|
|
46,499 |
52,560 |
54,410 |
61,540 |
69,152 |
75,206 |
78,462 |
Cost of sales |
(22,351) |
(24,854) |
(26,455) |
(29,189) |
(32,039) |
(34,637) |
(36,162) |
||
Gross profit |
24,148 |
27,706 |
27,955 |
32,351 |
37,113 |
40,569 |
42,300 |
||
EBITDA |
|
|
5,322 |
6,263 |
5,324 |
6,659 |
8,715 |
8,601 |
9,460 |
Operating Profit (before amort and except) |
|
|
4,283 |
5,241 |
4,284 |
5,820 |
7,955 |
7,862 |
8,721 |
Amortisation of acquired intangibles |
0 |
(285) |
(285) |
(285) |
(549) |
(637) |
(637) |
||
Exceptionals and other income |
939 |
0 |
1,468 |
0 |
(500) |
0 |
0 |
||
Other income |
0 |
0 |
0 |
(740) |
0 |
(500) |
(500) |
||
Operating Profit |
5,222 |
4,956 |
5,467 |
4,795 |
6,906 |
6,725 |
7,584 |
||
Net Interest |
(37) |
(435) |
(249) |
(151) |
105 |
100 |
100 |
||
Profit Before Tax (norm) |
|
|
4,246 |
4,806 |
4,035 |
5,669 |
8,060 |
7,962 |
8,821 |
Profit Before Tax (FRS 3) |
|
|
5,185 |
4,521 |
5,218 |
4,644 |
7,011 |
6,825 |
7,684 |
Tax |
(188) |
121 |
(1,046) |
(762) |
(1,456) |
(1,501) |
(1,690) |
||
Profit After Tax (norm) |
4,092 |
4,927 |
3,226 |
4,739 |
6,386 |
6,210 |
6,880 |
||
Profit After Tax (FRS 3) |
4,997 |
4,642 |
4,172 |
3,882 |
5,555 |
5,323 |
5,993 |
||
Average Number of Shares Outstanding (m) |
11.0 |
11.5 |
11.5 |
11.7 |
11.7 |
11.7 |
11.7 |
||
EPS - normalised (c) |
|
|
37 |
43 |
28 |
41 |
55 |
53 |
59 |
EPS - normalised fully diluted (c) |
|
|
34 |
41 |
28 |
40 |
55 |
53 |
59 |
EPS - (IFRS) (c) |
|
|
45 |
40 |
36 |
33 |
48 |
46 |
51 |
Dividend per share (c) |
18.2 |
22.7 |
22.7 |
25.0 |
30.0 |
32.0 |
33.0 |
||
Gross margin (%) |
51.9 |
52.7 |
51.4 |
52.6 |
53.7 |
53.9 |
53.9 |
||
EBITDA Margin (%) |
11.4 |
11.9 |
9.8 |
10.8 |
12.6 |
11.4 |
12.1 |
||
Operating Margin (before GW and except) (%) |
9.2 |
10.0 |
7.9 |
9.5 |
11.5 |
10.5 |
11.1 |
||
BALANCE SHEET |
|||||||||
Fixed Assets |
|
|
18,570 |
17,850 |
18,019 |
18,132 |
25,428 |
24,672 |
23,916 |
Intangible Assets |
16,621 |
15,370 |
15,078 |
14,692 |
21,296 |
20,590 |
19,884 |
||
Tangible Assets |
1,154 |
1,118 |
1,249 |
1,361 |
1,598 |
1,548 |
1,498 |
||
Other |
795 |
1,362 |
1,692 |
2,079 |
2,534 |
2,534 |
2,534 |
||
Current Assets |
|
|
36,769 |
34,914 |
34,892 |
38,946 |
37,085 |
41,464 |
47,070 |
Stocks |
1,388 |
1,451 |
1,820 |
2,075 |
3,146 |
3,246 |
3,346 |
||
Debtors |
19,562 |
18,642 |
20,768 |
27,791 |
26,369 |
28,846 |
30,095 |
||
Cash |
15,819 |
14,821 |
12,304 |
9,080 |
7,570 |
9,372 |
13,628 |
||
Other |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
Current Liabilities |
|
|
(20,651) |
(17,864) |
(17,451) |
(18,349) |
(21,051) |
(22,347) |
(24,432) |
Creditors |
(15,155) |
(14,512) |
(15,297) |
(17,528) |
(20,243) |
(21,539) |
(23,624) |
||
Short term borrowings |
(5,496) |
(3,352) |
(2,154) |
(821) |
(808) |
(808) |
(808) |
||
Long Term Liabilities |
|
|
(8,666) |
(6,965) |
(6,491) |
(5,105) |
(7,180) |
(7,180) |
(7,180) |
Long term borrowings |
(4,301) |
(2,896) |
(1,685) |
0 |
(1,391) |
(1,391) |
(1,391) |
||
Other long term liabilities |
(4,365) |
(4,069) |
(4,806) |
(5,105) |
(5,789) |
(5,789) |
(5,789) |
||
Net Assets |
|
|
26,022 |
27,935 |
28,969 |
33,624 |
34,282 |
36,609 |
39,374 |
CASH FLOW |
|||||||||
Operating Cash Flow |
|
|
2,760 |
7,630 |
5,404 |
2,412 |
10,676 |
7,919 |
10,196 |
Net Interest |
(37) |
(435) |
(249) |
(151) |
105 |
100 |
100 |
||
Tax |
64 |
(1,615) |
(1,344) |
(1,461) |
(2,022) |
(1,501) |
(1,690) |
||
Capex |
(405) |
(483) |
(615) |
(763) |
(738) |
(620) |
(620) |
||
Acquisitions/disposals |
(8,450) |
19 |
0 |
0 |
(5,403) |
(600) |
0 |
||
Financing |
1,690 |
(755) |
(597) |
2,215 |
(828) |
0 |
0 |
||
Dividends |
0 |
(2,107) |
(2,615) |
(2,678) |
(2,931) |
(3,496) |
(3,729) |
||
Net Cash Flow |
(4,378) |
2,254 |
(16) |
(426) |
(1,141) |
1,802 |
4,257 |
||
Opening net debt/(cash) |
|
|
(10,266) |
(6,023) |
(8,575) |
(8,465) |
(8,259) |
(5,371) |
(7,173) |
HP finance leases initiated |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
Other |
135 |
298 |
(94) |
220 |
(1,747) |
0 |
0 |
||
Closing net debt/(cash) |
|
|
(6,023) |
(8,575) |
(8,465) |
(8,259) |
(5,371) |
(7,173) |
(11,429) |
Source: TXT e-solutions, Edison Investment Research
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Is Yatirim’s (ISY) Q117 results showed a strong performance by the investment banking business, driven by robust equity, debt and derivatives markets, slight increases to some commission margins as well as continued growth in AUM, particularly from higher-fee pension fund assets. Is Investment (the investment bank) posted net profits more than 50% up on Q116, which was the strongest quarter in that year. With the exception of the NPL business, all the consolidated segments beat our expectations and we have revised our estimates upwards as a result. The government’s success in the 16 April referendum may bring greater stability to the turbulent political scene in Turkey, contributing to a better outlook in 2017.