Tinexta — Management confident of rebound in Q422

Tinexta (MIL: TNXT)

Last close As at 20/06/2024

EUR17.19

0.54 (3.24%)

Market capitalisation

EUR812m

More on this equity

Research: TMT

Tinexta — Management confident of rebound in Q422

Tinexta’s Q322 results highlighted the consistent strong growth of Digital Trust (DT) and contributions from M&A (seven acquisitions), offset by the typical lower seasonal contribution from its other divisions, which management believes were accentuated by the phasing of demand for certain products and services. Despite the more challenging macroeconomic backdrop, management re-iterated its FY22 guidance. This will require a greater profit contribution by Q4 than is typical, which management believes is supported by revenue backlogs and more positive phasing than Q322. We have increased our DCF-based valuation to €39/share (€38 previously).

Russell Pointon

Written by

Russell Pointon

Director of Content, Consumer and Media

TMT

Tinexta

Management confident of rebound in Q422

Q322 results

Professional services

14 November 2022

Price

€23.7

Market cap

€1,118m

Net debt (€m) at 30 September 2022

139.1

Shares in issue

47.2m

Free float

34%

Code

TNXT

Primary exchange

Euronext STAR Milan

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

27.0

0.9

(39.0)

Rel (local)

8.0

(4.8)

(30.3)

52-week high/low

€39.0

€17.9

Business description

Tinexta has three divisions: Digital Trust, solutions to increase trust in digital transactions; Innovation & Marketing Services, services to help clients develop their businesses; and Cyber Security, services to help digital transformation.

Next events

FY22 results

February 2023

Analysts

Russell Pointon

+44 (0)20 3077 5700

Max Hayes

+44 (0)20 3077 5700

Tinexta is a research client of Edison Investment Research Limited

Tinexta’s Q322 results highlighted the consistent strong growth of Digital Trust (DT) and contributions from M&A (seven acquisitions), offset by the typical lower seasonal contribution from its other divisions, which management believes were accentuated by the phasing of demand for certain products and services. Despite the more challenging macroeconomic backdrop, management re-iterated its FY22 guidance. This will require a greater profit contribution by Q4 than is typical, which management believes is supported by revenue backlogs and more positive phasing than Q322. We have increased our DCF-based valuation to €39/share (€38 previously).

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(€)

Yield
(%)

12/20

269.0

58.4

0.85

0.26

27.9

1.1

12/21

**301.5

70.4

1.02

0.30

23.2

1.3

12/22e

365.3

67.4

0.88

0.29

26.9

1.2

12/23e

408.2

83.7

1.09

0.29

21.7

1.2

12/24e

455.8

98.9

1.31

0.36

18.1

1.5

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. **Pro forma for disposal of Credit Information & Management.

Q322: Seasonally less important period

Tinexta’s Q322 revenue, adjusted EBITDA and operating profit grew by c 17%, 9% and 12% y-o-y respectively. M&A was the key growth driver in the period (revenue +14% y-o-y, adjusted EBITDA +24%) versus organic growth (revenue +3% y-o-y, adjusted EBITDA down 15%). DT continued to deliver strong organic growth (revenue +12.8%, adjusted EBITDA +14.5%). Total revenue growth and profitability were suppressed by two divisions. Innovation & Marketing Services (IMS) demonstrated its typical weaker Q3 seasonality, accentuated by phasing declines in Automatic Subsidised Finance. Cyber Security’s (CS’s) profitability fell due to mix shifts and internal investment for future growth. Its Q322 adjusted EBITDA margin of 8.7% (13.8% in Q321) was lower than the group average (Q322 22.5%, Q321 24.1%). The receipt of disposal proceeds (€130m) and free cash flow led to a significant improvement in period-end net debt (€139m vs €263m end H122)

FY22 estimates: Guidance re-iterated

Management re-iterated its FY22 guidance: y-o-y revenue growth of 21–23% and adjusted EBITDA growth of 25–27%. We retain our estimates, which are in line with guidance, but incorporate the completed investment by Intesa Sanpaolo (IS) of €55m for a 12% minority stake in Warrant Hub (IMS subsidiary). Meeting guidance requires a significant improvement in performance in Q422 by IMS (51% of FY22e divisional EBITDA to be generated) and CS (63% of FY22e EBITDA to be generated). Management’s confidence in meeting guidance stems from a high revenue backlog for both businesses and the elimination of Q3’s phasing issues.

Valuation: Well-supported by DCF

The current share price lags our DCF-based valuation, which increases to €39/share from €38 to take account of Tinexta’s improved net debt position.

Exhibit 1: Financial summary

€m

2020

2021

2022e

2023e

2024e

31-December

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

269.0

375.4

365.3

408.2

455.8

Operating costs

(187.8)

(276.6)

(267.9)

(295.0)

(327.2)

EBITDA

 

 

81.2

98.7

97.3

113.2

128.6

EBITDA (not adjusted)

 

 

77.9

93.0

90.5

110.4

125.8

Operating profit (before amort. and excepts.)

 

 

62.2

74.3

71.9

87.6

101.8

Amortisation of acquired intangibles

(6.0)

(11.7)

(11.7)

(11.7)

(11.7)

Exceptionals

(2.4)

(2.9)

(4.0)

0.0

0.0

Share-based payments

(0.9)

(2.8)

(2.8)

(2.8)

(2.8)

Reported operating profit

52.9

56.9

53.4

73.1

87.4

Net Interest

0.6

(3.3)

(4.2)

(3.7)

(2.7)

Joint ventures & associates (post tax)

(1.0)

(0.2)

(0.2)

(0.2)

(0.2)

Exceptionals

0.0

0.0

0.0

0.0

0.0

Profit Before Tax (norm)

 

 

58.4

70.4

67.4

83.7

98.9

Profit Before Tax (reported)

 

 

52.5

53.4

49.0

69.2

84.4

Reported tax

(14.6)

(13.8)

(15.7)

(20.1)

(24.5)

Profit After Tax (norm)

40.6

49.5

45.9

59.4

70.2

Profit After Tax (reported)

37.9

39.6

33.3

49.1

60.0

Minority interests

(0.6)

(1.3)

(5.4)

(9.6)

(10.7)

Discontinued operations

0.0

0.0

90.0

0.0

0.0

Net income (normalised)

40.0

48.2

40.4

49.8

59.5

Net income (reported)

37.3

38.3

117.9

39.5

49.2

Average Number of Shares Outstanding (m)

47.1

47.2

45.9

45.6

45.4

EPS - normalised (c)

 

 

85.5

104.4

88.1

109.2

131.1

EPS - normalised fully diluted (c)

 

 

84.9

102.0

88.1

109.2

131.1

EPS - basic reported (€)

 

 

0.80

0.83

2.57

0.87

1.09

Dividend (€)

0.26

0.30

0.29

0.29

0.36

Revenue growth (%)

4.0

39.5

(-2.7)

11.7

11.7

EBITDA Margin before non-recurring costs (%)

30.2

26.3

26.6

27.7

28.2

Normalised Operating Margin

23.1

19.8

19.7

21.5

22.3

BALANCE SHEET

Fixed Assets

 

 

325.8

591.0

651.2

628.2

605.8

Intangible Assets

285.1

538.5

603.7

583.6

562.6

Tangible Assets

19.0

25.2

20.2

17.3

15.8

Investments & other

21.7

27.4

27.4

27.4

27.4

Current Assets

 

 

196.1

213.2

429.5

502.2

568.3

Stocks

1.2

1.3

1.3

1.3

1.3

Debtors

84.1

119.5

125.1

139.8

156.1

Cash & cash equivalents

92.8

68.3

278.9

336.9

386.7

Other financial assets

7.3

4.1

4.1

4.1

4.1

Other

10.7

20.0

20.0

20.0

20.0

Current Liabilities

 

 

(154.9)

(207.5)

(205.1)

(215.4)

(226.8)

Creditors

(106.7)

(146.8)

(144.4)

(154.6)

(166.0)

Tax and social security

(5.1)

(3.6)

(3.6)

(3.6)

(3.6)

Short term borrowings

(40.4)

(54.1)

(54.1)

(54.1)

(54.1)

Other

(2.7)

(3.1)

(3.1)

(3.1)

(3.1)

Long Term Liabilities

 

 

(193.2)

(353.1)

(353.1)

(353.1)

(353.1)

Long term borrowings

(150.5)

(281.5)

(281.5)

(281.5)

(281.5)

Other long term liabilities

(14.3)

(30.2)

(30.2)

(30.2)

(30.2)

Net Assets

 

 

173.9

243.7

522.6

562.0

594.2

Minority interests

(4.0)

(47.0)

(92.4)

(99.5)

(102.7)

Shareholders' equity

 

 

169.8

196.7

430.2

462.5

491.5

CASH FLOW

Operating Cash Flow

 

 

81.6

72.5

69.4

88.5

98.9

Capex and intangibles

(14.9)

(16.2)

(16.4)

(14.3)

(16.0)

Acquisitions/disposals

(3.3)

(92.8)

146.1

0.0

0.0

Net interest

(1.9)

(2.3)

(4.2)

(3.7)

(2.7)

Equity financing

(10.0)

(9.3)

(10.0)

(10.0)

(10.0)

Dividends

(2.2)

(12.5)

(19.2)

(7.5)

(20.6)

Borrowings

35.4

42.9

0.0

0.0

0.0

Other

11.2

6.6

45.0

5.0

0.0

Net Cash Flow

59.2

(24.6)

210.7

58.0

49.7

Opening net debt/(cash)

 

 

129.1

91.9

263.3

52.6

(5.4)

Closing net debt/(cash)

 

 

91.9

263.3

52.6

(5.4)

(55.1)

Source: Tinexta, Edison Investment Research


General disclaimer and copyright

This report has been commissioned by Tinexta and prepared and issued by Edison, in consideration of a fee payable by Tinexta. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

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Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

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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

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Tinexta and prepared and issued by Edison, in consideration of a fee payable by Tinexta. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

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

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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