SinnerSchrader
Written by
SinnerSchrader |
A solid finish to a strong year |
Preliminary results |
Software & comp services |
19 October 2016 |
Share price performance
Business description
Next events
Analysts
SinnerSchrader is a research client of Edison Investment Research Limited |
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SinnerSchrader (SZZ) has reported a solid finish to an excellent financial year, which saw double-digit growth in underlying revenues and EBIT margin expansion. With some significant client wins announced, most recently Haspa and Audi in July, we believe FY17 will be another strong year and see scope for continued share price appreciation. We leave forecasts unchanged.
Year |
Revenue (€m) |
EBITA* |
EPS |
EPS* |
DPS |
P/E |
Yield |
08/14 |
48.6 |
4.6 |
16.5 |
27.8 |
12.0 |
19.4 |
2.2 |
08/15 |
47.7 |
4.2 |
13.4 |
25.1 |
12.0 |
21.5 |
2.2 |
08/16e |
51.0 |
5.0 |
26.4 |
29.2 |
13.0 |
18.4 |
2.4 |
08/17e |
58.7 |
5.9 |
34.1 |
34.0 |
13.7 |
15.8 |
2.5 |
Note: *EBITA and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items, share-based payments and discontinued activities.
Q4 trading in line with forecasts
Q4 results were broadly as we had expected. After three quarters of strong growth, revenues in Q4 were down slightly y-o-y (-4%). However, without the investment in Next Audience (NA), EBIT margins of 14% were well above Q415 (8.8%). For the year as a whole, this takes preliminary revenues to just over €51m, up 7% y-o-y or 13% on an adjusted basis excluding the discontinued NA venture. Full year EBIT (including NA losses) is approximately €4.5m, putting full year EBIT margins at c 9% compared to c 4% last year (c 10% excluding NA). This translates to a net profit of €3m, €0.26 per share – slightly above July’s guidance.
New clients underpin forecasts
SZZ is in a strong position as it enters its new financial year. Post the €1.2m share buyback and €1.2m dividend payments, it reported net cash of €6m at the end of the year. In July it announced that it has been selected by Audi as its worldwide digital lead agency, which could translate into SZZ’s largest win to date. Work started in mid-July and it should make a material contribution to revenues in the coming year. In its prelims yesterday, SZZ also announced that Hamburger Sparkasse (Haspa), Germany’s largest savings bank, has appointed it to develop a new digital service for the group. Resourcing larger projects like these may put pressure on margins; however, SZZ has maintained its staff numbers at the end of the year, despite the closure of NA, which we consider to be a positive sign that resourcing is in hand.
Valuation: More potential
SZZ’s shares are at an all-time high and on an FY17e P/E of 15.8x (calendarised FY17e P/E of 15.0x), it now trades broadly in line with European digital agency peers and the larger global agencies. However, we continue to see opportunity for both ratings and earnings expansion. Underpinned by the recent client wins, we forecast one of the faster revenue growth profiles among its peer set for FY17 (+15%) and, given the rarity value of German digital agencies in a consolidating market (eg closest peer Syzygy trades on 27x FY17e P/E), a premium rather than a discount is arguably justified.
Exhibit 1: Financial summary
€'000s |
2014 |
2015 |
2016e |
2017e |
2018e |
||
Aug |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
|||||||
Revenue |
|
|
48,601 |
47,690 |
51,000 |
58,650 |
64,515 |
Cost of Sales |
(37,168) |
(35,659) |
(37,368) |
(41,055) |
(45,161) |
||
Gross Profit |
11,433 |
12,032 |
13,632 |
17,595 |
19,355 |
||
Continuing EBITDA |
|
|
5,384 |
5,251 |
5,823 |
6,770 |
7,765 |
Continuing EBITA |
|
|
4,600 |
4,200 |
5,000 |
5,865 |
6,774 |
Intangible Amortisation |
(82) |
0 |
0 |
0 |
0 |
||
Exceptionals |
0 |
(614) |
0 |
0 |
0 |
||
Discontinued operations |
(1,536) |
(1,503) |
(500) |
0 |
0 |
||
Operating Profit |
2,982 |
2,083 |
4,500 |
5,865 |
6,774 |
||
Net Interest |
8 |
(2) |
4 |
0 |
1 |
||
Profit Before Tax (norm) |
|
|
4,608 |
4,198 |
5,004 |
5,865 |
6,775 |
Profit Before Tax (FRS 3) |
|
|
2,990 |
2,081 |
4,504 |
5,865 |
6,775 |
Tax |
(1,147) |
(563) |
(1,455) |
(1,889) |
(2,182) |
||
Profit After Tax (norm) |
3,124 |
2,847 |
3,388 |
3,976 |
4,594 |
||
Profit After Tax (FRS 3) |
1,843 |
1,518 |
3,049 |
3,976 |
4,594 |
||
Average Number of Shares Outstanding (m) |
11.1 |
11.3 |
11.6 |
11.7 |
11.8 |
||
EPS - normalised (c) |
|
|
28.0 |
25.2 |
29.3 |
34.1 |
39.0 |
EPS - normalised fully diluted (c) |
|
|
27.8 |
25.1 |
29.2 |
34.0 |
38.9 |
EPS - (IFRS) (c) |
|
|
16.5 |
13.4 |
26.4 |
34.1 |
39.0 |
Dividend per share (c) |
12.0 |
12.0 |
13.0 |
13.7 |
14.3 |
||
Gross Margin (%) |
23.5 |
25.2 |
26.7 |
30.0 |
30.0 |
||
EBITDA Margin (%) |
11.1 |
11.0 |
11.4 |
11.5 |
12.0 |
||
Operating Margin (before GW and except.) (%) |
9.5 |
8.8 |
9.8 |
10.0 |
10.5 |
||
BALANCE SHEET |
|||||||
Fixed Assets |
|
|
7,039 |
6,601 |
6,354 |
6,275 |
6,136 |
Intangible Assets |
5,136 |
4,999 |
4,481 |
4,481 |
4,481 |
||
Tangible Assets |
1,902 |
1,603 |
1,873 |
1,794 |
1,655 |
||
Investments |
0 |
0 |
0 |
0 |
0 |
||
Current Assets |
|
|
21,512 |
21,130 |
22,612 |
26,337 |
30,755 |
Stocks |
0 |
0 |
0 |
0 |
0 |
||
Debtors |
15,590 |
14,830 |
15,859 |
18,238 |
20,062 |
||
Cash |
5,833 |
5,559 |
6,011 |
7,358 |
9,952 |
||
Other |
90 |
741 |
741 |
741 |
741 |
||
Current Liabilities |
|
|
(13,777) |
(12,475) |
(13,193) |
(14,439) |
(15,794) |
Creditors |
(13,777) |
(12,475) |
(13,193) |
(14,439) |
(15,794) |
||
Short term borrowings |
0 |
0 |
0 |
0 |
0 |
||
Long Term Liabilities |
|
|
(699) |
(296) |
(296) |
(296) |
(296) |
Long term borrowings |
0 |
0 |
0 |
0 |
0 |
||
Other long term liabilities |
(699) |
(296) |
(296) |
(296) |
(296) |
||
Net Assets |
|
|
14,075 |
14,960 |
15,477 |
17,878 |
20,801 |
CASH FLOW |
|||||||
Operating Cash Flow |
|
|
2,656 |
2,244 |
5,230 |
5,645 |
7,305 |
Net Interest |
8 |
(2) |
4 |
0 |
1 |
||
Tax |
(1,147) |
(563) |
(1,455) |
(1,889) |
(2,182) |
||
Capex |
(1,504) |
(458) |
(788) |
(827) |
(852) |
||
Acquisitions/disposals |
(306) |
(300) |
(1,200) |
0 |
0 |
||
Financing |
177 |
153 |
0 |
0 |
0 |
||
Dividends |
0 |
(1,348) |
(1,339) |
(1,583) |
(1,679) |
||
Net Cash Flow |
(117) |
(274) |
453 |
1,346 |
2,594 |
||
Opening net debt/(cash) |
|
|
(5,949) |
(5,833) |
(5,559) |
(6,011) |
(7,358) |
HP finance leases initiated |
0 |
0 |
0 |
0 |
0 |
||
Other |
0 |
0 |
(0) |
(0) |
(0) |
||
Closing net debt/(cash) |
|
|
(5,833) |
(5,559) |
(6,011) |
(7,358) |
(9,952) |
Source: Company accounts (historic), Edison Investment Research (forecasts)
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