SNP Schneider-Neureither & Partner
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SNP Schneider-Neureither & Partner |
Two acquisitions completed |
Acquisitions completed |
Software & comp services |
5 January 2016 |
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Business description
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SNP has acquired Hartung Consult, along with Astrums (which was announced separately in early December), to target the Asian market. The pricing details have not been disclosed. Hartung and Astrums know each other well, having worked together as partners, with Hartung focused on China and Astrums on Singapore and Malaysia. Together they boost the group’s technical skills, expanding SNP’s reach into China and Asia more broadly while strengthening the group’s office infrastructure in Germany. Group headcount rises to c 580, up from c 260 a year earlier. We believe that both deals will be immediately earnings enhancing.
Year end |
Revenue (€m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/13 |
23.5 |
(2.8) |
(64.7) |
8.0 |
N/A |
0.3 |
12/14 |
30.5 |
(0.1) |
(13.9) |
13.0 |
N/A |
0.5 |
12/15e |
56.0 |
3.7 |
68.8 |
20.0 |
37.9 |
0.8 |
12/16e |
64.0 |
5.7 |
107.1 |
30.0 |
24.4 |
1.1 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Acquisition of Hartung Consult
SNP has acquired 51% of Berlin-based Hartung Consult, along with its majority-owned Shanghai subsidiary Hartung Informational Systems Co. SNP intends to acquire the remaining 49% of Hartung Consult on 1 January 2018 and on the same date it also intends to increase its Astrums stake from 51% to 70%. Hartung has c 80 employees of which c 70 are IT and software specialists with advanced SAP expertise. Established in 1998 by Dr Oswin Hartung, most of Hartung’s customers are Germany-based businesses with global operations. Around 20 of Hartung’s employees are based in Berlin while much of its business is in China, where it has been operating since 1995. Hartung generated revenue of €6.6m in FY14, and we understand its EBIT margins are lower than Astrums' (Astrums' FY14 revenues were €5m with 18% margins). As with Astrums, the deal pricing information has not been disclosed. The Hartung and Astrums acquisitions are both effective from 1 January 2016, and hence will be incorporated into SNP’s Q116 accounts. Astrums also brings a small development team, which is important for the group strategy as management wants to boost the software part of the business in FY16.
Forecasts
We will update our forecasts for the acquisitions following the finals on 29 January. Based on sector deals, we estimate the initial consideration of the combined Hartung and Astrums deals at c €10m (SNP had €14.2m cash at 30 September 2015). Assuming a further €7m of acquisition liabilities, this would suggest that the pro forma adjusted net debt would rise to c €21m from c €4m in September.
Valuation: Strong growth play in the ERP space
Before including the acquisitions, the stock trades on c 38x our FY15e EPS, falling to c 24x in FY16e and to c 18x in FY17e. We believe the ratings continue to look attractive given the forecast strong growth and margin recovery potential.
Exhibit 1: Financial summary
€000s |
2013 |
2014 |
2015e |
2016e |
2017e |
||
Year-end 31 December |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
|||||||
Revenue |
|
|
23,536 |
30,480 |
56,010 |
64,006 |
73,264 |
Cost of sales |
0 |
0 |
0 |
0 |
0 |
||
Gross Profit |
23,536 |
30,480 |
56,010 |
64,006 |
73,264 |
||
EBITDA |
|
|
(1,972) |
862 |
5,585 |
7,630 |
9,723 |
Adjusted Operating Profit |
|
|
(2,714) |
(66) |
4,469 |
6,496 |
8,590 |
Amortisation of acquired intangibles |
0 |
0 |
0 |
0 |
0 |
||
Exceptionals |
0 |
1,505 |
356 |
0 |
0 |
||
Associates |
0 |
0 |
0 |
0 |
0 |
||
Operating Profit |
(2,714) |
1,439 |
4,825 |
6,496 |
8,590 |
||
Net Interest |
(85) |
(66) |
(796) |
(775) |
(775) |
||
Profit Before Tax (norm) |
|
|
(2,799) |
(132) |
3,674 |
5,721 |
7,815 |
Profit Before Tax (FRS 3) |
|
|
(2,799) |
1,373 |
4,030 |
5,721 |
7,815 |
Tax |
477 |
(344) |
(1,102) |
(1,716) |
(2,344) |
||
Profit After Tax (norm) |
(2,322) |
(477) |
2,572 |
4,005 |
5,470 |
||
Profit After Tax (FRS 3) |
(2,322) |
1,028 |
2,928 |
4,005 |
5,470 |
||
Minority interest |
(84) |
(40) |
0 |
0 |
0 |
||
Adjustments for normalised earnings |
0 |
0 |
0 |
0 |
0 |
||
Net income (norm) |
(2,405) |
(517) |
2,572 |
4,005 |
5,470 |
||
Net income (FRS 3) |
(2,405) |
988 |
2,928 |
4,005 |
5,470 |
||
Average No of Shares Outstanding (m) |
3.7 |
3.7 |
3.7 |
3.7 |
3.7 |
||
EPS - normalised (c) |
|
|
(64.7) |
(13.9) |
68.8 |
107.1 |
146.3 |
EPS - normalised & fully diluted (c) |
|
|
(64.7) |
(13.9) |
68.8 |
107.1 |
146.3 |
EPS - FRS 3 (c) |
|
|
(64.7) |
26.6 |
78.3 |
107.1 |
146.3 |
Dividend per share (c) |
8.00 |
13.00 |
20.00 |
30.00 |
40.00 |
||
Gross Margin (%) |
100.0 |
100.0 |
100.0 |
100.0 |
100.0 |
||
EBITDA Margin (%) |
-8.4 |
2.8 |
10.0 |
11.9 |
13.3 |
||
Adjusted Operating Margin (%) |
-11.5 |
-0.2 |
8.0 |
10.1 |
11.7 |
||
BALANCE SHEET |
|||||||
Fixed Assets |
|
|
7,759 |
8,291 |
14,257 |
14,404 |
14,735 |
Intangible Assets |
5,194 |
5,190 |
11,151 |
11,151 |
11,151 |
||
Tangible Assets |
1,070 |
1,231 |
1,236 |
1,382 |
1,714 |
||
Other |
1,496 |
1,871 |
1,871 |
1,871 |
1,871 |
||
Current Assets |
|
|
16,145 |
17,882 |
35,787 |
41,477 |
48,588 |
Stocks |
0 |
0 |
0 |
0 |
0 |
||
Debtors |
9,105 |
11,286 |
20,739 |
23,700 |
27,128 |
||
Cash |
6,355 |
5,681 |
14,133 |
16,862 |
20,546 |
||
Current Liabilities |
|
|
(5,804) |
(9,782) |
(19,334) |
(22,098) |
(25,382) |
Creditors |
(5,204) |
(9,182) |
(18,734) |
(21,498) |
(24,782) |
||
Short term borrowings |
(600) |
(600) |
(600) |
(600) |
(600) |
||
Long Term Liabilities |
|
|
(4,338) |
(2,501) |
(12,501) |
(12,501) |
(12,501) |
Long term borrowings |
(2,250) |
(1,650) |
(11,650) |
(11,650) |
(11,650) |
||
Other long term liabilities |
(2,088) |
(851) |
(851) |
(851) |
(851) |
||
Net Assets |
|
|
13,762 |
13,890 |
18,210 |
21,282 |
25,440 |
CASH FLOW |
|||||||
Operating Cash Flow |
|
|
(2,110) |
2,579 |
5,083 |
7,134 |
9,233 |
Net Interest |
4 |
(66) |
(796) |
(775) |
(775) |
||
Tax |
(1,062) |
(1,102) |
(1,029) |
(1,602) |
(2,188) |
||
Capex |
(230) |
(701) |
(1,120) |
(1,280) |
(1,465) |
||
Acquisitions/disposals |
(2,267) |
(500) |
(3,203) |
0 |
0 |
||
Shares issued |
(35) |
0 |
0 |
0 |
0 |
||
Dividends |
(937) |
(335) |
(483) |
(748) |
(1,121) |
||
Net Cash Flow |
(6,638) |
(124) |
(1,548) |
2,729 |
3,683 |
||
Opening net debt/(cash) |
|
|
(10,152) |
(3,505) |
(3,431) |
(1,883) |
(4,612) |
HP finance leases initiated |
0 |
0 |
0 |
0 |
0 |
||
Other |
(10) |
51 |
0 |
0 |
() |
||
Closing net debt/(cash) |
|
|
(3,505) |
(3,431) |
(1,883) |
(4,612) |
(8,296) |
Source: Company accounts, Edison Investment Research
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