SNP Schneider-Neureither & Partner
Written by
SNP Schneider-Neureither & Partner |
Well positioned for further strong growth |
Preliminary results |
Software & comp services |
1 February 2017 |
Share price performance
Business description
Next events
Analysts
SNP Schneider-Neureither & Partner is a research client of Edison Investment Research Limited |
FY16 was a hectic year for SNP Schneider-Neureither & Partner (SNP), with three acquisitions successfully integrated, a €30m capital increase and a mammoth contract win announced in Q3 to combine the IT landscapes of two US chemical companies (we assume Dow Chemical and DuPont) that are merging. Preliminary figures show FY16 revenues growing by c 42% to c €80m (we forecast €77m) and adjusted operating profit rose by c 66% to c €7m, for a c 8.8% operating margin. We are reviewing our forecasts and would expect to edge FY17 revenues higher towards the middle of the guidance, with the operating margin maintained at c 12%. Given SNP’s strong market position in software-based transformation projects, and the sustained high level of activity, we believe the shares remain attractive on c 22x our existing cash-adjusted FY18e EPS forecast.
Year |
Revenue |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/14 |
30.5 |
(0.1) |
(13.9) |
13.0 |
N/A |
0.3 |
12/15 |
56.2 |
3.4 |
58.8 |
34.0 |
74.0 |
0.8 |
12/16e |
77.0 |
7.3 |
111.4 |
40.0 |
39.1 |
0.9 |
12/17e |
95.9 |
10.9 |
148.2 |
50.0 |
29.3 |
1.1 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Q4 results: Growth both organic and via acquisitions
Based on the FY16 preliminary numbers, Q4 revenues grew by c 51% to c €22.5m while adjusted operating profit more than doubled to c €1.8m, generating a margin of c 8.1%. Incoming orders were slightly below Q3, though we note they benefited from the record $10m+ contract win that is expected to be delivered over the next c 18 months. In wake of the €30m capital increase, Dr Andreas Schneider-Neureither saw his shareholding dip from c 20.6% to 18.3%, as he reserved some of his subscription rights for senior employees. Dr Andreas Schneider-Neureither has recently lifted his shareholding back to 19.5% through on market purchases.
Initial management revenue guidance for FY17
Management expects the group to generate revenues of €95-100m in FY17. The guidance is underpinned by the record €39.3m order backlog, which was 95% higher than a year earlier. No guidance has been given yet on margins. The guidance numbers only include organic growth, while fresh acquisitions are highly likely to be made in 2017. We note that the group has a strong net cash position, and combined with a c €30m proposed debt financing SNP has considerable firepower to make acquisitions.
Valuation: Strong growth play in the ERP space
The stock trades on c 39x our current FY16e EPS, falling to c 29x in FY17 and to c 23x in FY18. Adjusted for the net cash, the ratings fall to c 34x in FY16e, c 27x in FY17e and c 22x in FY18e. We believe the ratings continue to look attractive given the forecast strong growth and continued margin recovery potential.
Quarterly analysis
Based on the FY16 preliminary numbers, Q4 revenues grew by c 51% to c €22.5m while adjusted operating profit more than doubled to c €1.8m, generating a margin of c 8.1%. Incoming orders rose by 81% to €23.3m, though were slightly below Q1 and Q3 levels. This generated a book-to-bill ratio of 1.04x. For the full year, incoming orders were €95.6m, generating a book-to-bill ratio of 1.19x.
The complete audited FY16 numbers are scheduled to be released on 30 March.
Exhibit 1: Quarterly analysis
2015 |
2015 |
2015 |
2015 |
2015 |
2016 |
2016 |
2016 |
2016 |
2016 |
|
€'000 |
Q1 |
Q2 |
Q3 |
Q4 |
FY |
Q1 |
Q2 |
Q3 |
Q4* |
FY* |
Professional services |
9,495 |
12,909 |
12,200 |
12,264 |
46,868 |
15,516 |
16,558 |
15,953 |
|
|
Licences |
1,820 |
1,406 |
1,957 |
2,254 |
7,437 |
2,216 |
2,425 |
3,258 |
|
|
Maintenance |
863 |
368 |
350 |
350 |
1,931 |
742 |
457 |
416 |
|
|
Total revenue |
12,178 |
14,683 |
14,507 |
14,868 |
56,236 |
18,474 |
19,440 |
19,627 |
22,459 |
80,000 |
Other operating income* |
638 |
(95) |
(25) |
|
|
200 |
148 |
150 |
|
|
Cost of materials |
(1,428) |
(1,929) |
(1,652) |
|
|
(1,928) |
(2,037) |
(1,965) |
|
|
Personnel costs |
(7,257) |
(7,887) |
(7,834) |
|
|
(10,604) |
(11,382) |
(11,399) |
|
|
Other operating expenses |
(2,855) |
(3,344) |
(3,355) |
|
|
(4,174) |
(3,986) |
(4,209) |
|
|
Other taxes |
(13) |
(13) |
(14) |
|
|
(22) |
(27) |
(21) |
|
|
Op costs (before depreciation) |
(10,915) |
(13,268) |
(12,880) |
(13,689) |
(50,752) |
(16,528) |
(17,284) |
(17,444) |
|
|
Adjusted EBITDA |
1,263 |
1,415 |
1,627 |
1,179 |
5,484 |
1,946 |
2,156 |
2,183 |
|
|
Depreciation |
(249) |
(334) |
(280) |
(399) |
(1,262) |
(323) |
(372) |
(399) |
|
|
Adjusted operating profit (EBIT) |
1,014 |
1,081 |
1,347 |
780 |
4,222 |
1,623 |
1,784 |
1,784 |
1,809 |
7,000 |
Operating Margin |
8.3% |
7.4% |
9.3% |
5.2% |
7.5% |
8.8% |
9.2% |
9.1% |
8.1% |
8.8% |
Net interest |
(109) |
(204) |
(271) |
(244) |
(828) |
(191) |
(268) |
(141) |
|
|
Edison profit before tax (norm) |
905 |
877 |
1,076 |
536 |
3,394 |
1,432 |
1,516 |
1,643 |
|
|
Associates |
0 |
0 |
0 |
(3) |
(3) |
0 |
(1) |
0 |
|
|
Exceptionals - earnout adjustments* |
0 |
0 |
356 |
0 |
356 |
0 |
0 |
0 |
|
|
Profit before tax (FRS 3) |
905 |
877 |
1,432 |
533 |
3,747 |
1,432 |
1,515 |
1,643 |
|
|
New orders and backlog |
2015 |
2015 |
2015 |
2015 |
2015 |
2016 |
2016 |
2016 |
2016 |
2016 |
€'000 |
Q1 |
Q2 |
Q3 |
Q4 |
FY |
Q1 |
Q2 |
Q3 |
Q4* |
FY* |
Incoming orders |
16,600 |
12,700 |
17,000 |
12,900 |
59,200 |
26,200 |
19,900 |
26,200 |
23,300 |
95,600 |
Quarterly revenues |
12,178 |
14,683 |
14,507 |
14,868 |
56,236 |
18,474 |
19,440 |
19,627 |
22,459 |
80,000 |
Book-to-bill ratio |
1.36 |
0.86 |
1.17 |
0.87 |
1.05 |
1.42 |
1.02 |
1.33 |
1.04 |
1.19 |
Backlog |
18,900 |
18,200 |
20,000 |
20,200 |
|
28,700 |
29,300 |
36,200 |
39,300 |
|
Source: Company accounts. Note: *Based on the preliminary FY16 figures.
Exhibit 2: Financial summary
€'000s |
2013 |
2014 |
2015 |
2016e |
2017e |
2018e |
||
Year end 31 December |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||||
Revenue |
|
|
23,536 |
30,480 |
56,236 |
76,979 |
95,862 |
108,494 |
Cost of sales |
0 |
0 |
0 |
0 |
0 |
0 |
||
Gross Profit |
23,536 |
30,480 |
56,236 |
76,979 |
95,862 |
108,494 |
||
EBITDA |
|
|
(1,972) |
862 |
5,484 |
9,383 |
13,106 |
16,094 |
Adjusted Operating Profit |
|
|
(2,714) |
(66) |
4,222 |
8,030 |
11,666 |
14,349 |
Amortisation of acquired intangibles |
0 |
0 |
0 |
0 |
0 |
0 |
||
Exceptionals |
0 |
1,505 |
356 |
0 |
0 |
0 |
||
Associates |
0 |
0 |
(3) |
0 |
0 |
0 |
||
Operating Profit |
(2,714) |
1,439 |
4,575 |
8,030 |
11,666 |
14,349 |
||
Net Interest |
(85) |
(66) |
(828) |
(775) |
(775) |
(775) |
||
Profit Before Tax (norm) |
|
|
(2,799) |
(132) |
3,394 |
7,255 |
10,891 |
13,574 |
Profit Before Tax (FRS 3) |
|
|
(2,799) |
1,373 |
3,747 |
7,255 |
10,891 |
13,574 |
Tax |
477 |
(344) |
(1,195) |
(2,177) |
(3,267) |
(4,072) |
||
Profit After Tax (norm) |
(2,322) |
(477) |
2,198 |
5,079 |
7,624 |
9,502 |
||
Profit After Tax (FRS 3) |
(2,322) |
1,028 |
2,552 |
5,079 |
7,624 |
9,502 |
||
Minority interest |
(84) |
(40) |
0 |
(225) |
(248) |
(267) |
||
Adjustments for normalised earnings |
0 |
0 |
0 |
0 |
0 |
0 |
||
Net income (norm) |
(2,405) |
(517) |
2,198 |
4,854 |
7,376 |
9,235 |
||
Net income (FRS 3) |
(2,405) |
988 |
2,552 |
4,854 |
7,376 |
9,235 |
||
Average Number of Shares Outstanding (m) |
3.7 |
3.7 |
3.7 |
4.4 |
5.0 |
5.0 |
||
EPS - normalised (c) |
|
|
(64.7) |
(13.9) |
58.8 |
111.4 |
148.2 |
185.6 |
EPS - normalised & fully diluted (c) |
|
|
(64.7) |
(13.9) |
58.8 |
111.4 |
148.2 |
185.6 |
EPS - FRS 3 (c) |
|
|
(64.7) |
26.6 |
68.3 |
111.4 |
148.2 |
185.6 |
Dividend per share (c) |
8.00 |
13.00 |
34.00 |
40.00 |
50.00 |
60.00 |
||
Gross Margin (%) |
100.0 |
100.0 |
100.0 |
100.0 |
100.0 |
100.0 |
||
EBITDA Margin (%) |
-8.4 |
2.8 |
9.8 |
12.2 |
13.7 |
14.8 |
||
Adjusted Operating Margin (%) |
-11.5 |
-0.2 |
7.5 |
10.4 |
12.2 |
13.2 |
||
BALANCE SHEET |
||||||||
Fixed Assets |
|
|
7,759 |
8,291 |
15,243 |
25,430 |
25,907 |
26,332 |
Intangible Assets |
5,194 |
5,190 |
11,675 |
21,675 |
21,675 |
21,675 |
||
Tangible Assets |
1,070 |
1,231 |
1,999 |
2,185 |
2,663 |
3,087 |
||
Other |
1,496 |
1,871 |
1,570 |
1,570 |
1,570 |
1,570 |
||
Current Assets |
|
|
16,145 |
17,882 |
29,996 |
57,579 |
68,121 |
72,852 |
Stocks |
0 |
0 |
0 |
0 |
0 |
0 |
||
Debtors |
9,105 |
11,286 |
16,084 |
22,017 |
27,418 |
31,031 |
||
Cash |
6,355 |
5,681 |
13,769 |
35,419 |
40,561 |
41,679 |
||
Current Liabilities |
|
|
(5,804) |
(9,782) |
(13,703) |
(19,448) |
(24,550) |
(27,741) |
Creditors |
(5,204) |
(9,182) |
(11,101) |
(16,847) |
(21,948) |
(25,140) |
||
Short term borrowings |
(600) |
(600) |
(2,602) |
(2,602) |
(2,602) |
(2,602) |
||
Long Term Liabilities |
|
|
(4,338) |
(2,501) |
(15,513) |
(20,013) |
(20,013) |
(15,513) |
Long term borrowings |
(2,250) |
(1,650) |
(12,344) |
(12,344) |
(12,344) |
(12,344) |
||
Other long term liabilities |
(2,088) |
(851) |
(3,169) |
(7,669) |
(7,669) |
(3,169) |
||
Net Assets |
|
|
13,762 |
13,890 |
16,024 |
43,547 |
49,466 |
55,930 |
CASH FLOW |
||||||||
Operating Cash Flow |
|
|
(2,110) |
2,579 |
1,879 |
8,998 |
12,626 |
15,552 |
Net Interest |
4 |
(66) |
(167) |
(775) |
(775) |
(775) |
||
Tax |
(1,062) |
(1,102) |
(554) |
(2,031) |
(3,050) |
(3,801) |
||
Capex |
(230) |
(701) |
(1,779) |
(1,540) |
(1,917) |
(2,170) |
||
Acquisitions/disposals |
(2,267) |
(500) |
(3,228) |
(11,500) |
0 |
(5,200) |
||
Shares issued |
(35) |
0 |
0 |
29,768 |
0 |
0 |
||
Dividends |
(937) |
(335) |
(483) |
(1,271) |
(1,743) |
(2,488) |
||
Net Cash Flow |
(6,638) |
(124) |
(4,332) |
21,649 |
5,142 |
1,118 |
||
Opening net debt/(cash) |
|
|
(10,152) |
(3,505) |
(3,431) |
1,176 |
(20,474) |
(25,615) |
HP finance leases initiated |
0 |
0 |
0 |
0 |
0 |
0 |
||
Other |
(10) |
51 |
(275) |
0 |
0 |
() |
||
Closing net debt/(cash) |
|
|
(3,505) |
(3,431) |
1,176 |
(20,474) |
(25,615) |
(26,733) |
Source: Company accounts, Edison Investment Research
|
|