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INDRA SISTEMAS SA
INDRA SISTEMAS SA
Ongoing recovery even still
16 Nov 16
The recovery continued in Q3 16, despite a low and disappointing top-line. Q3 16 figures In Q3 16, revenue was €619m (-6%). At constant currency, revenue decreased by 5% following -1% in H1 16. Revenue decreased in all divisions: -1% in T&D (vs +4% in H1 16) due to the drop in activity in the Transport/traffic sector (-13%) offsetting the strong increase in revenue in the Defence/security sector (+14%), -9% in IT (vs -5% in H1 16) due to the drop in activities in all verticals except for the financial services (+1%). At constant currency, revenue was down in most geographic areas: -1% in Spain (vs -3% in H1 16), -16% (-19% reported) in America (vs -8% in H1 16), -5% in AMEA (vs +25% in H1 16). Conversely, revenue increased slightly in Europe, +1% (vs -2% in H1 16). The strong order intake was the positive item of this quarter. At constant currency, new orders were up 9%, following +6% in H1 16. The recurring EBIT reached €34m (+43%), corresponding to a margin rate of 5.5% of revenue (+2pts) thanks to lower purchases/external expenses/other costs (-15%) and depreciation costs (-19%). The reduction in staff costs slowed (-3% following -10% in H1 16) and declined at a slower pace than revenue due to a one-time project for the Regional Court of Justice in Brazil (3,600 employees involved) and extra-costs related to the cancellation of a BPO project with Vodafone in Spain. There were no extraordinary items like in Q3 15 (€-166.8m). Therefore, net EBIT reached €34.1m (vs €-143.4m in Q3 15). Net profit was €17.4m (vs €-125.1m in Q3 15) after lower net financial expenses (€-8.4m, -53%). FCF (after net financial expenses) was slightly negative at €-4.6m (vs €-23.1m in Q3 15) and €-19m excluding non-recourse factoring after net capex of €12m (+1.2%) and restructuring cash-out of €32.5m. 9 months 2016 figures: Revenue reached €1,951m (-6%). At constant currency, revenue was down 3%, o/w +2% in T&D (including +10% in Defence/security) and -6% in IT (including a decrease in all verticals). Organic revenue was down in all geographic areas (-2% in Spain, -10% in America, -1% in Europe) except for AMEA (+14%). Conversely, new orders were well-oriented and reached €2,080m (+3% and +6% at constant currency). The recurring EBIT was positive at €104.2m (vs €-1.4m in 9m 15) after lower purchase/external expenses/other costs (-16%), staff costs (-8%) and depreciations (-28%). Net EBIT was similar considering that there were no exceptional items unlike last year (vs €-557.1m in 9m 15). Net profit was €48.1m (vs €-560.8m in 9m 15) after lower net financial expenses (€-30.4m, -37%). FCF (after net financial expenses) was positive at €43.6m (vs €-187.3m in 9m 2015) thanks to a higher operating performance, the improvement in trade receivables and despite cash-out related to the redundancy plan (€-38m) and onerous projects (€-41m). Net debt amounted to €666m and represented 1.9x shareholders’ equity vs €659m in H1 16 and €700m at year-end 15. In 9m 16, non-recourse factoring was €187m, as in H1 16 and FY2015.
Recovery on track.
29 Jul 16
The recovery continued in Q2 16 and the recurrent EBIT turned positive in H1 16 thanks to the effect of restructuring and fewer onerous projects. Q2 16 figures. - Revenue reached €704m (flat, +3% at constant currency) driven by the Transport & Defense business, +15% at constant currency. By geographic area, revenue growth (at constant currency) came from Europe excluding Spain (+20%), AMEA (+8%) and America (+1%) to a lesser extent. Inversely, revenue declined in Spain (-2%). - The recurrent EBIT rebounded to 5.9% of revenue (vs -4% of revenue in Q2 15) thanks to higher direct margin, restructuring and fewer onerous projects. - FCF was slightly positive at €2m taking into account factoring (€-23m restated from this item) vs €-85m in H1 15. H1 16 earnings. - New orders increased to €1,599m (+1%, +6% at constant currency). There was an acceleration in Q2 16 (+5%, +11% at constant currency). Order intake increased in both divisions (+8% in T&D, +4% in IT at constant currency in H1 16). - Revenue reached €1,332m (-5%, -1% at constant currency). At constant currency, revenue grew by 4% in the T&D division (o/w +8% in Defense & Security, -2% in Transport & Traffic) and decreased by 5% in the IT division. Revenue declined in all geographies (-3% in Spain, -8% in America, -2% in Europe) except for AMEA (+25%) – all growth at constant currency. - EBITDA was €100m (vs €20m in H 115). - Recurrent EBIT turned positive to €70m (vs €-25m in H1 15). Staff costs decreased by 10% on the back of a lower average workforce (-8%) while outsourcing costs and operating expenses dropped by 16%. - Group net profit was €31m (vs €-436m in H1 15 which included non-recurring costs of €-390m) after a lower net financial result (€-22m vs €-31m in H1 15). The Group had positive FCF at €48m (vs €-164m in H1 15) including restructuring paid (€26m), the cash out related to the onerous projects (€33m). Net debt was reduced to €659m and represented 2.1x shareholders’ equity vs €700m at year-end 15. In H1 16, non-recourse factoring was €187m (vs €176m in 1H 15 and €187m in FY2015).
Some improvements despite still tough trading conditions
10 May 16
Q1 16 earnings Revenue was down at €628m (-10.5%, -6.3% excluding the currency effects). On an organic basis, the decrease in revenue was higher in the IT division (-8%) than in the Transport & Defence (T&D) division (-4%). Most geographic areas were organically poorly-oriented: -4% in Spain despite strong growth in Defence & Security (+23%) and an improvement in Energy & Industry (+3%), -15% (-29% reported) in Latin America reflecting adverse macro-economics and the repositioning of the IT business which represented 80% of revenue in Latin America, -25% in Europe and North America due to a lower contribution from the Eurofighter project and delays in some Transport & traffic projects. Conversely, there was strong revenue growth in the AMEA region (+56%) thanks to Defence & Security (+88%) and Transport & traffic (+61%). The good news related to the order intake which increased by 2.1% excluding the currency effect. This was a mix of lower new orders in T&D (-3%) and higher new orders in IT (+5%). The recurrent EBIT was €29m (vs €3m in Q1 15) and the operating margin improved to 4.6% of revenue (vs 0.5% of revenue in Q1 15). The operating expenses decreased by 15% taking into account lower revenue, fewer subcontractors, the reduction in staff costs (-10%) including the reduction in the average workforce, o/w overheads (-6%, o/w -7% in Spain and Latin America), and lower provisions for onerous contracts. The Brazilian operations had a positive EBIT margin. On 31 March 2016, the workforce comprised 35,972 employees (-8%), o/w 19,748 employees in Spain (-9% yoy or 1,988 employees, o/w two-thirds related to the reduncancy plan), and 12,938 employees in Latin America (-8% yoy or 1,143 employees mainly linked to the problematic and low value projects). The reported EBIT was €29m (vs €-0.9m in Q1 15) considering no non-recurring costs (vs €-4m in Q1 15). Net profit was €12m (vs net losses of €-20m in Q1 15) after lower net financial costs (-13%) due to lower average net debt. The FCF was positive at €46.6m (vs €-79.3m in Q1 15) including cash out of €17m related to the redundancy plan, €21m related to the onerous contracts and despite lower factoring. The change of WCR improved significantly due to lower activity and the decrease in trade and receivables and capex was reduced to €4m (vs €9m in Q1 15). On 31 March 2016, net debt was reduced by 11% yoy to €659m (vs €700m at year-end 2015) but remained significant (2.1x shareholders’ equity).
Some improvement in Q4 15, further provisions and cost overruns
02 Mar 16
In Q4 15, there were some improvements and also additional provisions, impairment losses and cost overruns of €-130m, o/w €-64m in Brazil. +Main figures in Q4 15+: Revenue decreased by 8% to €781m (-6% excluding the currency effects). Excluding the elections business which brought revenue of €16m, revenue was down 10%. At constant currency, Indra Sistemas had lower revenue in Spain (-2% due to the decline of the private sector vs +11% in 9m 15), Latin America (-19% vs +3% in 9m 15), Europe/USA (-10%) and Asia/Middle East/Africa (+16%), reflecting partly commercial selectiveness. The recurrent EBIT margin reached €46m, representing 6% of revenue (vs 3.5% in Q3 15; 5.7% in Q4 14) thanks to cost reductions, lower direct costs and the negative impact from problematic contracts. FCF was positive at €137m thanks to WCR actions (reduction of inventories and trade receivables) and net debt was reduced to €700m at year-end 2015 (vs €837m on 30 September 2015) considering the cash payments for restructuring of €78m in the year. The non-recurring charge of €-130m was related to a number of contracts in Brazil (€-64m) and changes in estimates of various projects in other geographic areas. In Brazil, the majority of the projects with high risks are expected to be finished by the end of the year 2016. +FY 2015 figures+: New orders dropped (-12%, -11% at constant currency). At constant currency, there were lower order intakes in Latin America (-38%), Asia/Middle East/Africa (-40%), Europe and the US (-9%). Conversely, new orders surged in Spain (+26%). Revenue reached €2,850m (-3%, -2% at constant currency). Excluding the elections business, revenue declined by 1%. Revenue increased in Spain (+7% driven by the Public sector +23%) and decreased in all other geographic areas (-3% in Latin America, -9% in Europe and the US, -13% in Asia/Middle East/Africa at constant currency) The recurrent EBIT was €45m (-78%), or 1.6% of revenue (vs 6.9% of revenue in 2014). In Q3 15, Indra Sistemas made provisions of €160m for a restructuring programme to generate €120m of cost savings in 2015-18. The first cost savings were €20m in 2015. The reported EBIT was negative at €-641m after €-687m non-recurring items. Group net losses reached €-641m (vs €-92m in 2014). FCF was negative at €-50m (vs €47m in 2014) including a strong improvement in Q4 15 (positive FCF). WCR was significantly reduced (lower inventories and trade receivables) and was equivalent to 30 DSO (vs 81 DSO in 2014). Excluding the adjustments made, the WCR underlying improvement was €130m, equivalent to 16 DSO.
Brazil looks far from stabilising
12 Nov 15
Q3 15 brought some positive news related to the Spanish activities and some negative news related to the Brazilian operations which look far from stabilising. +*9m 2015 figures*+: * Revenue reached €2,069m (-1%, flat excluding the negative currency effect). There was an acceleration of the activity in Q3 15 (+8%, +12% on constant currency vs -4.5%, -5% on constant currency in H1 15). In Q3 15, there was a positive impact of the election-related business which added 8pts of growth. Revenue growth was significant in Spain (+11% in 9m 15) thanks to an acceleration in Q3 15 (+20% to €881m) attributable to the recovery of the public sector, although still with low profitability, the financial services and the energy & industry sector. Conversely, the revenue trend was softer in Latin America (-1% to €573m on 9m 15, +3% on constant currency) due to the deterioration of the economic environment in Brazil. Lastly, revenue decreased significantly in the other geographic areas in 9m 15 (-8% in Europe and North America, -22% in AMEA mainly due to the elections in Iraq which were finalised in Q2 14). * Reported EBIT losses were significant, €-558m (vs €140m in 9m 14) due to the accounting of huge non-recurring costs of €422m in H1 15 (provisions, impairment losses, cost overruns, restructuring costs) and an additional provision of €160m in Q3 15 related to the restructuring of the workforce. The recurring EBIT was close to breakeven (€-1m vs €156m in 9m 14) after €-25m in H1 15. The operating performance improved in Q3 15 with a positive recurring EBIT of €23m (vs €-25m in Q3 14). * Group net loss was €-561m (vs group net profit of €78m in 9m 14) after no significant deterioration of the net financial costs (+2% to €-43m). +*Financial situation*+ * Net debt was not reduced and amounted to €837m on 30 September 2015 vs €825m on 30 June 2015 and €726m on 30 September 2014). Total borrowings of €1,115m included gross debt of €112m in Brazil. Non-recourse financing lines amounted to €175m on 30 September 2015. * In 9m 15, the operating cash flow was negative at €-139m (vs €60m in 9m 14) after a slight increase in the change of WCR (lower inventories, higher receivables). Net capex was reduced to €28.5m (vs €41.5m in 9m 14).
Huge losses, negative FCF, higher net debt
03 Aug 15
H1 15 earnings: Revenue reached €1,409m (-4.5%, -5% at constant currency). Lower revenue was attributable to the decrease in revenue (€88m) of the elections-related business. Excluding this item, underlying revenue grew by 2% at constant currency. Revenue growth was significant in Spain (+7%, o/w +8% in Q2 15). Conversely, revenue was flat in Latin America (both on the reported figure and at constant currency) where the Service division was affected by low demand, and dropped in Europe/North America (-10%, -11% at constant currency, due to lower activity in the Eurofighter project and the Transport/traffic sector in the UK and Romania) and the AMEA region (-36%, -39% at constant currency, due to the strong level of the elections-related activity last year with the elections in Iraq). EBIT losses were significant, €-415m (vs €101m in H1 14) due to the accounting of huge non-recurring costs of €422m including provisions, impairment losses, cost overruns and restructuring costs). Excluding these items, the recurring EBIT was negative at €-25m (vs €113m in H1 14). Group net losses reached €-436m (vs group net profit of €61m in H1 14). The operating cash flow was negative at €-132m (vs €44m in H1 14) after a negative change in WCR and FCF was negative at €-164m (vs €-3m in H1 14) after capex of €18m (vs €28m in H1 14). On 30 June 2015, Indra Sistemas had higher net debt, or €825m (vs €663m at year-end 2014) which represented 167% of shareholders' equity.
A data-driven H1 raises expectations
05 Dec 16
The first reporting period under the new D4t4 Solutions brand saw the group (previously IS Solutions) deliver good growth, leaving it well on track to meet PBT forecasts in FY 2017, and we now increase FY 2018 forecasts. The business continues to flourish from its focus on data management and analytics, enabling its international blue-chip client base to gather and gain advantage from the mass of customer data available, utilising the leading-edge Celebrus solution. Industry analysts predict 12% CAGR for the BI & Analytics market through to 2020, and D4t4 is riding this wave of demand.
Taking a prudent road
28 Nov 16
As flagged in September, H1 2017 profit is indeed below LY; adj. PBT of £0.5m compares with £1.5m in H1 2016 as Trakm8 invests heavily in new technology and acquisition integration. Management remains confident in another very strong H2 performance and in particular is focused on closing a couple of large high-margin software-related sales which would see the group meeting the original FY 2017 expectations of £5.9m adj. PBT. However, should these fall outside the March year-end, profits are only likely to be in line with last year’s £3.9m, albeit on a growing revenue base. Prudence dictates we assume a worst-case scenario in our forecasts so that surprise is only in the upside – if the deals close in the year, the company will meet those original revenue and profit expectations.
06 Dec 16
600 Group* (SIXH): Interim results: order book showing signs of improvement (CORP) | Real Good Food* (RGD): Commodity volatility impacts numbers (CORP) | Minds + Machines* (MMX): .vip goes live in China (CORP | Imaginatik* (IMTK): Interims (CORP) | iomart* (IOM): Quality business as usual (CORP) | Fulcrum (FCRM): Upgrades continue (BUY)
N+1 Singer - Morning Song 05-12-2016
05 Dec 16
RTHM is acquiring a profitable Canadian listed mobile specialist for equivalent of US$42.5m consideration in shares (88.235m). This helps adds to two growth vectors RTHM is targeting; (i) adds unique exclusive audience (10m unique) and (ii) Exclusive demand Yahoo and Facebook. The business has 15 premium and owned and operated apps which provide users with rewards for activity. The business is expected to deliver c$9m of EBITDA in FY18 including $2m of cost synergies. This equates to just 4.7x EV/EBITDA. This marks what we see the first step in RTHM activity to scale the business and deliver on margin potential (see our initiation notes). Our initial estimates for EPS revisions are very significant - for FY18 are 2.3 cents (currently 0.6) and for FY19 4.3 (currently 2.5). There is a call at 830 for investors and we will revise post this.
Joy of Techs
21 Nov 16
ICT evolution is driven by technological development as advances are made which both meet and shape customer requirements. Our 2011 note No such thing as a telco described the modern reality in that former ‘telcos’ now deliver varying elements of a range of managed services. We built on this theme last year, exploring in further detail their evolutionary paths, operating fundamentals, and cashflow yield similarities. In the consumer environment, demand for bundles of technology is complemented by demand for content. Across the pond, the mooted combination of AT&T and Time Warner typifies the bundled need of ‘pipe’ and content, since unbundled alternatives such as FaceTime and WhatsApp can be easier and clearer to chat over, and Amazon and Netflix are easier to watch anywhere. In the UK, BT’s defensive actions cover delivery, content and capabilities, acquiring EE yet also buying football rights. While TV was long ago added to triple play to become quad play, voice is now merely an app, and fixed and mobile seen as just dumb pipes: it's the content that will influence consumer choices. Growth of TV and film as well as music and gaming over IP leads to UK small cap opportunities. In context of the drive to maximise value from pipes and access by offering content and data, we look at some amongst the potential tech small cap beneficiaries: Amino*, Keyword Studios, ZOO Digital*, 7digital*, KCOM* and CityFibre*.
Quality business as usual
06 Dec 16
iomart's interims show delivery of continuing organic growth, complemented by targeted acquisitions to extend the strategic opportunities. Compared with peers exposed to project-based revenue, cloud services organic growth continued at 10% (comfortably within our expected 8-11% target range), with the evolution of margins as expected: the growing proportion of public cloud services mildly easing EBITDA margins but maintaining or even strengthening adjusted PBT margins, given the lack of related depreciation. With high quality recurring revenue at high margins, and (lower margin, lower recurring revenue) peer group exit valuations comfortably above iomart’s current valuation, the upside remains very clear. Target 360p reiterated.