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INDRA SISTEMAS SA
INDRA SISTEMAS SA
Recovery on track
28 Feb 17
Indra Sistemas met expectations with a satisfactory profit recovery and a reduction in net debt in 2016. It is a milestone of the strategic plan 2015-18. Q4 16 figures. Revenue reached €759m (-3%). Although the negative trend did not reverse, the decline in revenue decelerated at constant currency (-3% vs -5% in Q3 16, -1% in H1 16). The trend was disappointing in T&D and improved in IT. At constant currency, revenue was down in T&D (-3% vs -1% in Q3 16, +4% in H1 16) and IT (-3% vs -9% in Q3 16, -5% in H1 16). By geographic area, revenue collapsed in Spain (-11%) due to the high basis of comparison in Q4 15 and was flat in America. In Europe, higher revenue (+26%) was attributable to the airborne systems segment and air traffic management. In AMEA, revenue fell by 17% due to lower projects in defence & security and transport & traffic. The recurring EBIT surged to €57m (+23%), representing a margin rate of 7.6% of revenue (+1.6pts). The improvement was attributable to the traditional higher level of sales in Q4 and the positive effects of the restructurings. FCF increased to €140m (+2%). FY2016 figures. Revenue reached €2,709m (-5%). There was a negative currency effect of €61m. At constant currency, revenue was down €80m, or -3% (vs -2% in 2015 and -1% excluding the election business). This was attributable to America and Spain (respectively -8% and -5% at constant currency). At constant currency, revenue increased by 1% in T&D and decreased by 5% in IT. In T&D, revenue was sustained by the Defence & security sector (+8%), in particular in Spain where the group is involved in MoD pluriannual projects, which more than offset the decrease in the activities in Transport & traffic (-6%) reflecting some delays in the start and/or the execution of contracts in Spain and America. In IT, the decrease in revenue was attributable to the repositioning of the Brazilian activities, a tougher bidding policy and delays in some public tenders in Spain. The digital offerings (Minsait) represented 21% of 2016 IT revenue (€313m, +2% at constant currency). EBITDA increased to €229m (+75%). The recurring EBIT surged to €161m (vs €45m in 2015) representing 6% of revenue (+4.4pts). Purchasing and external costs decreased by 12% to €1,199m, staff costs were reduced by 7% to €1,342m and depreciation/amortisation dropped to €-68m (vs €-85m in 2015) due to lower recognition and amortisation of the subsidies related to R&D projects. Conversely, there were additional provisions of €-49m related to the problematic projects. The reported EBIT was similar at €161m (vs €-641m in 2015) taking into account no exceptional charge. Group net profit was €70m (vs €-641m in 2015) after lower net financial expenses (€-39m vs €-64m in 2015) due to lower cost of debt (-1.1pt to 2.8% on average) and a high tax rate at 43%. FCF was positive at €184m (vs €-50m in 2015) thanks to the higher EBITDA, the improvement in the change of WCR, lower capex (€28m, -24%) and despite significant cash-out related to the redundancy plan (€-51m) and the problematic projects (€-76m). Net debt was reduced to €523m (-25%) at year-end 2016, representing 143% of shareholders’ equity. The net debt/recurrent EBITDA was 2.3x in 2016 (vs 5.4x in 2015). The non-recourse factoring lines were unchanged at €187m in 2016.
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).
N+1 Singer - IQE - Upgrade cycle set to continue
24 Mar 17
IQE’s FY’16 results showed good growth in all key segments and came in c.4% ahead of our recently upgraded forecasts. We have upgraded our forecasts today by 5% and 3% in FY’17 and FY’18 respectively, but expect the upgrade cycle to continue. The increase in capex in FY’16 looks to us a strong indication of future volume increases, and we see scope for significant upgrades through the course of our forecast horizon. We highlight three opportunities in this note, each of which could materially move the needle in its own right. IQE is one of our key picks for 2017 and has performed strongly YTD (+48%), but we believe there is more to go for. We increase our target price to 76p and retain our Buy recommendation.
Photonics the star of the show
21 Mar 17
IQE’s diversification strategy delivered a 17% jump in adjusted profit before tax during FY16. Strong growth in photonics revenues was a key element of this improvement. This was boosted by a return to growth, albeit modest, in the wireless sector and weak sterling. We revise our FY17 estimates upwards to reflect the progress made on customer qualifications for photonics applications, and we introduce FY18 estimates.
Stronger and stronger
23 Mar 17
Sopheon has reported strong prelims in line with the January trading update which had demonstrated that revenue delivery had been achieved on cost underspend, leading to EBITDA (+7% vs FY16E) and adjusted PBT (+22%) outperformance. Strong licence sales, high levels of recurring revenue retention (94% by value), and ever upgrading product portfolio in terms of functionality delivered revenue strength. Gartner recognition illustrates the transition from a product which needed to be described then sold, to a solution set sought by customers to deal with the increasingly acknowledged enterprise problem of efficient product lifecycle management. Sopheon is well positioned for future growth, and board confidence for future growth leads to planned increase in investment, yet still delivering $5.6m ($5.3m pre FX) EBITDA. Having smashed through our FY16 forecasts and target price, we restore FY17 forecasts and lift the 12-month target from 360p to 620p.
Or, helping a juggernaut turn on a dime
24 Mar 17
Sopheon has spent many years evolving a state-of-the-art platform allowing Enterprise customers to manage and monitor their pipelines of innovation. As this market matures and on the back of some major reference client wins, Sopheon’s Accolade product is beginning to see material success on a number of fronts. This note describes the marketplace, the technology, and the progress now being achieved.
N+1 Singer - Morning Song 21-03-2017
21 Mar 17
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