SinnerSchrader — Update 29 November 2015

SinnerSchrader — Update 29 November 2015

SinnerSchrader

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Written by

SinnerSchrader

A confident outlook

Trading update

Software & comp service

30 November 2015

Price

€4.10

Market cap

€46m

Net debt (£m) at end August 2015

5.6

Shares in issue

11.3

Free float

33%

Code

SZZ

Primary exchange

FRA

Secondary exchange

N/A

Share price performance

Business description

SinnerSchrader is a leading European independent digital agency that specialises in helping companies use the internet to sell and market goods and services. The majority of sales originate from Germany and clients include Deutsche Bank, BMW, Allianz, Unity Media and Telefonica.

Analysts

Bridie Barrett

+44 (0)20 3077 5757

Dan Ridsdale

+44 (0)20 3077 5729

SinnerSchrader is a research client of Edison Investment Research Limited

SinnerSchrader (SZZ) ended its financial year to August with an expanding EBIT margin profile and a confident outlook for the year ahead. The ratings gap to peers remains pronounced despite the solid growth profile.

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

08/14

48.6

3.1

17.1

12.0

24.0

2.9

08/15

47.7

2.8

19.9

12.0

20.6

2.9

08/16e

50.7

4.9

30.3

13.0

13.5

3.2

08/17e

54.6

5.4

32.4

13.7

12.7

3.3

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, share-based payments

Full year results confirm the headline results from the trading update on 15 October: Revenues of €47.7m, reported EBITA of €2.1m, or €2.8m excluding the one-off restructuring charges related to Next Audience (slightly ahead of our €2.6m forecast) and net income of €1.5m. While revenues for the year were down slightly, this should be seen in the context of the 34% growth in FY14. Management’s focus on improving operating efficiency was evidenced in an improving margin profile as the year progressed – continuing EBITA margin (excluding Next Audience, NA) increased from 3.4% in H1 to 14.8% in H2.

FY16 should be a year of both top-line growth and margin improvement. Management has guided to revenue growth of 11% (excluding NA), EBITA of €5m implying a 10% margin and EPS of 26c (which includes 4c of restructuring costs), in line with our estimates. With the restructuring of NA and the focus on efficiencies across the group, there is further scope to improve the EBITA margin, which averaged 12-13% in recent years (please refer to our update note of 21 October for more detail). The shares trade on an FY16 P/E of 13.5x, a c 20% discount to small-cap agency peers. The recent bid by WPP for peer Syzygy on 12x FY15 EV/EBITDA serves as a reminder of the corporate value of successful digital agencies in Germany and compares to SZZ’s EV/EBITDA of 7.1x. The group reported €5.6m net cash, which we expect it to mobilise in the coming years, and has proposed a 12c dividend, yielding 2.9%.

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Marston’s — Update 27 November 2015

Marston’s

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