PiteCo's (MI:PITE) H1 revenue grew by 11% to €6.5m while EBITDA slipped 5% to €2.5m due to increased costs including several non-recurring items. However, cash flow was strong and the group’s financial position improved by €2.2m over the six months to €1.9m net cash.
In the year to date 22 new contracts have been signed including several high-quality names such as Mondadori (MI:MOED), Carrefour (PA:CARR), Unieuro and Eataly. The initial focus of the internationalisation strategy is Mexico, which is showing positive early signs. We have eased our forecasts due to fewer than expected up-sells in H1.
Nevertheless, given the attractive growth opportunities, strong cash generation and the healthy balance sheet, we believe the shares remain attractive on c 13x our FY18 earnings.
Interim results: 22 new contracts in the year to date
H1 numbers were a little below budget, due to smaller new deals and fewer up-sells to existing clients, which is reflective of the challenging economic conditions in Italy (GDP growth ground to a halt in Q2 according to Itstat). While there were 16 new contracts in H1, these were typically of smaller size. However, several large deals were signed after the period end, which brings the average contract signed in the year-to-date back to the normal range of €60-65k. Cash flow was helped by disciplined working capital management as well as the inclusion of Centro Data maintenance contracts. Piteco finished the period with gross cash of €11.6m.
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