Strong new business wins led to a 21% increase in like-for-like revenues in Q2 for Sinnerschrader O.N. (DE:SZZG) and, despite the pressure this can put on staffing, margins were fairly firm. With ‘significant tenders’ underway, management is confident of reaching full year guidance, a doubling of net profit. We expect the current c 30% FY16 P/E discount to peers to narrow.
Growth accelerates in Q2
On a like-for-like basis, Q2 revenues increased by approximately 21% y-o-y (13% including the impact of the now discontinued Next Audience, NA), an acceleration on Q1’s 8% (3% including NA), bringing year to date growth to 13%. The high level of new business was the main factor in the Q2 surge with a new client rate of almost 20%. Margins in Q2 held firm, resulting in a first half EBITA margin of 5.4% (we estimate 7.2% excluding the discontinued NA).
Strong new business can affect margins due to the need to add resource, and Q2 EBITA margins (4.3%), while up considerably on last year, were lower than Q1 (6.5%). Despite this, we are comfortable that margins are trending in the right direction with an H116 EBITA margin of 5.4% (vs -1.8% last year). Q2 should be the last quarter when losses from NA affect the bottom line. If we exclude final losses from this division, EBITA margins in H116 were a respectable 7.2%.
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