SNP Schneider (DE:SHFG) results indicated that the business environment remains healthy. The group has a strong balance sheet with net cash, boosted by the €30m capital increase last year, and has raised additional €40m in loan notes to build a war chest to make additional acquisitions. We have edged up revenue forecasts, but eased profits, to reflect the increased costs as it positions for the next phase of its growth. Given SNP’s strong market position in software-based transformation projects and assuming a sustained high level of activity, we believe the shares remain attractive on c 21x our cash-adjusted FY19 EPS.
Investment case: Huge transformation opportunities
SNP is building a global software-based consulting business focused on IT landscape transformations. SNP’s innovative software proposition has enabled it to win prestigious business, including a $5m+ contract to handle the HP Inc (NYSE:HPQ) demerger in 2015 and a $10m+ contract with two US chemical companies that are merging (we assume Dow Chemical (NYSE:DOW) and DuPont (NYSE:DD)). SNP’s T-B is the only off-the-shelf software that automates the process of combining, upgrading or carving out data from ERP systems. The industry is driven by the need to transform, adapt and harmonise data and initiated by M&A activity, system consolidation, cloudification and the need for simplification. This young industry is growing at a fast pace and is potentially very large. SNP estimates that only a third of transformation work is outsourced with only a tiny percentage involving software-based tools.
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