TXT e-solutions — Expanding the service offering

TXT e-solutions (Euronext STAR Milan: TXT)

Last close As at 20/12/2024

9.88

−0.06 (−0.60%)

Market capitalisation

129m

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Research: TMT

TXT e-solutions — Expanding the service offering

TXT e-solutions has expanded its Italian IT services business with the acquisition of HSPI for €11.6m in cash and equity. The deal adds public sector, energy and utilities to TXT’s existing fintech and industrial verticals and broadens the services offered to management consulting. On a pro forma basis, we estimate the deal adds c 18% to FY20 revenue and c 22% to FY20 EBITDA.

Katherine Thompson

Written by

Katherine Thompson

Director

TMT

TXT e-solutions

Expanding the service offering

Acquisition

Software & Comp Services

22 October 2020

Price

€7.96

Market cap

€93m

Net cash at end H120

€38.3m

Shares in issue

11.7m

Free float

45%

Code

TXT

Primary exchange

Borsa Italiana (STAR)

Secondary exchange

N/A

Share price performance

Business description

TXT e-solutions provides IT, consulting and R&D services to aerospace, aviation, automotive, banking and finance customers.

Analyst

Katherine Thompson

+44 (0)20 3077 5730

TXT e-solutions is a research client of Edison Investment Research Limited

TXT e-solutions has expanded its Italian IT services business with the acquisition of HSPI for €11.6m in cash and equity. The deal adds public sector, energy and utilities to TXT’s existing fintech and industrial verticals and broadens the services offered to management consulting. On a pro forma basis, we estimate the deal adds c 18% to FY20 revenue and c 22% to FY20 EBITDA.

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/18

40.0

1.5

0.10

0.50

77.7

6.3

12/19

59.1

7.6

0.46

0.00

17.5

0.0

12/20e

66.8

5.9

0.34

0.10

23.6

1.3

12/21e

73.0

6.8

0.39

0.12

20.3

1.5

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

On 19 October, TXT announced that it had acquired HSPI SpA, an Italian IT services business specialising in digital transformation processes, buying a 92% shareholding but 100% of ordinary shares with voting rights. TXT has paid €9.061m in initial cash consideration and will issue shares worth €2.515m. A final adjustment will be made for the net financial position of HSPI on the closing date. HSPI was owned 53.36% by Laserline, the business of Chairman Enrico Magni that also owns 25.6% of TXT, with the remaining 46.64% held by MFRBC and three manager shareholders. These managers will stay with the business and the shares they are to be issued (€2.3m of the total) will be restricted and released over three-years.

HSPI has three offices in Italy and with 100 consultants, provides IT consulting services to large public and private Italian companies, with a focus on IT governance. In 2019 HSPI generated revenue of €12m and an EBITDA margin of 15%. Trading during lockdown has been maintained at pre-COVID-19 levels and management expects to achieve flat revenues with a slightly lower margin in 2020. The price paid equates to a trailing price/sales multiple of 0.96x and a trailing price/EBITDA multiple of 6.4x. We plan to update our forecasts with Q320 results on 5 November.

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