TXT e-solutions — Update 2 March 2016

TXT e-solutions (Euronext STAR Milan: TXT)

Last close As at 21/11/2024

9.88

−0.06 (−0.60%)

Market capitalisation

129m

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Research: TMT

TXT e-solutions — Update 2 March 2016

TXT e-solutions

Katherine Thompson

Written by

Katherine Thompson

Director

TMT

TXT e-solutions

Aerospace software acquisition

Acquisition

Technology

3 March 2016

Price

€8.07

Market cap

€94m

Net cash (€m) at end FY15

8.3

Shares in issue

11.7m

Free float

43%

Code

TXT

Primary exchange

Borsa Italiana (STAR)

Secondary exchange

N/A

Share price performance

Business description

TXT e-solutions has two divisions: TXT Perform provides software solutions for supply chain management in the international retail and consumer-driven industrial sectors; and TXT Next provides IT, consulting and R&D services to Italian aerospace, high-tech manufacturing, banking and finance customers.

Analysts

Katherine Thompson

+44 203 077 5730

Dan Ridsdale

+44 203 077 5729

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

TXT is expanding the scope of TXT Next’s aerospace business with the acquisition of a majority stake in aerospace software specialist PACE, for an initial cash consideration of €5.6m. The deal will enable TXT Next to offer specialist software in addition to its aerospace IT, consulting and R&D services and gives the division access to a wider international customer base. We will review our forecasts when TXT reports FY15 results on 8 March.

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/13

52.6

4.8

0.41

0.23

19.7

2.9

12/14

54.4

4.0

0.28

0.23

28.8

2.9

12/15e

60.6

5.5

0.37

0.24

21.8

3.0

12/16e

63.2

6.7

0.45

0.25

17.9

3.1

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

TXT has announced that it plans to acquire PACE, a software vendor for the aerospace industry. TXT will pay an initial cash consideration of €5.6m to acquire 79% of the company with a put/call option for the remaining 21% stake exercisable from 1 January 2020 to 31 December 2021. A contingent consideration of c €1.9m is payable over 2016/17 subject to meeting targets for FY15 and FY16. PACE specialises in software for preliminary aircraft design, cabin configuration and fuel cost optimisation. The company has c 70 employees and is headquartered in Berlin. In 2015, the company generated revenues of €7.3m (+20% y-o-y) and EBITDA of €0.8m (11% margin, in line with our 10.7% forecast for TXT in 2015), with software licence and maintenance revenues making up 57% of the total. On closing it is estimated that PACE will have net cash of €1.7m. The initial cash consideration values PACE on a historic EV/sales multiple of 0.7x and EV/EBITDA of 6.7x. The acquisition is scheduled to complete on 1 April 2016. The business will continue to trade under the PACE brand and the three founders, who own the remaining 21% of the business, will stay as managing directors.

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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

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