Mensch Und Maschine Software: VAR Business Reaches Inflection Point
Edison | Mar 15, 2018 03:41AM ET
Mensch und Maschine Software's (DE:MUMG) FY17 results confirmed that its Software business continues to generate strong growth and margins. The VAR business managed to grow EBITDA despite the expected revenue decline, resulting in a record EBITDA margin for the group. With Autodesk (NASDAQ:ADSK) back on a growth path after its transition to subscription licencing and the VAR business returning to growth in Q417, we see scope for profitability in the VAR business to improve further in FY18.
FY17 results: Profit growth despite revenue decline
Despite the revenue hit from the Autodesk licencing transition, the group managed to grow gross profit and EBITDA year-on-year, generating a record EBITDA margin of 11.2%. The Software business grew revenues 9% y-o-y and has now hit its 25% EBITDA margin target. The VAR business saw an 8.6% revenue decline but through good cost control and strong proprietary software sales, grew EBITDA by 5% y-o-y. Net debt was reduced by 27% over the year, to close the year at €16.3m. The company announced a €0.50 dividend for FY17.
Outlook positive
The company has revised its outlook for FY18 and FY19: while the gross profit targets have been reduced, EBITDA, net income and DPS are marginally higher than previously guided. Consensus forecasts are for revenue growth of 10% in FY18 and FY19, and EPS growth of 37% in FY18 and 17% in FY19. Based on the Software business’ recent performance and the return to growth of the VAR business in Q417, these forecasts appear reasonable.
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