Mensch und Maschine Software SE (DE:MUMG) saw a revenue decline in H117 (-4.8% y-o-y). Software growth of 9% y-o-y was outweighed by the expected decline in the VAR business resulting from the shift in the Autodesk (NASDAQ:ADSK) licensing model. Gross and EBITDA margins increased y-o-y, with a 26% increase in EPS. Management has maintained its outlook for 2017 and beyond.
H117 results
M+M reported a 4.8% year-on-year revenue decline for H117, with 9.1% growth in the Software business offset by a 9.8% decline in the VAR business. The decline in the VAR business was expected, a result of the change in licensing for Autodesk software. The effect of this transition should be played out by the end of 2017; in fact, in Q217 the decline was only 0.6%. Gross and EBITDA margins increased by 4.6 percentage points (pp) and 1.4pp respectively, despite the revenue decline, as Software made up a larger proportion of revenues. This drove EPS 26% higher than a year ago.
Outlook maintained
The company is confident that it will achieve its guidance for 2017. The company outlook is for continued growth in EBITDA and earnings and c 30% annual growth in dividends to FY20. It expects subdued performance in the VAR business in FY17 as all new licence sales will be on a subscription basis, but despite this, expects to add €1.7-2.7m to group EBITDA in FY17 (range €17.5-18.5m). From FY18, it expects growth to normalise and therefore a larger increase in EBITDA (€3-4m). Consensus forecasts reflect this outlook.
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