Classification of GBC AG to Cenit AG

1st HY 2024: Acquisition of Analysis Prime is value-enhancing, HY figures in line with expectations, price target raised to €24.15 (previously: €20.55), rating: BUY

In the first six months of the current business year, CENIT AG once again achieved significant sales growth of 6.7% to € 93.36 million (previous year: € 87.47 million). Following sales growth of 16.4% in the first quarter of the current financial year, sales growth in the second quarter remained in the double-digit range at 10.8%.

Despite the increase in sales, CENIT AG recorded a decline in EBIT to € 2.01 million (previous year: € 2.62 million). Adjusted for acquisition-related expenses (acquisition of CCE and acquisition of Analysis Prime) and the disposal of CENIT Japan, which contributed € 0.87 million to EBIT in the previous year, CENIT AG would have achieved an EBIT increase of 33.2% to € 2.62 million (previous year: € 1.97 million).

On 17 July 2024, CENIT announced the acquisition of 60% of the shares in the US company Analysis Prime LLC. Founded in 2018, the company has a total of 72 employees and is active in the field of planning and analysing business-critical processes based on SAP architecture. The company has a high degree of specialisation and is able to call up high daily rates for consulting and implementation.

A provisional base price of USD 14.31 million was agreed for the acquisition of 60% of the shares. The final purchase price and the variable components will not be determined until Analysis Prime has presented its interim financial statements. For the current 2024 financial year, CENIT AG expects a pro rata sales contribution of USD 11.50 million and EBIT of USD 2.70 million.

Analysis Prime has recorded strong sales growth in recent financial years and has a highly scalable business model. With this acquisition, CENIT AG is increasingly entering the US market, which is accompanied by corresponding cross-selling potential. For example, the ISR consulting business, which covers the infrastructure area in the SAP Analytics environment in particular, can be transferred to the USA. In the opposite direction, the Analysis Prime business is to be transferred to Europe. In the USA, the newly acquired company is the market leader in its field and an important partner for SAP.

CENIT's Management Board has confirmed the previous forecast in its half-year report. Sales of € 195 million to € 202 million and EBIT of € 11.70 million to € 12.20 million are still expected for the current financial year.

These forecasts do not yet include the recently acquired Analysis Prime. According to the company, the new company is expected to contribute sales of USD 11.50 million and EBIT of USD 2.70 million in 2024. This is a pro rata temporis figure, as the company will only be included in the CENIT scope of consolidation from 1 August 2024. The expected EBIT contribution from Analysis Prime also does not include any M&A-related expenses or amortisation of acquired intangible assets (PPA). According to the Executive Board, Analysis Prime is not expected to contribute to earnings in 2024 after taking these expenses into account. We only expect to see a visible jump in earnings from the following financial year.

For the current 2024 financial year, we therefore expect sales of € 211.12 million (previously: € 200.42 million) and an unchanged EBIT of € 12.01 million (previously: € 12.01 million). With sales growth of 5.0%, we expect an acquisition-related sales contribution of € 24.21 million (2025) and € 25.43 million (2026) and are raising our sales forecasts accordingly. We expect PPA amortisation of € 3.0 million and an acquisition-related EBIT contribution of € 2.21 million (2025) and € 2.87 million (2026). We have adjusted our earnings forecasts accordingly.

As part of the DCF valuation model, we assume a constant shareholding of 60%. In addition to the provisional base purchase price of USD 14.31 million (€ 13.31 million), a variable earn-out could become due in 2025. We anticipate an additional purchase price of € 2.89 million. We have determined a new target price of € 24.15 (previously: € 20.55). Adjusted for the price target-increasing rollover effect, this results in a price target of €22.14, which we categorise as value-enhancing for the acquisition of Analysis Prime. We confirm our BIY rating.