MuM sees significant improvement in profit

Mensch und Maschine Software (MuM) today provided final, audited financial data for 2010 and updated guidance for 2011 and 2012. Nothing much changed in the data for 2010 (blog post on preliminary results), but the company’s share price is up almost 10% on the news, so I took a closer look. MuM CEO (and majority shareholder) Adi Drotleff says that significantly higher dividend payments are in the offing, if all goes to plan: ‘After the solid 2010 business we are confident to return to our old 10-15% [per annum] sales growth path and to profit from the margin reserves mainly existing in the software and VAR segments. For 2011, this results in a sales target of approx. €220 million, EBITDA target in the €9 to €11 million range (4% to 5% margin) and EPS target in the order of magnitude of [€]20 to 30 Cents. If we achieve these targets, [€]20 Cents divided payment is planned. The targets for 2012 are: Sales approx. €250 million, EBITDA approx. €15 million (6% margin) and EPS approx. [€]50 Cents, which would be in excess of the old [€]47 Cents EPS record from 2007. If we achieve these targets, [€]30 Cents divided payment is planned.’ That’s a dense paragraph, even with some format changes. The bottom line is that, if MuM makes its targets, shareholders can expect a dividend of €0.20 per share for 2011 and €0.30 per share if targets are met in 2012. To give context, MuM did not pay a dividend for 2009 as sales fell nearly 30% but from 2005 to 2008, the dividend had been €0.15 to €0.20 per share. In February, MuM announced that it was resuming dividend payments at €0.10 per share so these potential increases for 2011 and 2012 mean that shareholders, including Mr. Drotleff, stand to get a significant raise if all goes according to plan. According to data from the company, Mr. Drotleff owns about 41% of the company’s 14.6 million shares, roughly equal to the company’s public float. MuM believes these targets are within reach — and so do investors and analysts. MuM has been reinventing itself to provide a more services-laden offering to clients, more tightly integrating itself within their business processes. Of course, it all hinges on the continuing economic recovery bringing the business to MuM; the company clearly believes that it will continue to see improvements in its end-markets over the next two years.