MuM says slow Q2, but demand picking up

A few weeks ago, AVEVA teased that it had seen “good” conditions in the market for its engineering and enterprise solutions, but without giving any numbers. European company Mensch und Maschine (MuM) today painted a slightly different picture,  reporting that it had seen a slowing during the June quarter but anticipates that demand will pick up during the middle of the year. MuM has been acquiring value-added resellers around Europe while divesting distribution companies, so direct year/year comparisons can be a bit misleading, but here goes:

• Q2 revenue was €27.8 million, up 2% year/year
• For the six months through June, 2013, revenue was €65.2 million, up 15%
• The company divides its business into VAR and Software. The Software business had revenue of €17.8 million, up 8.4% for the half-year and €9.2 million in Q2. The company says all of its software growth is organic — and after interviewing a number of OPEN MIND (its CAM software brand) users, I can see why
• The VAR Business contributed €47.4 million, up 18% for the half. The company says this growth is about 50% organic/50% acquired with acquisitions closed in the last 12 months is Italy, France and Germany.

MuM says that its transition to a VAR company is “extensively complete and on plan” and that it closed three acquisitions that will have an impact on 2012/2013 comparisons: Italy, Romania (2012) and France (2013). It also expects to make “one or two more” acquisitions this year and next. One major milestone in this transition was hit during the June quarter: Operating cash flow, which had dropped to negative in 2012 to accommodate the new business model, reversed course from -€1.1 million a year ago to +€4.4 million in the half-year just completed. [Cash flow has to do with money moving in and out of a company, and the timing of those receipts and payments. A negative cash flow means that during a specific period, more went out than came in. If a company has cash in the bank or a loan facility, it will use that to pay bills and the business keeps rolling along. It’s all about timing: when does the customer pay? How does that fit into the schedule of bills that have to be paid? It’s not necessarily a bad thing to have a negative cash flow for a short time — but far better to have a positive one.] It sounds like the slowdown in Q2 was temporary. MuM CEO Adi Drotleff says that “customer demand significantly increased around mid year. [W]e expect a good Q3, followed by a strong final quarter. [T]he planned 1-2 VAR business acquisitions in Europe will probably not  impact 2013 sales … we now target sales between €135 and €140 million”. That’s down slightly from earlier forecasts, but still an increase of 13% to 18% over 2012 results. It’s hard to tell from MuM’s results how its Autodesk distribution business did –the acquisitions muddy the picture– but we’ll be looking for confirmation of that pickup during the middle of the year when Autodesk reports its results in late in August.