Hubwoo Results – Write-offs Make Poor Figures Look Worse

eProcurement and supplier network solution providers Hubwoo announced their annual results last week and at first sight they were spectacularly bad. On closer examination however, they were only pretty bad.

My US colleague, Jason Busch, commented here. As he says, “we’ve always been fans of what Hubwoo has been able to achieve in building surround strategies for customers to get more from ERP and P2P procurement investments, especially in the area of basic and complex e-invoicing scenarios”.

Being a firm quoted on the French stock market perhaps hasn’t helped, adding to their cost base in a number of ways, but the big blow came back in 2012 when their close partnership with SAP was jeopardised by SAP’s acquisition of Ariba. Since then, Hubwoo has tried to carve out its own identity, and has been partially successful. New partnerships have been announced with Microsoft and GEP in particular, although their results statement mentioned “delays in attaining market traction with new commercial and technological partnerships, established in place in 2013 and 2014”, which was not encouraging.

The headline results announced looked particularly bad because the firm took a write-down on the value of the goodwill in the balance sheet ; no less than 15 million Euros worth. If you strip that out, and it is not “real money” in the way most of us would think about profit or loss, then the figures weren’t quite so bad.

Over the year, the firm’s revenue at 27.5 million Euros declined by 11% compared to 2013. but “the improved level of orders in 2014 has allowed a significant increase in Revenue in the fourth quarter (+9%) in comparison to Q3 2014.” So that may be a sign of a directional change in the declining revenue line – we will see in the next results.

EBITDA over the year was positive at 3.6m Euros, down from 4.5m in 2013, but the bottom line (before the one-off impairment) declined to a small loss of 0.5m. However, cash is not a problem, with a comfortably positive cash flow for the year and 6 million Euros in the bank.

Jason picks up on a few questions, as well as the partnering aspect above, that the statement does not answer. These really hit on the big issues for the firm as it tries to carve out its post-SAP partnership place in the world.

  • Why is there no break out of the recurring revenue component of their declining revenue in the financial statement?
  • Where are the new deals and customers?
  • What is Hubwoo actually selling? We know that if Hubwoo had greater exposure for their network-based e-invoicing capabilities and was a more frequent shortlist candidate, they would come out well in many selections.
  • What verticals/industries is Hubwoo selling into? How is it customizing its solution for these markets (which we know it is capable of doing in impressive ways)?

The firm’s market capitalisation is now less than its annual revenue – compare that with b-pack’s sale last week to Seletica at around 3 times revenue, and of course SAP paying 10x for certain acquisitions like Ariba. That suggests there is considerable upside potential for Hubwoo in valuation terms – but also market uncertainty about whether that can be realised. But, as Jason says, we are “fans” so we wish them well for 2015!

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