(News Bulletin 247) – The Lyon specialist in software for dematerializing administrative management documents has revised its 2023 operating margin objective due to inflation. Esker falls on the Paris Stock Exchange.

The generalization of electronic invoices in France – even if the entry into force of this measure initially planned for July 1, 2024 has been postponed to a date which will be specified in the 2024 finance law – had significantly impacted Esker’s activity on the first six months of the year. The Lyon specialist in software for dematerializing administrative management documents had thus achieved growth of 15% (in published data) over the entire period. Hopes were therefore high on this issue which had not followed the rise in the Parisian market since the start of the year.

But those hopes gave way to disappointment Wednesday evening. Esker published its half-year results (the turnover had already been communicated) which clearly disappointed, with a clear deterioration in operating income and net profit.

On the Paris Stock Exchange, investors are sanctioning this disappointment on this issue. Esker shares fell by another 7.6% around 10:40 a.m. after having plunged by more than 14% in the first exchanges.

A disappointing cost orientation

Esker saw its profitability clearly erode between January and June, with operating income down 24% to 9.80 million euros compared to 12.87 million euros previously. The Lyon group explains this deterioration by the negative impact of the modification of the regularization of tax on remuneration based on free shares in France.

The very sharp rise in inflation in all areas where the company operates is also weighing on profitability for the half-year, as is an increase in costs that the Stifel research office considers “poorly controlled”. The financial intermediary is particularly targeting “marketing expenses which increased by more than 30% over the half-year, while turnover only increased by 15%”. The sharp increase in salary costs is also pointed out by Stifel, which recalls that “external costs and personnel costs (excluding non-recurring items) increased by 20% due to a sharp increase in the number of employees, as well as than significant salary increases.

The net result is in line with the current result with a profit of 7.5 million euros, down 26% in the first half. It represents 8.5% of Esker’s half-year turnover of 87.9 million euros.

A warning about profitability

This poor performance on the profitability front has led the company to revise downwards its operating margin objective for 2023. Esker is targeting operational profitability of between 11.5% and 12.5% ​​of sales, “taking into account the current inflationary context. It was previously expected between 12% and 14% of turnover. Despite everything, Esker expects its profitability to improve in the second half of the year, compared to the first half (11.5%) “due to the mitigation of non-recurring events and its moderation policy recruitments”.

Stifel also expects costs to fall significantly in the coming months. “Management cannot let its costs continue to spiral like this, as we see,” adds the design office.

Turnover is still expected to show organic growth of between 14% and 15%, an objective which was raised last July.

For its part, Stifel reiterates its confidence in Esker, as today’s disappointment does not “call into question the quality and prospects of the group”. “Growth is accelerating and the improvement in the gross margin shows that Esker has a unique positioning and pricing power,” adds the research office which confirmed its recommendation to the purchase and its price target of 175 euros.