After a clearly lackluster start to the year, in line with recent years, the German service provider returned to a more encouraging momentum in the second quarter. The market was pleasantly surprised by this strong performance and the stock gained 8%.
Since 2021, Bechtle's business has been hampered by low private investment, which still accounts for nearly two-thirds of revenue, particularly in industry and services in Germany and France, its two largest markets. However, in the second quarter, the group saw a recovery in public demand, driven by the German government's stimulus plans to get the economy back on track. The effects are still not very visible in the figures, with the domestic market (Germany) posting a decline of 3.4% and France faring little better. Fortunately, foreign markets are compensating, particularly in the Benelux countries and the UK (+7.2%).
The impact should be more tangible in the second half of the year. Management is confident. The synergies from recent acquisitions with E-Storage in the Netherlands (cyber resilience) and Grupo Solutia in Spain (strong foothold in government) should also come into full play, as should certain market catalysts such as the end of Windows 10 support and the IT infrastructure modernization plan in Germany.
There is no point in comparing with last year, as the basis for comparison is distorted by an exceptional item. The focus is therefore on the future to put these four disappointing years behind us. It should be noted that Bechtle previously posted strong growth, with a CAGR (compound annual growth rate) of 14.1% between 2015 and 2021. The targets for 2025 remain unchanged, with expected revenue growth of between 0% and 5%.
To stay on track, a sharp acceleration will be needed in the second half of the year. But the good news of a recovery is all the more welcome given that some competitors, such as Cancom, remain cautious and are lowering their forecasts. Visibility remains limited and a return to double-digit growth still seems a long way off. But Bechtle appears to be emerging from the turbulence it has been experiencing for several years. The next set of results will provide more clarity in a tense macroeconomic environment. After all, Bechtle has only made promises. And as the saying goes, on the stock market as elsewhere, promises are only binding on those who believe them.
However, with its strong management team (Thomas Olemotz has been CEO since 2010) and a robust balance sheet (€522m in cash), the group has some leeway. At only 20x expected earnings this year, the stock's valuation leaves room for significant upside if the news confirms the trend.
