Topic: 123fahrschule released its final H1 ’23 report, which was in line with the preliminary figures communicated in July. Further, the company announced the intention to resolve on another capital increase in order to facilitate the strategic expansion of the branch network. Here are the key takeaways:

H1 sales came in at € 11.1m (prelims: € 11.0m), implying a 5.9% yoy increase. The main revenue driver again was the private customer segment, which recorded sales of € 8.5m (eNuW: € 8.4m), up 6% yoy, on the base of increased registrations (+4.5%) as well as price increases. Notably, the driving instructor training segment grew sales by 22.6% to € 1.6m (eNuW: € 1.5m). On the other side, sales in the professional driver education segment showed a 14.6% yoy decline to € 1.0m (eNuW: € 1.3m).

Despite this, H1 EBITDA saw a slight decline, coming in at € 0.1m (vs € 0.2m in H1 ’23), which was however mainly due to a change in accounting, as the company is now building up provisions (i.e. vacation accruals) throughout the year instead of once a year in December. Adjusted for this, EBITDA amounted to € 0.5m.

Against this backdrop, management also provided an outlook for FY ‘24e, targeting clearly positive EBITDA (eNuW: € 0.4m). Next to the continuous expansions of the branch network, the newly acquired Forest GmbH (simulator provider) is seen to contribute to this and compensate for the seasonally weak Christmas period.

Moreover, the companyannounced last week the intention to resolve on another cash capital increase. In detail, management intends to issue up to 430k new shares at a price of € 2.30 per share in a private placement. The issue proceeds of around € 1m are to be used for expansion in Berlin, Hamburg and Cologne. Overall, management targets 20 new locations until FY ‘25e with an average revenue per location of € 500k, which shall all be equipped with simulators as well.

According to the pending regulation changes, learner drivers will in future be able to complete up to 10 lessons on a driving simulator, leading to significant scale effects as this increases the FTE per learner driver ratio. Through the acquisition of Foerst, 123f has also secured the sourcing of the simulators.

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Next to this, the company’s in-house instructor training (10% market share) grants a substantial competitive edge given the average age of instructor in Germany of c. 55 years. Unlike 123f, many competitors are going to face succession problems going forward, which should also open up the opportunity for some lucky-buys.

The stock remains a BUY with an unchanged PT of € 7.20 based on DCF.