AEX? Minus 10 percent. mid cap? Minus 12 percent. small cap? Minus 7 percent. If you look at the stock market trends since the beginning of this year, you will see downward movements. But not with IT service provider Ordina (Smallkap). It shows the opposite movement: in the past seven months, the share has increased in value by more than 18 percent.
Ordina – the name is derived from the French word for computer: ordinateur – started in 1973 as a Dutch company and is active in the Benelux. In the financial services, government and industry sectors, it helps clients with their ‘digital transformation’: designing, building and managing IT systems.
Ordina itself has also undergone a transformation in recent years. It used to be a ‘kind of employment agency’ for IT professionals, but now Ordina is on the way to becoming a ‘high-quality consultancy company’, says analyst Henk Veerman of Kempen & Co. Instead of only seconding individual IT professionals, Ordina now also rents out ‘high performance teams’ to customers. These are small teams consisting of specialists with different expertise. The bottom line is that the service in such teams goes further than just the technology. For example, digital strategy, coaching and protection against internet crime are now part of the service.
“That transformation started to bear fruit in 2021,” says Veerman. “And the figures for the first quarter of this year were also good than expected.” In the first months, Ordina achieved a turnover growth of more than 10 percent compared to the previous year. According to Veerman, investors are now starting to see these positive developments and Ordina’s potential.
In addition, Ordina proved to be very stable during the corona crisis, says Daan Arends, analyst at Kepler Cheuvreux. The secondment market is generally very cyclical, but the IT services sector has proven to be resilient, he says. Arends is therefore not very concerned about the current threat of a new economic crisis: „IT is a core competence become for governments, banks and companies, you don’t send that department home if things get a little worse.”
Organic growth, supplemented by acquisitions: this is how management formulates Ordina’s strategy for the coming years. But: “The shortage on the labor market is currently the most restrictive factor for organic growth,” says Arends. The company itself acknowledges this. Especially in combination with the sharply rising inflation, the shortage can make it exciting to achieve that organic growth; rising wage costs are inevitable. The question is whether Ordina will be able to continue to pass on all costs to customers.
And it seems that it is not going so smoothly with takeovers. In 2021 Ordina took over one company: the Barneveld IT consultancy firm IFS Probity. It is not due to a lack of capital: the company now has a net amount of 43 million euros on its balance sheet. During the last earnings calls with management, there were repeated questions about this from analysts and shareholders. Management says it wants to be “conservative” and “prudent” in terms of cash position, because the company has to deal with high fixed costs. According to the top, Ordina is “picky” on the takeover market.
In order to accommodate the shareholders, Ordina paid out a dividend of about 16 cents per share this year. It also earmarked 15 million euros for share buybacks – that buyback program has now almost been completed.
But the message from shareholders to Ordina’s board is clear: isn’t it time to do something with all that money?
A version of this article also appeared in the newspaper of August 1, 2022