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Gofore - Room for improvement in 2020

Gofore’s H2 results came in slightly better than expected. EBITA was at comparison period levels and amounted to EUR 3.0m (Evli EUR 2.8m). The BoD proposes a dividend of EUR 0.23 per share (Evli EUR 0.20). Gofore expects revenue and the comparable adj. EBITA to grow compared to 2019. We retain our HOLD-rating with a TP of EUR 8.2 (8.0).

H2 EBITA slightly above our estimate at EUR 3.0m

Gofore’s H2 results were slightly better than expected. Revenue amounted to EUR 30.6m (pre-announced), with growth of 18.2% y/y, while EBITA remained at comparison period levels and amounted to EUR 3.0m (Evli EUR 2.8m). The BoD proposes a dividend of EUR 0.23 per share (Evli EUR 0.20). Full year relative profitability declined slightly, driven by a 5% increase in average wages and a 1 %-point decrease in billing rates, while customer prices increased 2.3%.

Continued revenue and EBITA growth

Gofore expects revenue and the comparable adj. EBITA in 2020 to grow compared to 2019. Organic growth in H2 was according to our estimates clearly in the single-digits, affected by the drop in demand among certain larger customers in Q3. We expect organic growth to pick-up in 2020. Currently, the impact of inorganic growth in 2020 will be clearly smaller and we expect a decline in sales growth to 9.7% in 2020. Gofore is however sitting on a formidable cash position and continued M&A activity is not unlikely. Profitability in 2020 will be affected by one-offs relating to the divestment of the UK business but cost-savings will bring the impact to a net positive. We expect an improvement in adj. EBITA-margins to 13.6% in 2020.

HOLD with a target price of EUR 8.2 (8.0)

Gofore’s performance has slightly faltered, with slower organic growth and minor margin declines, but we still see performance and thus valuation at above peers. We value Gofore at 16x 2020 P/E (goodwill amortization. adj.) and adjust our target price to EUR 8.2 (8.0) and retain our HOLD-rating.

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