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Gofore - Guidance revision from weaker Q3

Gofore released its Q3 business review on October 11th and revised it guidance for FY2019 net sales, expected to be in between EUR 64-67m (prev. EUR 67-72m). Q3 was burdened by lower sales in July and August, with net sales growth of 16% y/y, and the EBITA-margin as a result lower than in the comparison period (Q3/19: 9.2%, Q3/18: 13.3%). The near-term demand outlook has improved while uncertainty going forward still remains at elevated levels. We retain our HOLD-rating and target price of EUR 8.0.

Weaker Q3 sales and lowered sales guidance

Gofore’s group net sales in Q3 amounted to EUR 13.3m, up 16 % y/y. Demand during July and August was affected by a delay in project deliveries, as some already signed projects did not pick-up as expected. The lower billing rate saw profitability fall from previous year levels, with a Q3/19 EBITA-margin of 9.2% (Q3/18: 13.3%). Gofore also noted that its UK business sales have decreased considerably during the year, possibly due to uncertainty related to Brexit, and the UK business being clearly loss-making. Gofore further revised its FY2019 net sales guidance to EUR 64-67m (prev. 67-72m) based on the weaker Q3 figures.

Demand recovery to aid end of year figures

We have revised our 2019 sales and EBITA-margin estimates to EUR 65.3m (prev. 67.8m) and 12.6% (prev. 13.6%) based on the Q3/19 figures. The revised guidance range indicates growth of some 18-40% during Q4/19, with the upper range corresponding to monthly levels seen during H1/19. The near-term demand outlook has improved compared with the earlier part of Q3/19, while the volatility in demand seen during 2019 keeps the uncertainty regarding the coming years development at higher levels.

HOLD with a target price of EUR 8.0

On our estimates valuation remains slightly above peers. Gofore continues to be among the top performers based on sales growth and profitability while the increased demand uncertainty remains a cautionary factor. With valuation in our view still quite fair, we retain our HOLD rating and target price of EUR 8.0.

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