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Financial overview

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Gofore - Slightly above expectations

19.02.2020 | Earnings Flash

Gofore’s EBITA in H2 was slightly better than our expectations, at EUR 3.0m (Evli 2.8m). Revenue amounted to EUR 30.6m (pre-announced). The BoD proposes a dividend of EUR 0.23 per share (Evli EUR 0.20). Gofore expects that its net sales and comparable adjusted EBITDA will grow in 2020 compared to 2019.

  • Gofore H2/19 net sales amounted to EUR 30.6m (pre-announced), with sales growth in at 18.2% compared to H2/18 figures. Growth was driven by organic growth and the acquisition of Silver Planet.
  • EBITA in H1 amounted to EUR 3.0m, slightly above our estimates (Evli EUR 2.8m), at a margin of 10.0%. EBIT amounted to EUR 2.0m (Evli EUR 1.7m), at a 6.5% EBIT-margin.
  • Dividend proposal: Gofore’s BoD proposes a dividend of EUR 0.23 per share (Evli EUR 0.20)
  • Guidance: Gofore's net sales and comparable adjusted EBITA will grow compared to 2019. Adjusted EBITA means EBITA, adjusted for nonrecurring items.
  • The number of personnel at the end of the period was 582 (H2/18: 495).

Gofore - Expect slightly lower margins in H2

17.02.2020 | Preview

Gofore will report H2 results on February 19th. Revenue in H2 amounted to EUR 30.6m based on reported monthly figures. We expect margin decreases compared to H1/19, driven by the weak development of Gofore’s UK operations and lower revenue, and expect an EBITA-margin of 9.0%. We expect a dividend proposal of EUR 0.20 per share. Growth will in our view slow down clearly in 2020 with a lower impact of inorganic growth and a weaker market outlook. We retain our HOLD-rating and TP of EUR 8.0.

Expecting weaker margins in H2 due to lower revenue

Gofore will report H2 results on February 19th. Revenue in H2 has based on monthly figures been EUR 30.6m, with a y/y growth of 18.4%, of which a majority will have been inorganic growth from the Silver Planet acquisition. Revenue development during H2 has been sub-par, affected partly by a weak development of Gofore’s UK operations, which were divested in early 2020. We expect the revenue development to have had a negative impact on margins and expect the EBITA-margin to decrease to 9.0% (H1/19: 15.1%). Our dividend proposal estimate is EUR 0.20 per share (2019: EUR 0.19).

Relative growth pace seen to slow down

Gofore revised its long-term financial target for growth in December 2019. Growth is still seen to be faster than the target market, but the market growth estimate was lowered from 15-25% to above the general ICT service sector growth but below 10%. Our growth estimate for 2020 is 10.8%, of which some 9% organic (not including possible new M&A activity). Cost savings from divesting the UK operations will have a slight net positive effect on profitability in 2020 and we expect an EBITA-margin of 13.5%.

HOLD with a target price of EUR 8.0

We have not made any notable changes to our estimates pre-H2 apart from adjustments based on monthly revenue figures. We retain our HOLD-rating and target price of EUR 8.0 ahead of the H2 results.

Gofore - Guidance revision from weaker Q3

14.10.2019 | Company update

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.

Gofore - Uncertain times ahead

15.08.2019 | Company update

Gofore’s H1 results were slightly better than expected, with EBITA at EUR 5.0m (Evli 4.8m). Of key interest were comments regarding market and demand development, which lacked more precise detail but still imply a weakened outlook. We retain our HOLD-rating with a target price of EUR 8.0 (8.5).

Comments point towards increased uncertainty

Gofore’s H1 results beat our estimates slightly. EBITA amounted to EUR 5.0m (Evli 4.8m), as the impact of the drop in certain customers’ demand during Q2 on margins was smaller than expected. There appears to have been no pattern in the decreased demand per customer segment, which opens up reasons to view the overall market development with further caution. Comments regarding the market development were somewhat lacking in detail and we opt to interpret the information given as likely weaker figures during H2 as filling the gaps caused by the demand drop may prove to be challenging.

Uncertainty driven sales growth estimate revision

We have made revisions primarily to our coming year growth estimates as well as our H2/19 estimates, having lowered our sales estimate to EUR 34.3m and EBITA-% estimate to 12.3% to account for an uncertainty in the demand situation, while our full-year estimates remain mostly intact due to the solid H1 figures. We have also lowered our coming years sales estimates, having lowered our 2018-2021E CAGR estimate by 4pp to 17%.

HOLD with a target price of EUR 8.0 (8.5)

The near-term revenue and earnings development along with the uncertain tone in the market outlook comments in our gives rise to additional concern relating to development in the coming years. We still highlight that Gofore still is and has been among the top performers in its field and as such we continue to justify a valuation premium to peers. Upside nonetheless appears limited and we retain our HOLD-rating but adjust our target price to EUR 8.0 (8.5) to account for the added estimates uncertainty.

Gofore - Slight earnings beat

14.08.2019 | Earnings Flash

Gofore’s EBITA in H1 came in slightly above our expectations, at EUR 5.0m (Evli 4.8m). Revenue was pre-announced at EUR 33.4m, with the organic growth amounting to 16%. Gofore expects net sales in 2019 between EUR 67-72m (unchanged).

  • Gofore H1/19 net sales amounted to EUR 33.4m (pre-announced), with sales growth in at 35.5% compared to H1/18 figures. Growth was driven by the acquisitions of Solinor and Silver Planet. Organic growth amounted to 16%. The company’s international business net sales amounted to EUR 3.6m, corresponding to 10.7% of total net sales.
  • EBITA in H1 amounted to EUR 5.0m, slightly above our estimates (Evli EUR 4.8m), at a margin of 14.9%. Profitability remained on par with the company’s long-term target (15%) following the strong Q1 figures, as the Q2 EBITA-% fell to 12.6%.
  • Guidance: Gofore expects net sales in 2019 between EUR 67-72m (updated 10.7.2019).
  • The number of personnel at the end of the period was 559 (H1/18: 423).

Gofore - Revised net sales guidance

12.07.2019 | Company update

Gofore revised its guidance for FY2019 net sales on the 10th of July, expected to amount to EUR 67-72m (prev. guidance EUR 71-79m). The revised guidance is mainly due to unforeseen reductions in demand of some of Gofore’s largest customers. We expect some impact on H1 billing rates but full-year margins to remain at healthy levels. We retain our HOLD rating with a target price of EUR 8.50.

FY 2019 sales guidance EUR 67—72m (prev. 71-79m)

Gofore revised its FY2019 sales guidance to EUR 67-72m (prev. EUR 71-79m) due to reduced demand among some of its largest customers. Based on monthly net sales figures the revision was not completely unexpected, with figures during Q2 in particular being weaker than our estimates. The reduced demand to our understanding stems from a cooling down of customer digitalization investment eagerness and the permanence is difficult to judge. The sales growth in 2019 is nonetheless expected to remain solid, at 32-42% based on the guidance range.

Expect some impact on H1 billing rates

We estimate FY2019 net sales at 69.9m (prev. 73.3m). Growth is supported by several significant orders as well as the Silver Planet and Mango Design acquisitions, with an expected impact on revenue on an annual basis of closer to EUR 10m. Pick up in public sector spending with the recently-elected Finnish government may also offer further growth opportunities going forward. We expect the weaker revenue in Q2 to impact on billing rates and as such on margins but the strong Q1 EBITA-margin (17.2%) will support overall margins in H1. We expect an EBITA margin of 13.7% in 2019.

HOLD with a target price of EUR 8.50

Compared to peer multiples the current valuation does not appear to offer any notable near-term valuation upside. With the rapid sales growth and healthy margins Gofore in our view still remains an attractive case and we retain our HOLD rating with a target price of EUR 8.50.

Gofore - Downgrade to HOLD

20.02.2019 | Company update

Gofore’s profitability in H2 fell below our estimates (EBITA EUR 3.0/4.1m act./Evli) largely due to a lower billing rate. Growth is expected to continue to be rapid in 2019, with net sales guidance of EUR 71-79m (2018: 50.6m). We have lowered our profitability estimates, expecting EBITA-margins of around 13.5% in the near to mid-term. With fairer valuation on our revised estimates we downgrade to HOLD (BUY) with an ex-div TP of EUR 8.5 (9.8).

Profitability impacted by a lower billing rate

Gofore’s profitability in H2 fell below our expectations, with EBITA at EUR 3.0m (Evli EUR 4.1m), at an EBITA-margin of 11.5%. The weaker profitability was largely due to a lower billing rate, with wage inflation, the integration of Solinor, and the sales mix also having an impact. Gofore’s guidance for net sales in 2019 is EUR 71-79m, revised from the previous EUR 65-73m mainly due to the acquisition of Silver Planet, with no profitability guidance given.

Margin development uncertainty remains

We have raised our sales estimates to account for the Silver Planet acquisition, while lowering our profitability estimates. Although some elements of the weaker profitability in H2 in our view could be seen as temporary, we take a more conservative stance to margin development and expect EBITA-margins slightly below the 15% long-term financial objective. We expect the Silver Planet acquisition to have a minor positive impact on margins. Our revised estimates for 2019 net sales and EBITA are 73.3m (prev. 67.5m) and 9.8m (prev. 10.4m) respectively. Our estimates assume EBITA-margins of around 13.5% in the near to mid-term (prev. ~15.5%).

HOLD (BUY) with an ex-div target price of EUR 8.5 (9.8)

On our revised estimates Gofore trades at a slight premium on 2019E EV/EBITDA. We continue to see a premium to peers as justifiable due to the expected rapid growth but with our lowered estimates valuation appears fairer. We downgrade to HOLD with an ex-div target price of EUR 8.5 (9.8).

Gofore - Profitability below expectations

19.02.2019 | Earnings Flash

Gofore’s EBIT in H2 amounted to EUR 2.6m, falling below our estimate of EUR 3.8m due to among other things a lower billing rate and increase in subcontracting. Gofore expects net sales in 2019 between EUR 71-79m. The dividend proposal is at EUR 0.19 per share (Evli 0.18).

  • Gofore H2 net sales amounted to EUR 25.9m, with sales growth in H2 at 32.2% compared to H2/17 figures. The company’s international business net sales amounted to EUR 5.7m, corresponding to 11.3% of total net sales.
  • EBIT in H2 was EUR 2.6m, falling below our estimates (Evli EUR 3.8m), at an EBIT-margin of 9.9%. Profitability was affected by a somewhat lower billing rate during the autumn and integration of acquired companies along with an increase in subcontracting and volume of low-margin cloud capacity.
  • Guidance: Gofore expects net sales in 2019 between EUR 71-79m. The guidance before the acquisition of Silver Planet was EUR 65-73m.
  • Dividend: Gofore’s BoD proposes a dividend of EUR 0.19 per share (Evli 0.18).
  • The number of personnel at the end of the period was 495 (2017: 374).

Gofore - Upgrade to BUY

22.11.2018 | Company update

Gofore specified guidance for 2018 and gave an outlook on net sales for 2019, at EUR 50-52m (prev. 48-52m) and EUR 65-73m respectively. The long-term financial objectives remain unchanged. The demand outlook in broad has remained good. On our revised estimates we expect net sales of EUR 67.5m and EBITA of EUR 10.4m in 2019. On our estimates Gofore trades at a nearly 20 % discount to peers on ‘19E EV/EBIT, which we do not consider justified. We upgrade to BUY (HOLD) with a target price of EUR 9.8 (9.2).

Guidance for 2018 specified and 2019 forecast given

Gofore’s BoD specified guidance for 2018, expecting net sales to be EUR 50-52m (prev. 48-52m). An outlook for 2019 was also given, according to which net sales are expected to grow to EUR 65-73m, excluding any potential acquisitions in 2019. The long-term financial objectives remain unchanged, at 15-25 % net sales growth in the next few years and an EBITA margin of 15 %. The demand situation has in broad remained good and growth is expected across the board of customer areas.

2019E net sales EUR 67.5m and EBITA EUR 10.4m

We have revised our estimates, now expecting net sales of EUR 67.5m (prev. 62.9m), to include for the Solinor acquisition. Our revised EBITA estimate is EUR 10.4m (prev. 9.6m). Our 2019E net sales estimate is on the lower side of the 2019 outlook, leaving sales growth upside along with any potential acquisitions. The availability of skilled professionals remains a limiting factor and the lower range of the 2019 outlook would imply limited organic growth when accounting for the Solinor acquisition.

BUY (HOLD) with a target price of EUR 9.8 (9.2)

Valuation levels have seen declines following recent market uncertainty but, on our estimates, Gofore trades on a nearly 20 % discount to peer on ‘19E EV/EBIT. Having been among the strongest performers both in sales growth and profitability we do not see the discount as justifiable and upgrade to BUY (HOLD) with a target price of EUR 9.8 (9.2).

Gofore - Initiate coverage with buy

23.01.2018 | Company report

We initiate coverage of Gofore with a BUY rating and target price of EUR 9.2. We expect growth to continue strong in 2018-19E and profitability to remain at good levels.

Targeting above market growth rate in the IT-services sector

Gofore aims to grow faster than the company’s target IT-services market. Gofore’s long-term profitability target is to generate an EBITA-margin of 15%. We expect Gofore to have good possibilities to reach its profitability target during 2017E-2018E mainly supported by price increases and a good cost discipline due to a competitive personnel cost structure. Our EBITA-margin estimate for 2018E is 18.0 %. Historically, Gofore has grown faster than its main competitors and profitability has been above the competitor average in 2012-2016.

Recruitments in 2017 support good growth in 2018

Gofore’s personnel increased to 374 in 2017 from 196 in 2016. The increase came mostly from new recruitments and a smaller part from the acquisition of Leadin. The recruitments will support the continued growth in 2018E, with our sales growth estimates at 46.2 %. We also expect Gofore to continue expansion internationally, giving further support for continued good near-term growth. We expect sales growth to slow down going forward from 2018. The certain sector-wide difficulties in recruitments could put pressure on further slow-down of growth.

BUY with a target price of EUR 9.2

We initiate coverage of Gofore with a BUY-rating and target price of EUR 9.2. Our target price is based on our DCF-value and the peer multiples for 2018E. Gofore trades at a discount on earnings-based multiples for 2018E. Our target price values Gofore at 12.2x EV/EBIT 2018E.

Gofore company presentation 17012020

Gofore - Company presentation

14.01.2020
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Gofore company presentation 17012020

Video presentation

Company Facts

Guidance

Gofore's net sales and comparable adjusted EBITA will grow compared to 2019.

Financial targets

Net sales growth exceeding the growth of the target market, which is estimated to grow faster than the economy and ICT sector but below 10 percent, and an EBITA margin of 15%

Share price (EUR)


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