EQS Group — Update 16 November 2016

EQS Group (SCALE: EQS)

Last close As at 28/03/2024

40.80

−0.40 (−0.97%)

Market capitalisation

409m

More on this equity

Research: TMT

EQS Group — Update 16 November 2016

EQS Group

Fiona Orford-Williams

Written by

Fiona Orford-Williams

Director, TMT

TMT

EQS Group

Growth stimulus from regulatory changes

Q3 trading update

Media

16 November 2016

Price

€43.0

Market cap

€52m

Net debt (€m) at 30 September 2016

8.9

Shares in issue

1.2m

Free float

42%

Code

EQS

Primary exchange

FRA

Secondary exchange

MUN

Share price performance

%

1m

3m

12m

Abs

12.4

10.5

41.9

Rel (local)

11.2

10.7

42.1

52-week high/low

€43.50

€28.20

Business description

EQS is a leading global provider of digital solutions for investor relations and corporate communications. Its solutions and services are provided to more than 7,000 clients worldwide, helping them to fulfil complex domestic and international corporate information requirements.

Next events

Full year results

April 2017

Analysts

Fiona Orford-Williams

+44 (0)20 3077 5739

Bridie Barrett

+44 (0)20 3077 5700

EQS Group is a research client of Edison Investment Research Limited

EQS Group’s Q3 results are the first to incorporate ARIVA, consolidated from 1 July. The purchase of this 51.1% stake was timely, benefiting from projects related to PRIIPs regulation. Year-to-date organic revenue growth of 8% reflects both growing international operations (non-Germany now 24% of group) and a pick-up in domestic activity related to the Market Abuse Directive. Recurring revenues (cloud-based services and licence income) were 71% of top line, despite the level of project work, highlighting the quality of earnings. Our FY16 forecast is unchanged, while FY17 is adjusted for higher ARIVA revenues but greater levels of investment. The shares remain undervalued.

Year
end

Revenue (€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/14

16.4

3.4

1.83

0.75

23.4

1.7

12/15

18.4

3.1

1.15

0.75

37.4

1.7

12/16e

23.6

3.6

1.71

0.80

25.1

1.9

12/17e

30.0

4.0

2.09

0.85

20.6

2.0

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Strong Q3 boosted by ARIVA

ARIVA’s performance has exceeded that expected at the time EQS took the majority stake as clients have implemented projects to get their reporting templates set up ahead of the implementation of the PRIIPs regulation (see our September 2016 outlook note). The date for this has been pushed back from January 2017 by one year to take account of the complexities that have become apparent as people have been preparing. The project work should continue in the interim and lays the ground for longer-term licence revenues. Elsewhere in the business, the Market Abuse Directive has bolstered sales of INSIDER MANAGER, generating initial fees and lining up future licence revenues. Revenues continue to build outside Germany, with Asian top-line growth significantly narrowing the losses and promising progress in Russia and the UK. The Middle Eastern and US operations are still early stage.

Investment to deliver longer-term growth

We have slightly lifted our FY17 revenue number from €28.9m to €30.0m, but the additional expense to be incurred in delivering contracts will drag on the EBIT margin and we have made a precautionary 7% trim to our pre-tax number to €4.0m. Net debt rose to €8.9m at end September, but underlying cash generation is good and our model shows a year-end figure of €7.5m, falling to €6.7m by end FY17.

Valuation: Discount narrowed, but still overstated

EQS remains in its investment/growth phase, so comparisons with large global financial information companies are inevitably distorted. Using blended historic and forward multiples to revenue and EBITDA, it is clear that, although the shares have performed well over 2016, EQS still trades at a discount to peers of over 20%. We believe this overstates the development risk and expect the discount to continue to close as EQS’s international expansion drives an attractive ROI.

Exhibit 1: Financial summary

€'000s

2013

2014

2015

2016e

2017e

31-December

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

15,829

16,390

18,377

23,600

30,000

Cost of Sales

0

0

0

0

0

Gross Profit

15,829

16,390

18,377

23,600

30,000

EBITDA

 

 

3,572

3,660

3,485

4,078

4,590

Operating Profit (before amort. and except.)

3,418

3,311

2,983

3,639

4,075

Intangible Amortisation

(140)

(280)

(351)

(580)

(680)

Exceptionals

0

(211)

(268)

0

0

Other

28

177

167

71

25

Operating Profit

3,306

2,997

2,532

3,130

3,420

Net Interest

(29)

(52)

(45)

(90)

(100)

Profit Before Tax (norm)

 

 

3,418

3,436

3,105

3,620

4,000

Profit Before Tax (FRS 3)

 

 

3,278

2,945

2,486

3,040

3,320

Tax

(1,096)

(1,105)

(1,372)

(1,420)

(1,260)

Profit After Tax (norm)

2,283

2,148

1,355

2,037

2,481

Profit After Tax (FRS 3)

2,182

1,841

1,115

1,621

2,060

Average Number of Shares Outstanding (m)

1.19

1.17

1.18

1.19

1.19

EPS - normalised (c)

 

 

191.0

182.9

115.2

171.2

208.5

EPS - (IFRS) (c)

 

 

183.3

156.8

94.8

136.2

173.1

Dividend per share (c)

75.0

75.0

75.0

80.0

85.0

Gross Margin (%)

100.0

100.0

100.0

100.0

100.0

EBITDA Margin (%)

22.6

22.3

19.0

17.3

15.3

Operating Margin (before GW and except.) (%)

21.6

20.2

16.2

15.4

13.6

BALANCE SHEET

Fixed Assets

 

 

13,658

19,383

22,287

31,437

33,522

Intangible Assets

10,524

15,827

17,360

25,151

25,151

Tangible Assets

1,032

1,468

2,796

4,526

6,611

Investments

2,103

2,088

2,131

1,760

1,760

Current Assets

 

 

6,055

4,750

6,972

7,034

8,781

Stocks

0

0

0

0

0

Debtors

2,971

3,282

3,215

4,784

6,281

Cash

2,980

1,370

3,607

2,100

2,350

Other

104

98

150

150

150

Current Liabilities

 

 

(3,274)

(4,380)

(5,325)

(9,680)

(11,267)

Creditors

(2,273)

(2,689)

(3,475)

(7,880)

(10,017)

Short term borrowings

(1,001)

(1,691)

(1,850)

(1,800)

(1,250)

Long Term Liabilities

 

 

(1,070)

(3,882)

(6,805)

(9,838)

(9,838)

Long term borrowings

(982)

(2,500)

(4,767)

(7,800)

(7,800)

Other long term liabilities

(88)

(1,382)

(2,038)

(2,038)

(2,038)

Net Assets

 

 

15,369

15,870

17,129

18,953

21,198

CASH FLOW

Operating Cash Flow

 

 

2,476

4,050

4,989

3,903

5,100

Net Interest

(29)

(52)

(45)

(90)

(100)

Tax

(1,096)

(1,105)

(1,371)

(1,384)

(1,380)

Capex

(3,088)

(1,041)

(1,978)

(1,500)

(1,500)

Acquisitions/disposals

0

(3,669)

(1,046)

(4,500)

(325)

Equity Financing

(202)

(100)

569

0

0

Dividends

(892)

(1,623)

(883)

(890)

(950)

Net Cash Flow

(2,831)

(3,540)

235

(4,461)

845

Opening net debt/(cash)

 

 

(3,827)

(996)

2,821

3,009

7,500

HP finance leases initiated

0

0

0

0

0

Other

0

(277)

(423)

(30)

(45)

Closing net debt/(cash)

 

 

(996)

2,821

3,009

7,500

6,700

Source: Company accounts, Edison Investment Research

Edison, the investment intelligence firm, is the future of investor interaction with corporates. Our team of over 100 analysts and investment professionals work with leading companies, fund managers and investment banks worldwide to support their capital markets activity. We provide services to more than 400 retained corporate and investor clients from our offices in London, New York, Frankfurt, Sydney and Wellington. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2016 Edison Investment Research Limited. All rights reserved. This report has been commissioned by EQS Group and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2016. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Edison, the investment intelligence firm, is the future of investor interaction with corporates. Our team of over 100 analysts and investment professionals work with leading companies, fund managers and investment banks worldwide to support their capital markets activity. We provide services to more than 400 retained corporate and investor clients from our offices in London, New York, Frankfurt, Sydney and Wellington. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2016 Edison Investment Research Limited. All rights reserved. This report has been commissioned by EQS Group and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2016. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

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