EQS Group — Investing to build

EQS Group (SCALE: EQS)

Last close As at 19/04/2024

40.80

−0.40 (−0.97%)

Market capitalisation

409m

More on this equity

Research: TMT

EQS Group — Investing to build

EQS flagged in September that it was accelerating investment to grasp the market opportunity prompted by further regulation. Q3 figures show the impact of the additional cost, with year-to-date EBITDA of €1.9m (prior year: €2.5m). Our forecasts are unchanged on confirmed guidance. The newer cloud-based products are scalable and should build recurring revenues, with market interest to date very encouraging. The service range continues to broaden out, particularly in corporate governance and compliance, while the geographic reach is also extending. The valuation remains in line with global peers, reflecting EQS’s strong growth potential.

Fiona Orford-Williams

Written by

Fiona Orford-Williams

Director, TMT

TMT

EQS Group

Investing to build

Q3 results

Media

16 November 2017

Price

€63.88

Market cap

€84m

Net debt (€m) as at end September 2017

8.3

Shares in issue

1.3m

Free float

55%

Code

EQS

Primary exchange

Xetra

Secondary exchange

FRA

Share price performance

%

1m

3m

12m

Abs

5.2

14.5

48.6

Rel (local)

5.3

7.4

22.9

52-week high/low

€68.7

€41.5

Business description

EQS Group is a leading international technology provider for digital investor relations, corporate communications and compliance. It has over 8,000 client companies worldwide using its products and services to securely, efficiently, and simultaneously fulfil complex national and international information obligations to the global investment community.

Next events

Full year results

April 2018

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 flagged in September that it was accelerating investment to grasp the market opportunity prompted by further regulation. Q3 figures show the impact of the additional cost, with year-to-date EBITDA of €1.9m (prior year: €2.5m). Our forecasts are unchanged on confirmed guidance. The newer cloud-based products are scalable and should build recurring revenues, with market interest to date very encouraging. The service range continues to broaden out, particularly in corporate governance and compliance, while the geographic reach is also extending. The valuation remains in line with global peers, reflecting EQS’s strong growth potential.

Year end

Revenue (€m)

EBITDA (€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/15

18.4

3.5

3.1

1.20

0.75

53.2

1.2

12/16

26.1

4.2

2.4

0.96

0.75

66.5

1.2

12/17e

32.3

3.6

1.2

0.43

0.00

148.6

0.0

12/18e

36.3

4.5

1.9

0.71

0.15

90.0

0.2

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

Organic and acquired revenue growth

Year-to-date revenues are up 22%, reflecting organic growth of 9% plus the consolidation of ARIVA. There was strong demand in Germany for products to help corporates comply with ever-tightening regulation, driving domestic revenues up by 28%. The impending introduction of MiFID II, along with SAPIN II in France, Market Abuse Regulation (EU) and PRIIP-Regulation (EU) are all fuelling the need for logging and reporting systems to ease the regulatory burden on corporates. EQS’s cloud-based platform approach allows extra functionality to be added with relatively modest project implementation costs. While the individual contract values can be quite small, the numbers of potential clients are substantial.

Added cost in forecasts

Governance & Compliance has the most attractive growth prospects, with EQS suggesting a top-line CAGR of over 20% in this segment through to 2025. This is clearly the main focus of the accelerated investment. Spend was quantified at €2.2m for FY17 and €5.8m over the following three years, but the phasing may not be as we currently model. Personnel costs held at €4.3m in Q3 from Q2, with around half of all group employees now developers, based in Germany and India. Freelancers are also being used to accelerate development and handle peak workflows.

Valuation: In line with peers

EQS clearly remains in its investment/growth phase, so comparisons with large global financial information companies are inevitably distorted. Using average historical and forward multiples to revenue and EBITDA, EQS continues to trade broadly in line with peers, with the share price gaining around 50% in the last year and continuing to climb post the investment announcement at the end of September. DCF analysis suggests further upside if medium-term growth reaches management’s anticipated rate.

Exhibit 1: Financial summary

€000s

2015

2016

2017e

2018e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

18,377

26,061

32,300

36,250

Cost of Sales

0

0

0

0

Gross Profit

18,377

26,061

32,300

36,250

EBITDA

 

 

3,485

4,175

3,600

4,460

Operating Profit (before amort. and except.)

2,983

3,282

2,200

2,900

Intangible Amortisation

(351)

(619)

(750)

(850)

Exceptionals

(268)

0

0

0

Other

165

(874)

(862)

(850)

Operating Profit

2,529

1,788

588

1,200

Net Interest

(59)

(14)

(138)

(190)

Profit Before Tax (norm)

 

 

3,090

2,393

1,200

1,860

Profit Before Tax (FRS 3)

 

 

2,471

1,774

450

1,010

Tax

(1,372)

(960)

(456)

(698)

Profit After Tax (norm)

1,407

1,144

558

930

Profit After Tax (FRS 3)

1,099

814

(6)

313

Average Number of Shares Outstanding (m)

1.17

1.19

1.31

1.31

EPS - normalised (c)

 

 

120.1

96.1

42.6

71.0

EPS - (IFRS) (c)

 

 

93.8

68.4

(0.5)

23.9

Dividend per share (c)

75.0

75.0

0.0

15.0

EBITDA Margin (%)

19.0

16.0

11.1

12.3

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

16.2

12.6

6.8

8.0

BALANCE SHEET

Fixed Assets

 

 

22,777

30,389

35,689

40,729

Intangible Assets

17,850

26,314

28,514

32,164

Tangible Assets

2,796

4,075

7,175

8,565

Investments

2,131

0

0

0

Current Assets

 

 

6,972

12,014

9,883

10,486

Stocks

0

0

0

0

Debtors

3,215

4,562

5,541

6,094

Cash

3,607

6,610

3,500

3,550

Other

150

842

842

842

Current Liabilities

 

 

(5,325)

(9,942)

(11,313)

(12,213)

Creditors

(3,359)

(5,791)

(7,313)

(8,363)

Short term borrowings

(1,967)

(4,151)

(4,000)

(3,850)

Long Term Liabilities

 

 

(7,276)

(7,237)

(9,664)

(9,464)

Long term borrowings

(6,357)

(5,073)

(7,500)

(7,300)

Other long term liabilities

(919)

(2,164)

(2,164)

(2,164)

Net Assets

 

 

17,148

25,224

24,594

29,537

CASH FLOW

Operating Cash Flow

 

 

4,688

4,802

3,200

4,050

Net Interest

(56)

(27)

(138)

(190)

Tax

(995)

(1,302)

(834)

(516)

Capex

(1,978)

787

(4,500)

(2,950)

Acquisitions/disposals

(1,046)

(3,731)

(3,424)

0

Equity Financing

(1,138)

2,435

1,300

6

Dividends

(883)

(877)

(1,008)

0

Net Cash Flow

(1,408)

2,087

(5,404)

400

Opening net debt/(cash)

 

 

2,821

4,716

2,614

8,000

HP finance leases initiated

0

0

0

0

Other

(487)

15

18

(0)

Closing net debt/(cash)

 

 

4,716

2,614

8,000

7,600

Source: EQS Group accounts, Edison Investment Research

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. 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 2017 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 2017. “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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. 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 2017 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 2017. “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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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