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EQS Group — Accelerated investment

EQS Group (SCALE: EQS)

Last close As at 05/08/2026

—

— 0.00 (0.00%)

Market capitalisation

—

More on this equity

Research: TMT

EQS Group — Accelerated investment

EQS has accelerated its investment plans to take advantage of the timing opportunity as new and complex regulations regarding data privacy, corporate governance, compliance and risk are introduced. With additional spend of €2.2m planned in the current financial year and €5.8m over the following three years, this obviously has an impact on short-term profitability. However, it opens up a broader set of revenue streams from a greater number of potential clients. We have revised our numbers to reflect the financial impact. The share price has reacted positively to the news and the valuation is now broadly in line with global peers.

Fiona Orford-Williams

Written by

Fiona Orford-Williams

Director, TMT

TMT

EQS Group

Accelerated investment

Investment plan

Media

16 October 2017

Price

€60.71

Market cap

€80m

Net debt (€m) as at end June 2017

6.3

Shares in issue

1.31m

Free float

55%

Code

EQS

Primary exchange

Xetra

Secondary exchange

FRA

Share price performance

%

1m

3m

12m

Abs

15.5

13.5

58.7

Rel (local)

9.6

8.4

28.3

52-week high/low

€61.1

€37.9

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

Q3 trading update

15 November 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 has accelerated its investment plans to take advantage of the timing opportunity as new and complex regulations regarding data privacy, corporate governance, compliance and risk are introduced. With additional spend of €2.2m planned in the current financial year and €5.8m over the following three years, this obviously has an impact on short-term profitability. However, it opens up a broader set of revenue streams from a greater number of potential clients. We have revised our numbers to reflect the financial impact. The share price has reacted positively to the news and the valuation is now broadly in line with global peers.

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

50.6

1.2

12/16

26.1

4.2

2.4

0.96

0.75

63.2

1.2

12/17e

32.3

3.6

1.2

0.43

0.00

141.2

0.0

12/18e

36.3

4.5

1.9

0.71

0.15

85.5

0.2

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

Adjustments to forecasts

Our FY17 forecast adjusted EBITDA moves from €4.7m to €3.6m, while FY18e moves from €5.6m to €4.5m, reflecting the investment in additional IT development staff and in product development. The earlier launch of the whistle-blowing module SAFECHANNEL was very well received, which has encouraged the acceleration of the timing of the launch of additional functionality. With the impending introduction of MiFID II, updates to the corporate governance code in Germany and the Sapin II anti-corruption regulations in France, the window of opportunity for launching product and locking in client contracts is relatively tight. There are good opportunities to cross- and up-sell to clients who have already taken INSIDER MANAGER and/or SAFECHANNEL, who will already have completed their due diligence on EQS as a supplier.

Investment in Issuer Direct

At the end of September, EQS bought a 10% stake in NYSE-listed Issuer Direct, for €3.1m. This locks it in with Issuer Direct’s Accesswire, with which EQS already has a collaborative relationship, and gives a stronger foothold from which to develop the US business. The group raised €5.2m in December 2016 to fund continued global expansion. The scale and timing of these enhanced investment requirements, though, have led to management indicating no FY17 dividend payment.

Valuation: Investment phase extended

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 trades broadly in line with peers, the share price gaining over 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.

Communications and regulations

EQS is broadening out its sphere of influence from digital investor relations and corporate communications/PR through the fast-growing segment of governance, risk and compliance. This latter segment is estimated by Gartner to be valued in excess of $5bn and to be growing at a CAGR of more than 13%, making it an attractive proposition.

In many territories, the responsibilities for governance, risk and compliance within the corporate rest with the same department or individual as for EQS’s longer-standing service offers, giving the group an advantage over other suppliers. The larger players already in this segment are based either in the US or in Asia-Pacific, with the result that the European market has no single, strong incumbent. EQS’s cloud-based solutions are also scalable and flexible to incorporate additional modules as new regulatory requirements are introduced. Fuller descriptions of the business elements were given in our Outlook note published in August.

Guidance for growth

Company guidance for FY17 was for sales growth of 20-25% to €31.2-32.5m, with non-IRFS EBIT expected to increase by 10-20% to a range of €3.6-3.9m. Company guidance has been revised to adjusted EBIT of €2.0-2.3m, on unchanged revenues. With higher associated depreciation/ amortisation and interest costs, the impact at the pre-tax and earnings level is obviously greater, as shown in our new summary forecasts below.

For FY18e, the guidance is for top-line growth of 10-15%, with a step up to 15-20% revenue growth for FY19e. For the medium term through to FY25e, management anticipates that rate being maintained, driven by the compliance sector, which it envisages growing at a faster rate of 22.5% compound.

Exhibit 1: Revised forecasts

EPS (€)

PBT (€m)

EBITDA (€m)

Old

New

% chg.

Old

New

% chg.

Old

New

% chg.

2017e

1.46

0.43

-71

3.7

1.2

-68

4.7

3.6

-23

2018e

1.87

0.71

-62

4.5

1.9

-58

5.6

4.5

-20

Source: Edison Investment Research

Valuation encouraged by investment

The share price has reacted positively to the recent newsflow, despite the downgraded short-term financials. In our Outlook note, we described our valuation methodology. The earnings and sales multiples have obviously been thrown by the adjustments to short-term forecasts, but on averaged forward and backward looking sales and EBITDA multiples, EQS is now trading at around par to global peers across the B2B, financial software and financial information sectors.

Exhibit 2: Reverse DCF (€/share)

Medium-term growth rate

8.00%

10.00%

12.00%

14.00%

16.00%

18.00%

EBITDA margin

13.00%

31.34

35.58

40.20

45.24

50.71

56.66

14.00%

35.63

40.34

45.48

51.07

57.15

63.76

15.00%

39.93

45.11

50.75

56.90

63.59

70.85

16.00%

44.23

49.87

56.03

62.73

70.02

77.95

17.00%

48.53

54.64

61.30

68.56

76.46

85.04

18.00%

52.83

59.41

66.58

74.40

82.90

92.13

19.00%

57.13

64.17

71.86

80.23

89.33

99.23

20.00%

61.43

68.94

77.13

86.06

95.77

106.32

21.00%

65.72

73.70

82.41

91.89

102.21

113.41

Source: Edison Investment Research

We have also used a reverse DCF, using a fixed WACC of 7% and a terminal growth rate of 2%. 17.5% medium-term growth and a rebuild in EBITDA margin to 17% suggest that the share price could reach €82.83. Adding in a 15% discount to reflect execution risk suggests a share price of around €70.

Exhibit 3: 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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