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Research: TMT
DATAGROUP recorded strong 9M19 figures, with y-o-y revenue growth of 12.8% and EBITDA margin increasing by 27bp to 12.2% (pre-IFRS 15 and IFRS 16 impact), driven by first-time consolidation of UBL acquired in April 2019 and a solid order book. In addition, the company announced its 23rd post-IPO takeover in August of IT-Informatik, strengthening its SAP competences and customer base. Due to robust business progress to date and positive outlook for the digital industry in Germany, DATAGROUP confirmed its pre-IFRS 15 and IFRS 16 guidance for sales of €300m and EBITDA of over €38.5m (post-IFRS at over €295m and €45m, respectively).
DATAGROUP |
Major orders and M&A fuel growth
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IT services |
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5 September 2019 |
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DATAGROUP recorded strong 9M19 figures, with y-o-y revenue growth of 12.8% and EBITDA margin increasing by 27bp to 12.2% (pre-IFRS 15 and IFRS 16 impact), driven by first-time consolidation of UBL acquired in April 2019 and a solid order book. In addition, the company announced its 23rd post-IPO takeover in August of IT-Informatik, strengthening its SAP competences and customer base. Due to robust business progress to date and positive outlook for the digital industry in Germany, DATAGROUP confirmed its pre-IFRS 15 and IFRS 16 guidance for sales of €300m and EBITDA of over €38.5m (post-IFRS at over €295m and €45m, respectively).
Strong 9M figures with EBITDA up c 15% y-o-y
On a comparable basis, DATAGROUP’s sales increased 12.8% y-o-y to €224.7m in 9M19 (ending 30 June 2019), driven by the consolidation of UBL Informationssysteme from Q3, but also organic growth from new orders. The latter is a continuation of its longer-term trend, with average organic growth in FY15–18 (excluding companies in transformation) of c 5%. Meanwhile, EBITDA (pre-IFRS) improved 15.3% to €27.4m in 9M19. Post-IFRS, revenue was €213.9m and EBITDA €32.7m. Net debt increased to €39.5m from €12.1m at end-September 2018 (pre-IFRS 15 and 16), equally affected by the UBL acquisition and pre-financing for the new NRW Bank transition project. Post-IFRS adoption, net debt stood at €66.9m.
Organic growth coupled with M&A activity
During 9M19, DATAGROUP expanded its customer base of CORBOX (its core IT services offering) by 24 to 167. This included long-term, several million-euro contracts from, among others, BayernInvest, IKB Deutsche Industriebank, Bankhaus Lampe, ARD and Munich Trade Fair, which further strengthen the company’s business stability. In addition, DATAGROUP continues its M&A expansion, which it perceives as faster, less costly and more secure compared to organic growth. In August 2019, it acquired IT-Informatik from insolvency, a specialist for SAP consulting and maintenance, cloud infrastructure and software development with 300 employees, and has further acquisitions in its pipeline.
Valuation: Reflects growth prospects
Following a c 47% ytd share price appreciation, DATAGROUP trades at 22.5x FY19e P/E and 9.9x EV/EBITDA. This implies a 2% premium to its peers on both ratios, and reflects a solid track record, increasing its share of recurring sales (73% sales in FY17/18 vs 66% in FY15/16) and strong business drivers.
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Consensus estimates
Source: DATAGROUP accounts, Refinitiv consensus estimates |
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Research: TMT
EMIS reported growth in revenues (+7%), adjusted operating profit (+8%) and adjusted EPS (+11%) in H119. Management restructured the business during H1 to reflect the two key customer groups for EMIS products and, with the disposal of the Specialist & Care division, streamlined the product portfolio. Development of EMIS-X continues on track, with the first application based on the platform launched within the Patient Access app. We view the share price as likely to tread water until the outcome of the GP IT Futures procurement process is announced in the next few months.