FY16 was a strong year for Keywords St (LON:KWS) both financially and operationally, with EPS growing by 61% and acquisitions strengthening the business across a number of service lines and geographies. It has also invested into key staff and core systems to support continued growth and we fully expect the growth trajectory to continue from here. We see scope for further upgrades through organic performance, further acquisitions and potentially larger outsourcing deals. Given the recent run, we feel the valuation prices in strong progress this year but believe that sustained execution of the strategy will continue to create shareholder value.
Another strong year – some exceptional strength
FY16 results were in line with our estimates, upgraded at the time of the February trading update (see Another beat and raise). Revenues of €96.6m, up from €58.0m last year, reflect the contribution from the eight acquisitions made over the course of the year and 24% like-for-like growth, with the exceptionally strong trading at Synthesis (acquired in April 2016) boosting revenues by c €4m above run rate. PBT increased by 84% y-o-y to €14.9m, but EPS was not far behind, growing by 61% to 20.3c, highlighting the accretive nature of the acquisitions. The company generated free cashflow of €12.7m while net cash stands at €8.7m. A heads of terms agreement has been reached with Barclays (LON:BARC) for a €35m revolving credit facility, reducing the near-term likelihood of equity dilution to support acquisitions.
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