Investment summary: Pre-tax profits up 10%
GFT Technologies (GFT) has been providing technology services and staffing to the financial and corporate sectors for many years. The latest results show it is gaining traction in its international expansion strategy, and benefiting from outsourcing trends in the banking industry. Core revenue growth of 3% is respectable given the economic backdrop, and the group has withdrawn from its low-margin third-party management (TPM) activities. GFT has a strong financial position with €40.4m of cash and investments as at 31 December, representing €1.53 p/s. Adjusted for this, the shares look attractive, trading on a modest P/E of c 6x FY13 consensus EPS.
A technology partner, operating globally, with two divisions
GFT is a technology services and staffing business based in Stuttgart, Germany, specialising in the financial (c 75% of revenues) and engineering sectors. The group has two core divisions: GFT Solutions (52% or revenues), which provides IT solutions primarily to the finance sector, and emagine (48% or revenues), which sources highly skilled IT specialists and engineering staff for technology projects in the financial and corporate sectors. GFT is becoming increasingly internationalised, with just 20% of staff in Germany, and the FY12 performance was particularly strong in the US, with 38% growth, driven by demand from investment banks.
Preliminary results: Underlying revenue growth was 3%
Revenues fell by 15% to €230.7m, reflecting the group’s withdrawal from TPM activities, which reduced group revenues by c €50m. The underlying revenue growth was 3% and group pre-tax profits rose by 10% to €12.1m. GFT Solutions’ revenues grew by 5% to €121.1m, reflecting healthy demand for corporate and investment banking solutions in the US. emagine slipped by 30% to €109.5m, reflecting the planned reduction in the TPM activities. Cash and investments edged up to €40.4m from €39.7m and the annual dividend is maintained at €0.15.
Forecasts and valuation: Attractive after adjusting for net cash
Stripping out group cash and investments, GFT has an enterprise value of c €49m. On this basis, the stock trades on c 0.2x consensus FY13 revenues and c 4x operating profit. These numbers look favourable when compared to c 0.5-0.9x sales and c 7-10x operating profits for UK and large-cap global IT services business. GFT will provide guidance on FY13, when it publishes its annual report on 28 March.
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GFT Technologies (GFT) has been providing technology services and staffing to the financial and corporate sectors for many years. The latest results show it is gaining traction in its international expansion strategy, and benefiting from outsourcing trends in the banking industry. Core revenue growth of 3% is respectable given the economic backdrop, and the group has withdrawn from its low-margin third-party management (TPM) activities. GFT has a strong financial position with €40.4m of cash and investments as at 31 December, representing €1.53 p/s. Adjusted for this, the shares look attractive, trading on a modest P/E of c 6x FY13 consensus EPS.
A technology partner, operating globally, with two divisions
GFT is a technology services and staffing business based in Stuttgart, Germany, specialising in the financial (c 75% of revenues) and engineering sectors. The group has two core divisions: GFT Solutions (52% or revenues), which provides IT solutions primarily to the finance sector, and emagine (48% or revenues), which sources highly skilled IT specialists and engineering staff for technology projects in the financial and corporate sectors. GFT is becoming increasingly internationalised, with just 20% of staff in Germany, and the FY12 performance was particularly strong in the US, with 38% growth, driven by demand from investment banks.
Preliminary results: Underlying revenue growth was 3%
Revenues fell by 15% to €230.7m, reflecting the group’s withdrawal from TPM activities, which reduced group revenues by c €50m. The underlying revenue growth was 3% and group pre-tax profits rose by 10% to €12.1m. GFT Solutions’ revenues grew by 5% to €121.1m, reflecting healthy demand for corporate and investment banking solutions in the US. emagine slipped by 30% to €109.5m, reflecting the planned reduction in the TPM activities. Cash and investments edged up to €40.4m from €39.7m and the annual dividend is maintained at €0.15.
Forecasts and valuation: Attractive after adjusting for net cash
Stripping out group cash and investments, GFT has an enterprise value of c €49m. On this basis, the stock trades on c 0.2x consensus FY13 revenues and c 4x operating profit. These numbers look favourable when compared to c 0.5-0.9x sales and c 7-10x operating profits for UK and large-cap global IT services business. GFT will provide guidance on FY13, when it publishes its annual report on 28 March.
To Read the Entire Report Please Click on the pdf File Below.