GFT accelerates growth with new client groups

 

 

 

Revenue trend in the first nine months of 2019

In the first nine months of 2019, the GFT Group’s revenue rose slightly by 2 percent to EUR 315.95 million (9M/2018: EUR 309.07 million). With a growth rate of 23 percent, the dynamic growth trend without the top-2 clients continued to accelerate. As expected, steps taken to diversify the business are taking effect and, as a result, the share of total revenue contributed by the top-2 clients was decreased further to 30 percent (9M/2018: 42 percent). Driven in particular by the positive trend in France and Canada, business with insurance clients rose to 11 percent of revenue (9M/2018: 5 percent).

Revenue of the Continental Europe business division fell by 2 percent to EUR 168.24 million (9M/2018: EUR 171.54 million). The decline in business with the top-2 clients in Germany was virtually offset by increasingly strong demand from other clients over the course of the year. Revenue of the Americas & UK segment grew by 7 percent to EUR 147.30 million (9M/2018: EUR 137.10 million). The expected decline in revenue with the top-2 clients in the UK was more than offset by the particularly positive trend in Mexico, Brazil and Canada.

 

 

Adjusted EBITDA rose by 21 percent year-on-year to EUR 34.78 million (9M/2018: EUR 28.79 million). This trend reflects the positive effects from IFRS 16 of EUR 9.37 million. There was an opposing effect from increased expenses for the expansion of sales and technology expertise, as well as burdens from underutilisation and expenses for capacity adjustments. Against this backdrop, EBIT fell by 23 percent to EUR 14.30 million (9M/2018: EUR 18.51 million), EBT by 27 percent to EUR 12.34 million (9M/2018: EUR 16.92 million) and net income by 39 percent to EUR 10.08 million (9M/2018: EUR 16.61 million). IFRS 16 effects on EBIT amounted to EUR 0.81 million and were negligible in the case of EBT and net income. Expenses for capacity adjustments amounted to EUR 3.48 million (9M/2018: EUR 0.55 million).
 

As a result of the falling revenue share of the top-2 clients, costs from the V-NEO acquisition and increased sales expenses, EBT of the Americas & UK division fell to EUR 2.13 million (9M/2018: EUR 3.90 million). EBT of the Continental Europe division declined by 4 percent to EUR 12.52 million (9M/2018: EUR 13.02 million). There were corresponding burdens on earnings from underutilisation and expenses for capacity adjustments, especially at sites in Germany and Spain.

Revenue and earnings trend in the third quarter of 2019

In the third quarter of 2019, revenue rose by 7 percent to EUR 104.92 million (Q3/2018: EUR 97.91 million). In the Continental Europe division, revenue increased by 3 percent to EUR 55.09 million (Q3/2018: EUR 53.28 million). Revenue in the Americas & UK division rose strongly by 12 percent to EUR 49.68 million (Q3/2018: EUR 44.51 million). There was significant growth in the Group’s adjusted EBITDA of 55 percent to EUR 12.84 million; this figure includes positive effects from IFRS 16 of EUR 3.20 million. EBT improved by 18 percent to EUR 5.19 million (Q3/2018: EUR 4.39 million), while net income fell by 17 percent to EUR 4.01 million (Q3/2018: EUR 4.82 million).

Employees

As of 30 September 2019, the GFT Group employed a total of 5,173 people, representing a year-on-year increase of 6 percent (30 September 2018: 4,860 employees). In the Americas & UK segment, the headcount increased by 26 percent to 1,680 (30 September 2018: 1,335), due in particular to expansion in Mexico and Brazil. As a result of capacity adjustments, the number of full-time employees in the Continental Europe segment fell by 1 percent to 3,377 (30 September 2018: 3,405). At the end of the reporting period, 116 people were employed in corporate functions (30 September 2018: 120). All figures are based on full-time equivalents.

Additional key data
 

In the first nine months of 2019, cash flow from operating activities amounted to EUR 22.27 million and was thus 47 percent up on the previous year (9M/2018: EUR 15.14 million). As a result of closing-date effects, cash and cash equivalents rose by 16 percent to EUR 71.59 million (31 December 2018: EUR 61.57 million). As at 31 September 2019, the equity ratio stood at 29 percent – or 34 percent excluding IFRS 16 effects (31 December 2018: 34 percent). The net liquidity of the GFT Group – calculated as the result of disclosed cash and cash equivalents less financial liabilities – declined slightly to EUR -64.14 million (31 December 2018: EUR -59.67 million).

Outlook 2019

The GFT Group is upholding and confirming its guidance for the financial year 2019. The general growth drivers, including the digitalisation of business processes and the increased use of exponential technologies such as data analytics and cloud computing, continue to gain momentum. GFT is capable of generating high double-digit growth rates in these areas, enabling it to offset the current investment uncertainties of the top-2 clients and a potential macroeconomic slowdown.
 

The GFT Group therefore anticipates an unbroken growth trend outside its top-2 clients in the financial year 2019. The steps taken to diversify clients and industries, as well as the expansion of sales and technology expertise, will lead to expected revenue growth of over 20 percent without the top-2 clients. By contrast, the share of total revenue generated with the top-2 clients is expected to continue to decline and fall below 30 percent (2018: 40 percent). This corresponds to an anticipated decline in revenue from the top-2 clients of around 30 percent.
 

All in all, the GFT Group forecasts an increase in revenue of 2 percent across all clients to EUR 420 million for the full-year 2019 (2018: EUR 412.83 million). Adjusted EBITDA before effects from IFRS 16 is likely to reach EUR 35 million (2018: EUR 39.68 million) and adjusted EBITDA including effects from IFRS 16 is expected to reach EUR 48 million (no prior-year figure). The GFT Group anticipates an EBT result of EUR 18 million (2018: EUR 22.64 million), with negligible effects from IFRS 16.
 

The GFT Group will continue to drive its successful client and industry diversification strategy. The insurance business will be expanded to a revenue share of over 10 percent in the financial year 2019. The revenue share of exponential technologies is expected to rise further from 25 percent to 30 percent. This will be supported by the dynamic development of the Group’s cloud business.