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EQS Group
Q3 figures
Pushing ahead in Asia
Media
3 December 2015
EQS’s Q315 numbers show that is making good progress in building its
Asian business, albeit at a cost to margin in the current year. The strong
growth in revenues for both Websites & Platforms (buoyed by Asia) and for
Reports & Webcasts more than made up for the weakness in Distribution &
Price
Media as the SME bond market ground to a halt. Regulatory Information &
News performance continues to be constrained by de- and down-listings in
the German market. The group’s valuation should expand as management
demonstrates successful delivery on its overseas expansion plans.
Net debt (€m) at end September 2015
Revenue
(€m)
PBT*
(€m)
EPS*
(€)
DPS
(€)
P/E
(x)
Yield
(%)
12/13
15.9
3.4
1.91
0.75
15.7
2.5
12/14
16.5
3.5
2.05
0.75
14.7
2.5
12/15e
18.5
3.2
1.84
0.75
16.3
2.5
12/16e
19.8
3.8
2.14
0.80
14.0
2.7
12/17e
20.9
4.2
2.36
0.85
12.7
2.8
Year end
€30.06
Market cap
€36m
2.0
Shares in issue
1.2m
Free float
42%
Code
EQS
Primary exchange
FRA
Secondary exchange
MUN
Share price performance
Note: *PBT and EPS are normalised, excluding intangible amortisation, exceptional items
and share-based payments.
Expectations updated
We have adjusted our FY15 expectations on the back of the Q3 performance, tax
and in the light of movements in exchange rates, which have been broadly
favourable. For FY16 and FY17, we have trimmed numbers a little on lower global
GDP forecasts. Russia remains difficult, unlikely to recover short term, but the
group has opened a new front in the Arab states via a marketing co-operation
agreement in Dubai, commenced in September. We expect to see a strong uplift in
operating margin in FY16 and FY17 as the first benefits of the push into Asia start
producing returns. Success in Asia, leveraging 2014’s acquisition of TodayIR, would
be transformative both for the scale of the group and for its financial performance.
Investing in new geographies and the product set
The group has been investing heavily in its products and services, which are at the
heart of its proposition to expedite the day-to-day tasks of the corporate IR
manager. In addition to geographic expansion and investment in IT, further
capabilities have now been built into the COCKPIT, which draws together various
information streams into one dashboard, to ease integration with clients’ own CRM
systems, including the ability to send emails and newsletters.
Valuation: Scale discount to peers
Our valuation framework for EQS is three sets of peers: software companies in the
financial and B2B sectors, global financial information service majors and B2B
media companies. Many of these latter groups are large and complex global
enterprises, but some legacy business requiring reinvention for new channels. On
%
1m
3m
12m
Abs
0.0
7.1
7.2
(2.1)
(3.8)
(4.9)
Rel (local)
52-week high/low
€33.10
€27.30
Business description
EQS is a leading global provider of digital solutions
for investor relations and corporate
communications. Its solutions and services are
provided to more than 7,000 clients worldwide,
helping them to fulfil complex domestic and
international corporate information requirements.
Next events
2015 final results
April 2016
Analysts
Fiona Orford-Williams
+44 (0)20 3077 5739
Bridie Barrett
+44 (0)20 3077 5700
[email protected]
Edison profile page
our revised numbers, EQS still trades at a discount of around 20-30% to these
companies, and at a greater discount to the software stocks. We would expect this
to close as EQS proves it can expand overseas and that it can generate a good
ROI, internally and by acquisition.
EQS Group is a research client of Edison Investment Research Limited
Q3 figures and trading update
Formal guidance from the company for FY15 has not been changed. However, we have made
modest adjustments to our numbers on the back of the Q3 figures, which are now towards the
lower end of the range. For the following years, we have trimmed on a slightly more cautious
outlook on global GDP assumptions and we have also input a higher tax charge than we had
previously factored in, based on mix.
Exhibit 1: Revisions to forecasts
2015e
2016e
2017e
Old
1.96
2.46
2.63
EPS (€)
New
1.84
2.14
2.36
% chg.
-6
-13
-10
Old
3.4
4.1
4.4
PBT (€m)
New
3.2
3.8
4.2
% chg.
-6
-7
-5
Old
4.0
4.7
5.0
EBITDA (€m)
New
4.0
4.6
5.0
% chg.
u/c
-2
u/c
Source: Edison Investment Research
Over the first nine months of 2015, like-for-like growth in group revenues was 8% (adjusted for
TodayIR). The Asian expansion, including the IT infrastructure and support centre in Kochi, India,
led to a 21% rise in personnel costs and an increase in other operating expenses, also up due to
the office move to new headquarters in Germany. These factors were already built into our
forecasts. In total, over the course of 2015, the cost of the Asian expansions is estimated by
management at €1.0m.
Full description of the group’s activities and markets are available in our initiation note, published in
September 2015.
Asian scale remains the big prize
The scale of the opportunity in Asia dwarves the potential offered in the existing geographies. The
group has already established a foothold in Hong Kong, Singapore and Taiwan. Hong Kong has
continued to see good growth in market listings, with the number of listed companies up 5.5% in the
year to end September, up 1.3% in Q315, with Singapore and Taiwan both also showing increases,
albeit smaller in percentage terms. The turmoil seen earlier in the year in mainland Chinese stock
markets, leading to a temporary ban on IPOs, may prove to have been very helpful to EQS’s cause.
Chinese markets are implementing new regulations and aim to meet international investors’
requirements for transparency. To meet these enhanced requirements, listed companies will need
to buy in the expertise they need or develop it internally. Working with a partner such as EQS, they
can access knowledge of best practice in public markets, coupled with experience built up over the
years and the technical ability to execute appropriate solutions.
Cash flow to fund investment
The group has inherently strong cash generation, particularly in its Regulatory News & Information
segment. This cash has funded the development of the platforms and products, as well as the
acquisition of TodayIR. The Asian expansion was further funded by the long-term loans of €3.575m,
at effective interest rates of between 1.0% and 1.4%, maturing in 2019 and 2020.
The continuing investment in technical capability and deliverables is restricting the pay-down of the
debt in the short term, but providing the foundation for a much stronger and more substantial
business.
EQS Group | 3 December 2015
2
Exhibit 2: Financial summary
2013
IFRS
2014
IFRS
2015e
IFRS
2016e
IFRS
2017e
IFRS
15,915
0
15,915
3,572
3,418
(140)
0
28
3,306
(29)
3,418
3,278
(1,096)
2,283
2,182
16,500
0
16,500
3,729
3,380
(280)
0
177
3,277
(52)
3,505
3,225
(1,105)
2,403
2,121
18,500
0
18,500
4,002
3,158
(356)
0
99
2,901
(45)
3,212
2,856
(985)
2,190
1,871
19,822
0
19,822
4,612
3,807
(356)
0
35
3,486
(47)
3,795
3,439
(1,181)
2,542
2,258
20,943
0
20,943
5,029
4,189
(356)
0
10
3,843
(39)
4,160
3,804
(1,311)
2,813
2,494
1.19
1.91
1.83
0.75
1.17
2.05
1.81
0.75
1.19
1.84
1.57
0.75
1.19
2.14
1.90
0.80
1.19
2.36
2.10
0.85
100.0
22.4
21.5
100.0
22.6
20.5
100.0
21.6
17.1
100.0
23.3
19.2
100.0
24.0
20.0
BALANCE SHEET
Fixed Assets
Intangible Assets
Tangible Assets
Investments
Current Assets
Stocks
Debtors
Cash
Other
Current Liabilities
Creditors
Short term borrowings
Long Term Liabilities
Long term borrowings
Other long term liabilities
Net Assets
13,658
10,524
1,032
2,103
6,055
0
2,971
2,980
104
(3,274)
(2,273)
(1,001)
(1,070)
(982)
(88)
15,369
19,383
15,827
1,468
2,088
4,750
0
3,282
1,370
98
(4,380)
(2,689)
(1,691)
(3,882)
(2,500)
(1,382)
15,870
20,133
15,827
2,218
2,088
4,509
0
3,679
732
98
(4,715)
(3,015)
(1,700)
(3,882)
(2,500)
(1,382)
16,045
20,793
15,827
2,878
2,088
4,927
0
3,942
887
98
(4,930)
(3,230)
(1,700)
(3,882)
(2,500)
(1,382)
16,908
21,453
15,827
3,538
2,088
5,216
0
4,165
953
98
(4,913)
(3,413)
(1,500)
(3,882)
(2,500)
(1,382)
17,874
CASH FLOW
Operating Cash Flow
Net Interest
Tax
Capex
Acquisitions/disposals
Equity Financing
Dividends
Net Cash Flow
Opening net debt/(cash)
HP finance leases initiated
Other
Closing net debt/(cash)
2,476
(29)
(1,096)
(3,088)
0
(202)
(892)
(2,831)
(3,827)
0
0
(996)
2,844
(52)
(1,105)
(3,669)
0
26
(1,623)
(3,579)
(996)
0
(238)
2,821
3,600
(45)
(1,075)
(1,594)
(126)
356
(1,764)
(647)
2,821
0
0
3,468
4,500
(47)
(1,034)
(1,500)
0
0
(1,764)
155
3,468
0
0
3,313
4,800
(39)
(1,213)
(1,500)
0
100
(1,882)
266
3,313
0
0
3,047
31-December
PROFIT & LOSS
Revenue
Cost of Sales
Gross Profit
EBITDA
Operating Profit (before amort. and except.)
Intangible Amortisation
Exceptionals
Other
Operating Profit
Net Interest
Profit Before Tax (norm)
Profit Before Tax (FRS 3)
Tax
Profit After Tax (norm)
Profit After Tax (FRS 3)
€'000s
Average Number of Shares Outstanding (m)
EPS - normalised (€)
EPS - (IFRS) (€)
Dividend per share (€)
Gross Margin (%)
EBITDA Margin (%)
Operating Margin (before GW and except.) (%)
Source: Company accounts, Edison Investment Research
EQS Group | 3 December 2015
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Frankfurt +49 (0)69 78 8076 960
London +44 (0)20 3077 5700
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34b| 3 December280
High Holborn
EQS Group
2015
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London, WC1V 7EE
Germany
United Kingdom
New York +1 646 653 7026
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US
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4