What’s new: JTC Group (LON:JTC) has published results for 2018 which exceed consensus and Zeus Capital’s expectations (see Exhibit 3).
29.3% rise in revenue to £77.3m (1% above Zeus forecast: £76.5m);
8.7% organic (Zeus forecast 8.0%) and 20.6% inorganic;
65.3% increase in adj EBITDA to £23.8m (Zeus forecast: £23.7m);
Underlying EBITDA margin of 30.9% (Zeus forecast: 31.0%);
69.8% rise in adj operating profit to £21.9m (Zeus forecast: £21.9m);
95.1% rise in adj PBT to £20.1m (Zeus forecast: of £20.0m);
33.1% rise in adj diluted EPS to 18.4p (10% above Zeus forecast: 16.7p);
2.0p final DPS making a total of 3.0p (in line with Zeus forecast: 3.0p)
£48.7m net debt (2.6% below Zeus forecast: £50.0m);
Work won in 2018 increased 9.0% YoY to £9.7m, while annualised value of the new business pipeline increased 25% to £32.0m.
Outlook: Management guides to 8% to 10% net organic growth and 30% to 35% EBITDA margin. 2017 acquisitions are “fully and successfully integrated” and 2018 “integrating as planned”. With “new business enquiry picking up”, “strong M&A pipeline” and many “new hires”, JTC is set for a year of strong growth.
Zeus view: These results confirm the quality of JTC’s business, its management control and its acquisitions. We see the new hires at Board level and the c. 30% increase in staff to 700, as increasing JTC’s capacity.
Today we increase our 2019 and 2020 forecasts to reflect acquisition of Exequtive Partners (“EP”), which was announced on 26 March 2019 (see Exhibit 1). Our forecasts ex-EP were consistent with management guidance. Our forecasts ex-EP were consistent with management guidance of 8% to 10% organic revenue growth and 32.5% EBITDA margin +/- 2.5%.
Valuation: JTC, at 300p a share, is trading on a 2019 PER of 13.7x, based on what we believe to be prudent forecasts.
JTC shares have de-rated to a prospective PER of under 14x from 18x at IPO and a high of 25x in June 2018. We see these results as exceeding our expectations on both quality and quantity of revenue and EBITDA growth.