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JTC Group Acquisition of Exequtive Partners

What’s new: JTC Group (LON:JTC) has announced the acquisition of Exequtive Partners SA for an initial consideration of €25m (absolute cap of €34m) from its principals, who will all join JTC with immediate effect.

The 28 EP employees will join JTC’s existing Institutional Client Services team in Luxembourg.

The consideration will be satisfied by €18.3m cash and the issue of 1.9m new ordinary shares. The earnout, if payable, will be paid 70% cash and 30% shares based on EP’s performance on a sliding scale against revenue and EBITDA targets.

EP, a fast-growing, specialist provider of corporate and related fiduciary services, is based in Luxembourg and was established in 2013. EP has demonstrated exceptional growth over the past six years. 2018 adj EBITDA was €2.5m.

JTC expects the EP acquisition to be immediately enhancing.

Nigel Le Quesne, Founder and Group CEO observed: “Exequtive Partners is a specialist business in a key strategic location that has demonstrated exceptional performance since its inception. As such, this acquisition is reflective of our focus on high quality growth and on strengthening our proposition for institutional clients. The management team at Exequtive Partners has built a successful business based on very similar principles to JTC, making it an excellent cultural fit for us”.

JTC will announce full year results for the year to 31 December 2018 on Wednesday 3 April 2019.

Zeus view: On 3 April, we will update our forecasts, which are currently within 1% of consensus at revenue and adj EPS level, to include EP. We make no changes today.

EP will enhance JTC’s market presence in Luxemburg and complement JTC’s expanding corporate services capabilities. The EP acquisition creates even greater opportunities for JTC’s growth.

For the 9 months to 31 December 2019, we expect EP to contribute: £4.0m of revenue (i.e. 4% enhancing), £1.6m of adj EBITDA and £1.2m of PAT. We expect the EP deal to enhance JTC’s 2019 adj EPS by 4% to 22.4p (see Exhibit 3).

Valuation: JTC, at 299p a share, is trading on a 2019 PER of 13.3x, based on what we believe to be prudent forecasts, including the EP acquisition which completes immediately.