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JTC Plc

Maiden interims & rise in forecasts

This morning, JTC Group (LON:JTC) announces its interim results:

Revenue rose 25.2% YoY to £35.3m (1H17: £28.2m);

Underlying EBITDA rose 56.7% to £10.5m (1H17: £6.7m);

Underlying EBITDA margin improved 6.3pp to 29.9% (1H17: 23.6%);

Underlying diluted EPS of 7.29p per share uses an average of 91m shares.

Revenue growth was driven by new business wins (£9.5m in LTM; 8% net growth) and successful integration of 2017 acquisitions (£8.3m impact). New business pipeline of £25.8m is healthy of which £1.9m pending on-boarding.

Nigel Le Quesne, Founder and Group CEO commented: “We continue to see positive organic growth in both our Institutional and Private Client Divisions with a healthy ongoing pipeline from new and existing clients. As well as good progress with integrating the businesses acquired in 2017 we have also made two further acquisitions, post period end …. In addition to these, we have several other potential targets … in negotiations. [We are] confident in … meeting the Board’s expectations for the full year.”

Zeus view:

The 29.9% 1H18 adj EBITDA margin is encouraging. After including £5.0m of revenue from acquisitions about to complete and allowing for the £2.4m of unexpected lost revenue in 1H, we increase our FY18E revenue by 2.8% to £76.5m and FY18E EBITDA by 7.7% to £23.7m.

Investors should note that our adj EBIT, PBT, PAT and adj EPS exclude goodwill amortisation and interest on pre-IPO financial structure: consequently, these “adj” estimates are slightly above reported underlying figures. We calculate 1H18 adj EPS using 107m shares in issue to be 7.5p. After taking account of these interims and including the two acquisitions, Van Doorn (due to complete in October) and Minerva (due to complete in November), we raise our 2018 and 2019 forecasts:

§ Revenue for 2018E by 2.8% to £76.5m & for 2019E by 17.6% to £99.0m;

§ EBITDA for 2018E by 7.7% to £23.7m & for 2019E by 18.5% to £32.0m

§ Adj PBT for 2018E by 2.6% to £20.0m & for 2019E by 9.5% to £26.6m.

Valuation:

JTC Plc at 405p a share, is trading on a current year PER of 24.3x, based on what we believe to be prudent forecasts. On a proforma basis, including a full year contribution from both the Minerva and Van Doorn deals, we would expect JTC’s 2018 proforma PER to be circa 22.1x (see Exhibit 3) with prospects of 18% growth.