Gofore - Revised net sales guidance

Gofore revised its guidance for FY2019 net sales on the 10th of July, expected to amount to EUR 67-72m (prev. guidance EUR 71-79m). The revised guidance is mainly due to unforeseen reductions in demand of some of Gofore’s largest customers. We expect some impact on H1 billing rates but full-year margins to remain at healthy levels. We retain our HOLD rating with a target price of EUR 8.50.

FY 2019 sales guidance EUR 67—72m (prev. 71-79m)

Gofore revised its FY2019 sales guidance to EUR 67-72m (prev. EUR 71-79m) due to reduced demand among some of its largest customers. Based on monthly net sales figures the revision was not completely unexpected, with figures during Q2 in particular being weaker than our estimates. The reduced demand to our understanding stems from a cooling down of customer digitalization investment eagerness and the permanence is difficult to judge. The sales growth in 2019 is nonetheless expected to remain solid, at 32-42% based on the guidance range.

Expect some impact on H1 billing rates

We estimate FY2019 net sales at 69.9m (prev. 73.3m). Growth is supported by several significant orders as well as the Silver Planet and Mango Design acquisitions, with an expected impact on revenue on an annual basis of closer to EUR 10m. Pick up in public sector spending with the recently-elected Finnish government may also offer further growth opportunities going forward. We expect the weaker revenue in Q2 to impact on billing rates and as such on margins but the strong Q1 EBITA-margin (17.2%) will support overall margins in H1. We expect an EBITA margin of 13.7% in 2019.

HOLD with a target price of EUR 8.50

Compared to peer multiples the current valuation does not appear to offer any notable near-term valuation upside. With the rapid sales growth and healthy margins Gofore in our view still remains an attractive case and we retain our HOLD rating with a target price of EUR 8.50.

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