While group Q219 organic revenue growth was 3.3% vs the 10.2% reported for Q119, growth remained strong in the two most important divisions, 10.5% in Digital Trust and 7.6% in Innovation & Marketing Services. On the other hand, the decline in Credit Information & Management accelerated in Q219, although good cost control resulted in an increase in margin. Group EBITDA net of non-recurring items (including ‘virtual stock options’, which were extraordinarily large during the period) declined organically by 11% in Q2. Most importantly the operating margin remained healthy. Excluding this charge, adjusted EBITDA for the group in H119 was €35.7m, a margin of 28.2% versus 25.6% in H118. 

We have increased our forecast EBITDA for FY19 and FY20 by c 3% and 6%, respectively, based on higher revenue growth assumptions for Digital Trust and Innovation & Marketing Services, but lower assumptions for Credit Information & Management. In addition, we increase the assumptions for EBITDA margin in all three divisions. We update our forecasts for IFRS 16, which adds €3.2m to EBITDA in FY19 and FY20, although this is offset in FY19 by the incentive charge for virtual stock options of €3.3m. We remain above management’s reiterated guidance for FY19 of revenue above €250m and EBITDA (pre IFRS 16 and incentive charge) between €68m and €70m. 

In our view, buoyant margins, growth prospects for the two largest divisions, and the benefits of the group’s strategic re-organisational programme point to upside in the valuation. We increase our DCF-based valuation from €14.2 to €14.6 per share, which offers 17% potential upside to the current share price. The EV/EBITDA multiples for FY19 and FY20 are 10.0x and 9.0x, respectively