Group organic revenue growth in FY18 was driven by double-digit growth of the aerospace business. TXT started to invest some of its substantial cash pile in H218, acquiring two Italian businesses in the fintech space. This investment should provide growth opportunities for the Banking & Finance business. Increased investment in sales and R&D in FY19 reduces our normalised EPS forecast by 15.5%; we introduce a forecast for 21% EPS growth in FY20. The company continues to assess targets in both business lines and has net cash of €60m available to fund acquisitions.
TXT reported revenue growth of 11.4% year-on-year in FY18, of which 7.5% was organic. The Aerospace, Aviation and Automotive (AAA) business grew 12% (all organic), while the underlying Banking & Finance business declined 8.6% before the contribution of €1.4m of revenues from the Cheleo acquisition. While gross profit was marginally better than expected, higher commercial and R&D costs resulted in lower than expected EBITDA. Net finance costs were affected by fair value losses on the funds in which the company invested its cash in H218, resulting in normalised EPS 46% below our forecast. The company announced a €0.5 annual dividend, well ahead of our €0.16 forecast.
Management expects to report revenue growth in Q119 (organic plus Cheleo) and EBITDA broadly in line with Q118. We have revised our forecasts to reflect slightly higher revenues that are outweighed by higher sales and R&D costs, resulting in a 15.5% decline in our normalised EPS forecast. TXT continues to assess potential targets in both business lines. In AAA, we believe that the focus is on adding niche software and internationalising the business. In Banking & Finance, we believe the business is seeking to add technology to widen its product offering with a focus on European customers.
TXT is trading on EV multiples that are at a small discount to peers – EBITDA margins are broadly in line with peers, although EBIT margins are lower. As the company has not yet deployed most of the cash from the sale of TXT Retail, its P/E multiples are inflated versus peers. We expect this premium to reduce as the company makes earnings-enhancing acquisitions.