TXT reported strong organic revenue growth in both divisions in Q219, which combined with the contribution from recent acquisitions, translated into strong growth in EBIT and improved EBIT margins year-on-year. Recent acquisitions have been integrated and provide the potential for cross-selling in the banking & finance division, while the aerospace business has seen significant contract wins in North America. We have revised our forecasts to reflect stronger revenues, higher operating costs and higher tax rates in FY19 and FY20.
TXT reported year-on-year revenue growth of 57% for Q219, of which 26% was organic. The recent Cheleo and Assioma acquisitions contributed revenue of €3.0m in Q219. On a divisional organic revenue basis, the Aerospace, Aviation & Automotive division grew 25% and Banking & Finance 33% in Q219. Gross margins were lower on a year-on-year basis due to the higher mix of services revenues. Normalised EBIT grew 108% y-o-y, generating a margin of 7.3%, up from 5.5% a year ago. Net cash at the end of H119 was €44.2m, reflecting the payment of dividends and the acquisition of Assioma in H119.
Management expects continued organic revenue growth in Q319 and improved EBITA versus Q318. We have revised our forecasts to reflect stronger services revenues in FY19 and FY20, higher operating expenses and a higher tax rate (to match the rate reported in H119). These changes, combined with movements in the value of short-term investments, result in a 9.5% upgrade to FY19 normalised EPS and a 5.8% reduction in FY20 EPS.
TXT is trading at a discount to its peer group on EV/Sales and EV/EBITDA multiples, with EBITDA and EBIT margins slightly below the group average. While the company still holds a high level of cash (we forecast €50m by the end of FY19), it continues to trade at a premium to peers on a P/E basis. Further acquisitions of earnings-enhancing businesses should reduce this premium.