SEB sees (admittedly in a commissioned quarterly comment) that the market has bottomed out, but the recovery may be slower than expected. Fair value range €26-29.
Gofore again demonstrated how to defend above-peer margins in a soft market in Q2. We now see flat 2024 EBITA y/y. While it seems the market is not turning any more sour, we believe the recovery is likely to be slower than we previously expected. However, thanks to solid cost management, our profit estimates rise slightly. The share is now trading at a cycle bottom EV/EBITA multiple of <12x. Our fair value range is unchanged at EUR 26-29.
Behind a paywall, in brief: Gofore won the tender, the price was at the lower end (range €8–10.39M, Gofore €8.76M) and they received the highest quality scores.
Corporate reputation was assessed on a scale of 1–5. The study included Finland’s 80 largest listed companies, and of course Gofore was among them, reaching third place.
Operating as a listed company has certainly been a great time. Sometimes a bit demanding, but then again, the public nature of the role brings its own unique flair. At the same time, it provides a magnifying glass for observers and a megaphone for the company. How to use them skillfully, while constantly learning—that’s the heart of it, I suppose.
Good news from us! At the same time, a reminder to forum members to (also) subscribe to our press releases; not all new wins exceed the threshold for a stock exchange release, but they are still reported as news every now and then
I’m sharing the link to our interesting M&A-themed webinar here as well; the recording will be available on 11 September at 10:00. We are often asked about acquisitions; how and why we buy additions to the Group. The case study in the webinar is the acquisition of eMundo, which marks its second anniversary in November, so experience has also been gained in life together after the deal.
The speakers are our M&A Director Ville Hurnonen, Gunther Palfinger, who was one of eMundo’s selling shareholders, and Marc Fuchs, who started as the CEO of the DACH region at the beginning of this year. It will be an interesting event for those interested in Gofore as an investment as well as acquisitions in general! Due (in part) to the speakers, the presentations are in English.
Inside information: Gofore’s net sales were EUR 15.8 (16.9) million in August 2024. In July 2024, net sales amounted to EUR 5.9 (5.9) million. The Group’s last 12 months (LTM) pro forma net sales were EUR 188.6 million. At the end of August, the Group employed a total of 1,452 (1,448) people.
However, we have still not completely cleared customers’ needs for savings; instead, new and previous reduction decisions made by customers continue to have an impact.
Revenue slightly below expectations? September would need to bring in €19.6m in revenue to reach Joni’s forecasts? Last year it was €18m and there were the same number of working days.
In August, revenue fell by approx. 7%. Last year there was probably one more working day. Growth has turned into contraction. The market it operates in is bad, and even this company can’t do anything about it.
Gofore’s July and June revenue fell more than expected as the organic decline steepened. Utilization rates were also weaker than in the comparison period and expectations, although they improved toward the end of August. Market comments remained somewhat concerning, as customers still have needs for savings. The weaknesses appear to be more in the DACH region, where the company implemented adjustment measures. In Finland, on the other hand, Gofore is recruiting. Echoing our Q2 comments, the market’s price pressure challenges have seeped into the order books of Gofore and other companies in the sector, which makes returning to the previously more profitable growth path slower than previously expected. Thus, we slightly lowered our forecasts for the coming years. We reiterate the target price of EUR 24.0 and the Reduce recommendation.
@Emmi_Berlin1@Timur_Karki
I am posing a question to you (or any other willing Gofore employee!) similar to the one @Pohjolan_Eka asked @Harri_Sieppi in the Witted thread! The question is absolutely brilliant, and I also appreciate Harri’s answer regarding the topic. I believe many others invested in Gofore are interested in this same thing, as the weakness of the public sector and potential cuts are a bit concerning.
Thanks @Ituhippinen - we hadn’t spotted this. A good and important question, which we will answer as soon as someone has the time to consider the matter as thoroughly, or at least close to it, as @Harri_Sieppi
Timur Kärki, Chairman of the Board and founding member of Gofore Plc, M.Sc. (Tech.), was awarded today as Business Leader of the Year at the annual seminar of the Finnish Businessmen’s Association.
The jury that selected Timur Kärki as Business Leader of the Year emphasized in its reasoning not only Gofore’s impressive financial success but also the fact that Kärki has dared to shake up traditional management methods and bring a new spirit of a more open corporate culture, not only to his own industry but also to the activities surrounding it. According to the jury, Kärki also dares to take a bold stand on the pain points of the IT industry.
Congratulations @Timur_Karki on the great achievement, and of course to the entire Gofore organization; after all, you get to enjoy his leadership.
Kauppalehti has a good article about CEO of the Year Timur Kärki, the birth of Gofore, and the values emphasized by the founders that still guide our daily life
Regarding the question about public sector procurement—whether savings will be made by cutting development costs or by developing more—I would answer: yes, savings will be made.
In reality, no single entity exists that could provide an answer for the coming years, as there are so many parties involved, and different organizations and their service procurement behave very differently from a budgetary perspective.
Currently, however, taking the public sector as a whole, new projects are coming into the pipeline at a fairly good pace (this is a strongly empirical interpretation based on everything I’ve heard and seen). My own feeling is that, at least on a visionary level, the level of ambition is increasing rather than decreasing. At the same time, projects are of course being wound down for cost-saving reasons, but this has certainly happened before. It may be that some organizations have scrutinized projects with a finer-toothed comb, but I don’t have any concrete data to support this. There are, of course, examples of individual organizations, such as the Tax Administration (Vero), which has announced fairly clear cuts to its development budget.
What has made the public sector market more challenging in our industry is the intensified competition. And this is due to problems in the private sector market. I would be very surprised if this pattern didn’t change as private sector investments grow and competitors’ benches empty out.
Personally, I consider Gofore’s positioning as a trusted and often preferred partner for public sector clients to be a very strong asset in the future as well. I don’t believe that the digital transformation of the public sector will stop or even pause, nor do I believe that in-house companies will disrupt the market in any significant way in the coming years. However, tightened competition, especially in software development services, is a reality that has also affected Gofore’s growth, as they have sought to maintain margins.
In addition to the Danske comment shared by @KuHa, SEB also published a comment yesterday. It covers some of the same public sector-related points that I was trying to articulate above.
On that page, I think the “valuation” tab does a particularly good job of showing how the valuation has developed over time across different key metrics.
In the big picture, it seems that SEB and Danske focus a bit more on evaluating our stock against international peers, whereas Inderes considers comparisons to domestic companies in the industry to be more relevant.
Hopefully Joni and Mikael won’t mind me highlighting analysis from others on this platform as well.
