JDC Group AG (DE:A8AG) continues to execute its new strategy of digital platform development while acting as a consolidator of client contract portfolios. Two large portfolio acquisitions made last year, assisted by organic growth, allowed the company to increase revenues (up 10.1% y-o-y to €40.3m in H117), improve profitability (gross margin at 33.5% in H117 vs 29.3% in H116) and enhance cash generation (operating cash flow up 40.4% y-o-y to €3.3m). Management remains confident that it will deliver c 15% y-o-y revenue growth and double EBITDA in FY17. Although JDC’s stock is currently trading at a premium of more than 100% to its peer group on FY17e P/E, it is also characterised by superior earnings growth potential (c 90% y-o-y in FY18), according to market consensus.
H117 results driven by client portfolio acquisitions
JDC reported a considerable y-o-y increase in H117 EBITDA to €1.7m from €0.4m in H116. This was the result of last year’s acquisition of two retail client insurance portfolios – one consisting of 20,000 contracts and the other consisting of 195,000 contracts, which made up a large proportion of the growth in commission income in H117. These transactions also translated into a decline in commission expenses as a percentage of total commission income to 68% from 73% last year. The 10.1% top-line increase was aided by revenue growth in both Advisortech (11.2% y-o-y) and Advisory (13.8% y-o-y). At the bottom line, JDC was able to reduce net loss to €0.6m from €0.8m in H116.
Outlook reiterated
Management continues to guide to FY17 EBITDA in the range of €5-6m and group revenues at €85-95m, implying an EBITDA margin of 5.3-7.1% (compared with 4.2% in H117). Total commission income and EBITDA reported in H117 represent 44% and 31% of the full-year midpoint guidance, respectively. However, the second half of the year (Q4, in particular) is usually a seasonally stronger period for JDC.
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