The share at a glance: IT specialist GFT senses new dynamism in the financial sector

The banks and insurance companies with which the IT service provider GFT Technologies does its business are not known for quick decisions. Usually, small projects are first used to test what the people at GFT can do, and it takes years for the first contact to turn into a good customer relationship. At least that's how it has been so far. But the pandemic and the digitalisation push that went with it changed a lot. "Now everything is going much faster, and there are also larger projects at stake," reports GFT CEO Marika Lulay in an interview with the FAZ, and you can see that she is still a little amazed at this change.

Her team is still used to the fact that some things are delayed, that the project pipeline can never be converted one-to-one into sales. But the new dynamic among customers has resulted in so many additional orders that GFT has raised its own forecasts and published an ad hoc announcement. Now GFT expects a quarterly increase in turnover to 550 million euros, the operating result (Ebitda) is expected to increase by 46 percent to 62 million euros and the pre-tax result by 155 percent to 36 million euros.

Investors reacted enthusiastically and gave the share a double-digit percentage jump on the day after this announcement - especially since the forecast for this year was raised for the second time. The strong incoming orders should pay off especially in the second half of the year, explained Warburg analyst Andreas Wolf, and sets the price target for the GFT share from 25 to 31 euros. This makes Wolf the most confident of the only four analysts who regularly observe the IT service provider. His colleagues from Quirin, Kepler and Pareto, with their price targets between 24 and 30 euros, are even closer to the current rates, which have fluctuated between 26 and 27 euros in the last few days. Last autumn, all four analysts had given price targets between 13.30 and 15 euros,At that time, GFT shares were paid less than 10 euros at times.

Since then, however, a lot of what the Stuttgart-based IT service provider has on offer has become trendy. The bread and butter business may have been implementing the regulatory requirements in the IT systems of the financial sector for a long time, but the GFT portfolio also includes the cloud or blockchain or artificial intelligence. “They definitely belong to the better,” says Sebastian Droste, who, as an analyst for the private bank Quirin, maintains an overview of the IT and software industry. “What used to be only a fraction of sales is now growing rapidly,” he observes.

GFT also increased its staffing levels during Corona. The workforce grew by 14 percent to 6,225 full-time positions by the end of the first quarter. A real advantage, as analyst Droste judges: “These people are extremely difficult to find on the job market.” Only a quarter of the workforce is in Germany, the rest work at “near-shore” locations with low cost structures in Poland and Spain and since then 2005 in Brazil, where more than 2000 people now work for GFT. "We are among the top 5 IT service providers there," reports CEO Lulay. The home market is even less important for sales. Last year Germany accounted for only 15 percent of sales, while Italy, Great Britain and Spain together account for two thirds of the business volume. America accounts for 10 percent,and Asia will soon also play a significant role, says the GFT boss.

"Still a lot of room for improvement"

At the same time, GFT wants to build a new pillar: a fifth of sales should soon come from industry. Yes, Lulay admits in an interview with the FAZ that last year they lagged behind their plans and only managed 10 percent. But as an IT service provider with roots in the industrial state of Baden-Württemberg, GFT sees its own competencies, for example in matters of cars. Lo and behold: GFT is referred to by Google as a “key partner” when it comes to assessing cars with the help of artificial intelligence. Such projects should also attract new attention on the stock exchange. If GFT had traded on the Nasdaq, the price would probably be much higher, the GFT boss speculates: "There growth is valued more highly than in Germany." That would fit in with her strategy, which places a clear priority on growth.

However, Lulay has rarely seen highs on the stock market since she took over responsibility for GFT's core operational business in 2002. The price hovered around below 5 euros for years until an upswing set in in 2013, which led to 32.20 euros at the end of 2015. A third of this value was already gone when Lulay took over the position of CEO from GFT founder and main shareholder Ulrich Dietz in June 2017. The British “yes” to Brexit caused the course to decline because the high sales in Great Britain appeared to be a risk.

And then there was the excessive dependency on two major customers (Deutsche Bank and Barclays), whose savings plans had a drastic impact. The rest of the business has been growing at double-digit rates for years, but that wasn't really noticed, reports Lulay. But now there are no longer any cluster risks, the two banks are only responsible for one sixth of sales. She sees “still a lot of room for improvement” for the course and is aware that nothing has been achieved with a few road shows. "We concentrate on business," she says as the motto: "The course will follow us."