Relais Q3'24 preview: We expect continued growth and margin strengthening

Translation: Original published in Finnish on 11/4/2024 at 7:20 am EET.

Relais publishes its Q3 result on Thursday at about 9:00 am EET. We expect the company's revenue to continue on an upward trend, driven by acquisitions and organic growth, which continues at a good pace. We expect that the efficiency gains achieved earlier in the year will continue to drive Relais to profitability in the third quarter. As usual, Relais has not issued any guidance for the current financial year. In addition to general market developments, the report draws our attention to comments on the outlook for the rest of the year, which is important for the company's lighting product business.

Growth expected to moderate after a very strong start to the year

We forecast Relais' revenue to have grown by 9% in Q3 to 76.6 MEUR. The majority of the growth is explained by the acquisitions of Jyväskylä Truck Center, Asennustyö M. Ahlqvist and AutoMateriell. The latest acquisition of Team Verkstad Sverige AB has only been reported as part of the Relais Group since the beginning of October, so the acquisition had no impact on the Q3 figures. We expect organic revenue growth to have slowed from the high level of the first half (~10%) to just over 3%. Among the business segments, we expect Technical Wholesale and Products to grow in line with the market, and Commercial Vehicle Repair and Maintenance to grow in line with strong demand and slight price increases. We expect the exchange rate development of the Swedish krona to support reported revenue by around 1%.

We expect the profitability uptick to come from a number of minor improvements

Our Q3 operating profit estimate excluding PPA amortization (EBITA) is 9.6 MEUR. This corresponds to an EBITA margin of 12.6%, which is stronger than in the comparison period. As in the first half of the year, our forecast for stronger profitability is driven by the same factors, such as the gross margin supported by price increases, small synergies from the acquisitions made, and efficiency improvements in workshops and procurement. However, we do not expect the strong demand of the first part of the year to continue and therefore expect the profitability improvement in Q3 to be more moderate than in the first half of the year. Given the high tax rate in recent years and normal financing costs relative to Relais's debt level, we expect Q3 EPS adjusted for goodwill amortization to settle at EUR 0.31.

2024 looks like an exceptionally good year, supported by weather conditions early in the year

As usual, Relais has not provided numerical guidance for the current year, and we do not expect it to do so now either. For the full year, we forecast revenue growth of 13% to 321 MEUR, driven by demand boosted by favorable weather conditions in the first half of the year. In our forecast, Relais's organic growth of just under 6% in FY2024 is above the company's trend growth in the coming years, which is reflected in our projections as weak organic growth in 2025. We forecast Relais to achieve an adjusted EBITA margin of 11.3% for the financial year, a clear improvement on recent years. The report draws our attention to comments on developments in the main markets, which have been quite respectable this year despite the sluggish general economic situation. We are also interested in the outlook for the rest of the year and the winter season, which is important for the lighting product business.