Q2 details
Growth and margins held back by challenging end-markets. Sales came in at SEK 1,373m (-9% vs. ABGSCe, -5% vs. FactSet cons), -20% y-o-y (-10% vs. restated figures) of which -9% organically (ABGSCe/cons -5%, -3% Q1'24). Adj. EBITA declined 17% y-o-y (-25% vs. restated figures) to SEK 133m (-17% vs. ABGSCe, -11% vs. cons), for a margin of 9.7% (ABGSCe 10.6%, cons 10.3%, 9.4% Q2'23, 11.6% restated). Strong margins in Water offset by lower sales in all three divisions, and also lower margins in Services/Infrastructure. FCF was subdued at negative ~30m (including a 15m one-off from refinancing costs) while gearing was stable q-o-q at 2.7x (2.7x) and up to 2.6x (2.4x) excluding earn-outs. On outlook, the CEO says that Water continues to develop strongly, but that Services and Infrastructure continue to be negatively affected by challenging end-markets, where Services' installation companies are expected to return to growth in the latter part of H2'24.
Estimate changes
We expect consensus to lower '24e EBITA by 4-6% on the back of a softer-than-expected Q2 report, while the recent M&A within the Water segment should offset this by 3-4%, which results in net negative revisions of 1-2%.
Share price view
A soft report. The share has outperformed the broader market into numbers (+8% L1M vs. OMXSGI -6%) and is trading at 10-7x EBITA '24e-'26e, ~20-30% below key service/M&A peers despite our expectation of Vestum delivering similar financial performance in 2024e-2026e. Thus, we would expect a negative reaction on the day. There is a conference call at 11:00 CET, link: https://ir.financialhearings.com/vestum-q2-report-2024/register.