Sales was SEK500m (646) and came in 9% below our forecast of SEK549m. Organic growth was negative 27%, while our forecast was -15%, due to a soft market and adverse weather. With copper likely phased out during 2025, along with Transtema’s order inflow – where the recent pan-Nordic support and maintenance deal with GlobalConnect is the highlight, see below for details – we believe Transtema’s structural headwind in sales growth will turn in 2025. EBITA (adjusted for SEK7.1m one-offs related to the data breach at Tietoevry) was SEK3m (37). Our forecast was SEK 14m. The adjusted EBITA margin was 0.6%, compared to 5.7% in Q1 2023, and below our forecast of 2.5%. We believe there are many reasons to expect improvements over the coming quarters. First, Q1 is seasonally soft. Second, cost-saving initiatives will likely have a larger positive impact going forward. Third, many of Transtema’s new larger deals will start having a positive impact from H2 2024 and onwards. Thus, although we do not expect Transtema to reach its ambitious 7% EBITA margin target, we expect Q1 2024 to be the bottom in terms of profitability.

In early May, Transtema announced a 3-year deal (with an option of +3 years) regarding support and maintenance on all four Nordic markets – Sweden, Norway, Finland, and Denmark – with GlobalConnect. While the initial SEK200m over three years might not seem that significant in relation to Transtema’s 2023 sales of SEK2.7bn, we believe this deal is important and strengthens the investment case in Transtema. It is Transtema’s first major deal with GlobalConnect, which is a large and expansive player within fibre in the Nordics. The pan-Nordic deal fits well within Transtema’s strategy of becoming a Nordic player – with in-house capabilities in Sweden and Norway and partners in Finland and Denmark. Transtema currently has limited resources for support and maintenance in Norway. However, with this deal, the company has a foundation for establishing a combination of an in-house team and partner network in Norway, opening for further support and maintenance deals in the market.

We decreased our Base Case from SEK29 to SEK25 based on the estimate revisions. However, our positive view is retained, and we believe this quarter sets the bottom for Transtema’s profitability. The company is trading at 4.2x EBITA 2025e. Although we expect significant margin improvements compared to R12m numbers, our 4.9% EBITA margin assumption remains below the company’s 7% target.