Redeye takes a positive stance towards the partial divestment of Aspire. While it puts some question marks on the 2022 acquisition of Attentec, we believe the move is financially and strategically wise.

Today, CombinedX announced that it divests Aspire’s Borlänge-based system development business working for Transportstyrelsen to Consid. The operation has sales of about SEK40m with limited profitability. The purchasing price is negligible due to the limited profitability, and as Aspire will lose its major contract with Transportstyrelsen to Consid in 2025. Thus, not selling would have resulted in substantial costs for CombinedX – given that it could not find new assignments for all consultants, which seems challenging in the current market environment. The remaining Aspire operations – circa SEK60m in sales and likely negative EBIT R12m – will join Ninetech.

We believe the partial divestment and splitting of Aspire is a sound move. Based on annual reports, Aspire was the only CombinedX subsidiary with negative EBIT in 2023. Also, Aspire is not as specialized in its go-to-market approach as the other subsidiaries and lacks focus on specific software suits.

Addnode Group

Proact IT Group

CombinedX

* Lack of major recurring revenue streams, potentially impacting business stability and predictability.
* Limited geographic diversification, with a high concentration of sales in Sweden.
* Absence of easily identifiable sustainable competitive advantages typical in the IT consulting industry.
* Not expected to achieve five-fold growth within a decade, indicating potential limitations in long-term expansion.
* Operates in a fragmented market with numerous competitors, which could impact pricing power and market share.

* Strong positioning in specialized IT consulting niches, leading to above-average profitability and solid returns on invested capital.
* Benefits from secular tailwinds in digitalization, cloud computing, and AI, with a business model unlikely to be disrupted in the near future.
* Demonstrates operational stability with minimal regulatory interference, independence from key individuals, and limited cyclical dependencies.
* Proactively promotes environmental sustainability and maintains high employee satisfaction, as evidenced by a strong eNPS score.
* Products contribute to the greater good by helping businesses digitize and become more efficient, while avoiding any environmental or ethical issues.

* Inconsistent earnings growth, failing to maintain 10%+ growth over five years or show stable growth over a decade.
* Operating margin below 20% and not increasing for three consecutive years, suggesting potential efficiency or pricing power issues.
* Stock price has not compounded by at least 10% since IPO, indicating underperformance in long-term shareholder value creation.

* Strong financial health with current assets 1.5 times greater than current liabilities, low debt levels, and good interest coverage ratio.
* Efficient cash flow management, demonstrated by high Operating Cash Flow and Free Cash Flow conversion rates above 80% over the past five years.
* Attractive dividend yield between 1-2.5 times market median, well-covered by cash flows, with recent growth exceeding 7% annually.
* Return on Assets outperforming industry average over the past five years, indicating superior asset utilization.

* Management team's average tenure is slightly less than five years, potentially limiting institutional knowledge.
* Inconsistent achievement of the 10% EBIT margin target, despite overall growth and transparency about challenges.
* Lack of opportunistic action on attractively priced stock, opting for dividends over share buybacks.
* Absence of a controlling owner with more than 20% voting rights, which could provide additional long-term stability.
* Limited experience of CEO in IT consulting industry prior to joining CombinedX, though mitigated by five years at the company.

* Strong visionary leadership from CEO Jörgen Qwist, with a clear long-term outlook and commitment to creating leading specialized IT consulting brands.
* Decentralized organization promoting accountability, with a management team experienced in M&A and listed companies.
* Consistent communication strategy focusing on long-term value creation, with transparent reporting and upfront discussions about challenges.
* Significant insider ownership, including founders, board members, and management, aligning interests with shareholders.
* Diverse and experienced board of directors with relevant expertise in IT consulting, digitalization, and entrepreneurship.

SEKm	2023	2024e	2025e	2026e	2027e
Revenues	766.3	970.3	1,008.2	1,051.0	1,092.2
Revenue Growth	17.6%	26.6%	3.9%	4.2%	3.9%
EBITDA	117.1	125.3	147.2	154.2	159.5
EBIT	80.0	78.5	97.9	106.4	113.9
EBIT Margin	10.4%	8.1%	9.7%	10.1%	10.4%
Net Income	71.0	61.2	77.2	84.0	89.9
EV/Revenue	0.7	0.6	0.5	0.4	0.4
EV/EBIT	6.5	7.4	5.4	4.4	3.6

Key financials