Sales was SEK591m (603) and came in 9% above our forecast of SEK543m. Organic growth was 0.3%, compared to -15% in Q2. The Norwegian segment grew by 8.4% y/y related to the final delivery of a large 5G project. The Swedish segment grew by -4.5% y/y as Transtema did not fully manage to compensate for the decline in copper (now about 5% of sales). We are encouraged to see the positive trend in organic growth continue. Adjusted EBITA was SEK16m (21), and our forecast was SEK 22m. The adjusted EBITA margin was 2.8% (3.5). As the soft margin, according to the report, is solely due to the Norwegian market, we assume Sweden has an EBITA margin of around 5% - which is a solid level. Norway was hurt by low utilization within fibre and a high share of sub-consultants. Also, the efficiency measures have not positively impacted margins yet.

To increase efficiency in the office and in the field, Transtema will initiate a significant digitalization effort in the coming years. The number of systems in use will decline to a few group-common systems, which management believes will increase efficiency, scalability, and quality. While causing some short-term costs that are likely to be capitalized, we believe the initiatives for a group-common modern IT infrastructure are necessary and profitable long-term investments.

Based on the estimate revisions, we lowered our Base Case from SEK27 to SEK25. However, our positive view is retained, and we believe the worst is behind Transtema – although the Norwegian business remains soft. The company is trading at 6x EBITA 2025e. Although we expect significant margin improvements compared to R12m numbers, our 4.6% EBITA margin assumption remains below the company’s 7% target.