Avensia: Entering 2025 in Good Shape
Research Update
2025-02-20
06:45
Analyst Q&A
Closed
Fredrik Nilsson answered 2 questions.
Redeye strengthens its positive view of Avensia following an overall solid Q4 report. Adjusted EBIT was somewhat soft, but announced cost cuts, along with a seemingly solid momentum in the business given the soft market environment, set Avensia for an interesting 2025.
Fredrik Nilsson
Contents
Review of Q4 2024
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Sales was SEK115m (108), corresponding to a 7% growth y/y, and beat our expectations by 3%. Although all listed Nordic IT Consulting companies have not disclosed their Q4 figures yet, everything points towards Avensia continuing to outperform the market, both generalist firms and e-commerce-focused segments. EBIT, adjusted for SEK4.4m in one-offs, was SEK8.0m (4.0), corresponding to an EBIT margin of 6.9% (3.7), somewhat below forecast SEK9.7m and 8.6%. The deviation was primarily due to slightly lower gross profit, as the COGS relative to sales was somewhat higher than anticipated. Free cash flow was strong at SEK20.5m, and the board proposed a dividend of SEK0.5 per share (SEK18.6m).
In November, Avensia announced a reorganization (Press release in Swedish) to save SEK8-10m in annual costs and to introduce two segments, Commerce and Information Management (IM). The reduced costs are related to the group overhead. Besides cutting costs, the goal is to drive sales in Information Management separately, presenting it as a separate segment from Q1 2025. Commerce has higher profitability, while IM has more substantial growth potential. Today, most customers use both offerings, but moving forward, IM will be able to acquire more customers on its own, particularly among companies where e-commerce is less central.
We raise our Base Case to SEK15 (14) following increased forecasts. While EBIT margins remain below the short-term 10% target (and the long-term 15% target), Avensia continues outperforming the market. Thus, we believe Avensia is in a strong position to improve its profitability once the market rebounds. We believe it can reach a 10% EBIT margin in 2025 without a substantial market rebound. Avensia is trading at ~45-50% discount to the peer average and median EV/EBIT on 2025-2026e. We believe the market does not agree with our assumption of the EBIT margin reaching ~10% in 2025e – still below potential levels in a solid market.
Key Financials | |||||
---|---|---|---|---|---|
SEKm | 2024 | 2025e | 2026e | 2027e | 2028e |
Net Sales | 422.3 | 446.0 | 473.2 | 495.8 | 516.4 |
Sales Growth | 2.1% | 5.6% | 6.1% | 4.8% | 4.2% |
EBITDA | 44.7 | 63.6 | 67.7 | 70.4 | 72.6 |
EBIT | 26.7 | 46.9 | 53.2 | 58.4 | 62.3 |
EBIT Margin | 6.3% | 10.5% | 11.2% | 11.8% | 12.1% |
Net Income | 16.8 | 37.2 | 42.2 | 46.4 | 49.5 |
EV/Sales | 0.7 | 0.6 | 0.5 | 0.4 | 0.4 |
EV/EBIT | 11.6 | 5.7 | 4.4 | 3.6 | 3.1 |
Estmates vs. Actuals | ||||||
Sales | Q4E 2024 | Q4A 2024 | Diff | Q4A 2023 | Q3A 2024 | |
Net sales | 112.3 | 115.4 | 3% | 108.0 | 91.7 | |
Y/Y Growth (%) | 4% | 7% | -3% | -1% | ||
Sales-COGS/employees/working day | 5,193.2 | 5,134.1 | -1% | 4,595.7 | 3,892.7 | |
Y/Y Growth (%) | 13% | 12% | 28% | 8% | ||
Contribtuion/employee/working day | 1,287.7 | 1,044.5 | -19% | 911.3 | 863.7 | |
Y/Y Growth (%) | 41% | 15% | 105% | 95% | ||
OPEX | ||||||
Cost of revenues | -12.0 | -15.9 | 32% | -15.6 | -12.8 | |
Y/Y Growth (%) | -23% | -14% | -14% | -14% | ||
Other external costs | -9.9 | -10.8 | 9% | -9.8 | -8.0 | |
Y/Y Growth (%) | 1% | 10% | -65% | -33% | ||
Personnel expenses | -76.6 | -80.5 | 5% | -74.0 | -58.6 | |
Y/Y Growth (%) | 4% | 9% | -16% | -14% | ||
Earnings | ||||||
EBIT | 9.7 | 8.0 | -17% | 4.0 | 5.9 | |
EBIT Margin (%) | 8.6% | 6.9% | 3.7% | 6.4% | ||
Diluted EPS | 0.21 | 0.03 | -86% | 0.02 | 0.10 |
Disclosures and disclaimers
Contents
Review of Q4 2024
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