While sales was roughly flat y/y, EBIT improved significantly following cost cuts and higher utilization rates. EBIT was SEK8.6m (-1.4), corresponding to an EBIT margin of 9.4% (-1.5). Our forecast was SEK3.5m and 3.9%, and the beat was due to significantly lower personnel expenses than anticipated. We are impressed with the margin of 9.4% in the seasonally weak Q3, a level higher than most generalist IT consulting firms with low exposure to the weak e-commerce market.

The market stabilized during the quarter, although at a lower level than during last year. This market view aligns with what we hear from generalist IT consultants with some exposure to e-commerce. New sales was solid, and management believes Avensia has gained market share. However, sales to current customers continued to be weak due to a softer e-commerce market.

We retain our Base Case to SEK13 (13), as the positive effect of increased forecasts – mostly short/mid-term – is neutralized by us increasing the risk-free rate from 2.5% to 3%, following higher market rates. While the strong Q3 report has only a minor effect on our long-term forecasts, we believe the strong margin seen in this quarter is evidence that our expectations of EBIT margins of 11-12% in a stronger e-commerce market are very realistic, strengthening the likelihood of our Base/Bull Cases.