BTS Group: Eyes on Europe - ABG

European improvements in H2e key for recovery, but risk remains
A miss in Q3 would likely trigger a FY guidance downgrade
We make small revisions (-0-2%) and expect a recovery


European recovery in H2e key for FY guidance

BTS' beat Q2 expectations vs consensus driven by North America and Other markets, while European sales dropped organically by 23% y-o-y and missed EBITA expectations by 51%. On the conference call, the company expected to see a recovery to low-single-digit growth in Europe in H2e, and reiterated the FY guidance of "2024 EBITA better than 2023". As we both estimate a recovery in the European segment (-2% organic growth in Q3e and 4% in Q4e) as well as estimate a group EBITA growth of 8% in '24, we argue that there is a potential risk to the FY guidance if Europe disappoints in Q3e. The latest macro trends have not been supportive in the region, with weakness in Germany (automotive and IT) as well as in the Nordics (IT services). Globally, Accenture reported 5% local currency growth in its Q4'24 (ended Aug'24) and guides for 3-6% growth in FY'25, showing a steady development ahead.

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