BTS Group: Fast-changing world driving demand for BTS - ABG

Adj. EBITA +4-5% for 2022e-24e post Q1 beat
We expect guidance upgrade during 2022
19.1x EV/adj. EBITA 2022e vs 5-year average 16.7x

Q1: seasonally weaker quarter just became a solid quarter
BTS beat our sales and EBITA expectations by 6% and 9% in Q1, respectively, and we conclude the beat to be of good quality as it was driven by sales beats in both of its two largest regions, North America and Europe. Demand remains strong, according to the company, as customers globally are facing a high pace of change and need to adapt to the new environment. This is driving demand for BTS’ consulting services, and its global reach (~1,100 employees in 34 offices) gives its offering an advantage in global deliveries. Challenges for BTS ahead likely relate to salary inflation and increased external costs (travelling). A worsening of the macroeconomic environment would also lower demand, although this has not yet been seen by the company to date. We estimate BTS’ utilisation to be high at the moment given a strong market and the Q1 EBITA margin of 10.8% (vs average Q1 margin in 2016-2021 of 6.5%). We expect growth to remain strong during 2022e but margins to flatten out slightly due to the above-mentioned factors causing higher costs.

Estimates up 2-5%, guidance upgrade likely during 2022
Based on the Q1 beat, we raise sales and adj. EBITA by 2% and 4-5%, respectively, in 2022e-24e. We forecast 2022e adj. EBITA growth of 25% vs 2021, compared to the company’s guidance of “better than in 2021”, which means more like 10% for us. This leaves us with the view that the company is likely to upgrade its guidance to “significantly better” (~20%) later in 2022, maybe already at Q2, which will be the first quarter for Jessica Skon as new group CEO. That would be well timed.

19.1x EV/adj. EBITA and 4% lease adj. FCF yield
On our revised estimates, the share is trading at 19.1x 2022e adj. EBITA, with an estimated 14% organic sales growth and 25% adj. EBITA growth in 2022e. This is a 14% premium to ...
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