Careium: Solid growth despite external headwinds - ABG
- Q2 sales a touch above our ests. at SEK 229m, for 7% org. growth (ABGSCe 6%)
- EBIT 18% above ABGSCe, but FCF lower than expected at SEK 0.5m
- '24 org. growth target kept at 12-15% - trading at 9x '24e EV/EBITA
Q2: Solid growth, margin up 130bps, reiterated '24 targets
Careium delivered sales of SEK 229m (1% vs ABGSCe 228m), 9% q-o-q and y-o-y organic growth (ex. FX) of 7% (1pp vs ABGSCe 6%). The Nordics (+8 y-o-y) and UK (-12% y-o-y) were, as expected, affected by market delays, including a loss of a few large customers in the UK. However, the positive trajectory in the Netherlands (+14% y-o-y) and other markets (+180% y-o-y) contributed to the top line growth. Segment wise, service sales was SEK 163m (-3% vs ABGSCe 169m), while product sales cae in at SEK 66m (11% vs ABGSCe 59m). The gross margin slightly decreased to 42% (1pp vs ABGSCe 41%, -1.2pp q-o-q and -0.4pp y-o-y), on increased freight costs and an unfavourable product mix. Opex came in as expected at SEK -74m (1% vs ABGSCe -74m). EBIT amounted to SEK 22m (18% vs ABGSCe 18m), for a margin of 9.5% (ABGSCe 8.1%, 6.8% in Q2'23), corresponding to a 49% EBIT growth y-o-y, which is encouraging. While the FY'24 organic growth target remains unchanged for FY'24e (target 12-15%, ABGSCe at 12% pre-Q2), Careium stated that reaching the target is a challenge, but is committed to deliver accelerated growth in H2 to achieve it. In particular, Q4 is expected to accelerate, which is in line with our expectations and is partly supported by lighter comps (following a soft Q4'23 top line).
Cash flow burdened by WC tie-up
FCF ex. M&A in Q2 amounted to SEK 0.5m. This is a decrease of SEK -7.2m y-o-y (7.7m Q2'23) and SEK -16m q-o-q (17m Q1'24), with a change in WC of SEK -21m, mainly on inventory build up. While the cash flow is lower than expected, the market delays makes the inventory build-up less surprising.
Valuation and conference call details
On our pre-Q2 estimates, the share is trading at 9.2x ‘24e EV/EBITA adj. In addition, we expect more details about Q2 on the conference call at 12.00 CET.
Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/careium/Equity-research/2024/7/careium---solid-growth-despite-external-headwinds-/