Embellence Group: Artscape is the detractor - ABG

Net sales SEK 190m, -3% vs ABGSCe, +3% vs Factset cons.
Adj. EBITA SEK 23m, -7% vs ABGSCe, +5% vs cons.
Capital Markets Day in May announced


Q4 in brief: better overall

The report is better than consensus estimates in general. Net sales of SEK 190m is 7% higher y-o-y (6% org.), and is 3% below ABGSCe and 3% above Factset cons. The three geographical segments Nordics, Europe and RoW grew by 16%, 7% and -5% respectively, and commentary on a weaker trend in Artscape could be the explanation for the softer RoW development. Gross margins were 57.7%, 210bp bp lower y-o-y but 10 bp better sequentially on higher input prices, however the direction of change for input prices have levelled, according to management. The gross margin was the main reason for the miss vs our estimates, and it seems the gross margin relief that was anticipated by management in the Q3'23 report did not fully materialise. SG&A expenses were down y-o-y despite the higher scale due to ongoing cost savings programs across the organisation, which together with the decent gross margin resulted in adj. EBITA growth of 5% for adj. EBITA of SEK 23m (12% margin). This was 7% below ABGSCE SEK 25m but 5% above cons. SEK 22m. Leverage is better sequentially for Q4'23 IFRS-included ND/EBITDA of 1.7x after SEK 34m FCF (Q3 ND/EBITDA 2.2). The board proposes no dividend for 2023, which could be interpret as a signal that the company is preparing for an aquisition as the leverage ratio looks fair to us.

Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/embellence-group/Equity-research/2024/2/embellence-group---artscape-is-the-detractor/