Embellence Group - Q4'22: continued stability from geo exposure - ABG
Q4'22 at first glance
Net sales were SEK 177m (-7% vs ABGSC SEK 190m), corresponding to y-o-y growth of 2% (-16.5% org.) supported by continued growth of 110% in the RoW segment after the Artscape acquisition, while Nordics declined by 24% and RoE remained flat. Embellence continues growing the premium share of sales due to a higher share of Europe segment sales, leading to higher gross margins, but a higher opex ratio y-o-y led to adj. EBITA of SEK 22 (-28% y-o-y) for a 12.4% margin, 7% below ABGSCe SEK 24m. The mechanical effect on our 2022 estimates is -2% on sales and -2% on adj. EBITA, pointing to a slightly softer momentum into '23e. A continued positive free cash flow of SEK 12m means that leverage is reduced further in this quarter for a quarter-end ND/EBITDA of 2.1x. The board has proposed a SEK 0.8 dividend per share, ~30% of net profits compared to the 30-50% dividend policy and last year's SEK 2.7 DPS.
Outlook and cost savings programme
The different markets display widely different market dynamics. Decorator/hospitality-oriented Europe segment holds up well, and commentary around hospitality is optimistic. To counteract the experienced margin pressure in Nordics and protect margins into a downturn, Embellence launches a personnel-related cost-savings program expected to save SEK 9m on an annual basis starting from Q1’23, incurring one-off costs of SEK 5m in the quarter. The company will also implement another round of price increases in the beginning of ‘23e facing expected cost inflation. Main focal points for 2023 will be profitability, cash flow and a resilient balance sheet.
Share trading at 6-5x '23e-'24e EV/EBITA
The Embellence share is up 2% YTD and is on our unrevised estimates trading at ’23e-‘24e EV/EBITA of 6-5x. Embellence hosts a conf. call at 10:00 AM CET. It can be followed at https://ir.financialhearings.com/embellence-group-q4-2022 or by dialling +46 8 525 07003. PIN: 5009313#.
Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/embellence-group/Equity-research/2023/2/embellence-group---q422-continued-stability-from-geo-exposure/
