Embellence Group: Sales in line, beating EBITA expectations - ABG

Sales 0% vs ABGSCe
Adj. EBITA 12% vs ABGSCe
Europe and RoW driving growth, Nordics more muted

Q1’22 outcome
Sales came in at SEK 184m (0% vs ABGSC 184m), Gross profit SEK 110m (7% vs ABGSC 102m), EBITA SEK 31m (5% vs ABGSC 29m), Adj. EBITA SEK 33m (12% vs ABGSC 29m), EBIT SEK 28m (3% vs ABGSC 27m), Net profit SEK 25m (29% vs ABGSC 19m), EPS SEK 1.14 (34% vs ABGSC 0.85).

Q1’22 takeaways – strong margins adding confidence
Embellence grew sales in Q1 with 4% y-o-y to SEK 184m. In line with our expectations, Europe and RoW were the main drivers to the growth (primarily driven by increased activity in the hospitality segment), while the Nordics showed a more muted growth (on tough comps). Newly acquired US-based Artscape (RoW) was a part of the group for one month of Q1, and we are yet to see its full effect on the group in Q2. Furthermore, we are impressed by the gross margin of 59.4% (+5.7pp y-o-y and +3.9pp vs ABGSCe). In terms of adj. EBITA it grew 17% y-o-y to SEK 33m (+12% vs ABGSCe 29m), yielding a margin of 17.8% (+2pp y-o-y and +1.9pp vs ABGSCe). Mgmt. says that the primary reasons behind the EBITA growth in the quarter were the acquisition of Artscape (above-group EBITA margin) and strengthened margins in Europe (foremost in Italy and the UK). Although Embellence has limited exposure to Russia and Ukraine (2% of FY’21 group sales), it has seen a decreased activity in Europe in March on web-searches for home interior and also on store activity. We hope to gain more insights on this on today’s conf. call. In all, despite some uncertainties ahead, the Q1 report at first glance adds confident on Embellence’s ability to stay resilient, which not least is reflected in the strong gross and adj. EBITA margins.

Estimate changes and final thoughts
The Embellence share is -5% YTD and is on our unrevised estimates trading at EV/EBITA of 7.4x-5.7x in ’22e-‘24e. On isolated numbers, consensus is expected to raise sales and EBITA by low single-digits. Embellence is hosting a ...
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