Ework Group: Improved gross margin in the limelight - ABG

- Sales +1% vs. ABGSCe, EBIT +10% on better GM
- Expects sales to decline H1'24 but recover well in H2'24
- Expect cons to raise '24e EBIT c. 5%

Q4 results
Q4 sales of SEK 4,657m (+1% vs. ABGSCe 4,626m), -1% y-o-y. Gross profit was SEK 182m (+3% vs. ABGSCe SEK 176m), +5% y-o-y, while EBIT was SEK 58m (+10% vs. ABGSCe 53m), +6% y-o-y. The gross margin of 3.91% improved from 3.77% in Q3, driven by a favourable sales mix and profitability-enhancing initiatives. The beat in terms of EBIT was driven by a higher gross profit as opex was in line.

Q4 thoughts
While some segments remain weak (public sector and telecom), automotive and life science continue to show strength. Ework has started to see some signs of recovery after a weak market in Q2-Q3. In light of the weaker market, Ework is prioritising profitability over growth, and has therefore announced a cost savings program, looking to reach SEK 60m in annual savings from Q2 and beyond. On outlook, Ework expects negative growth in H1, but sees improved metrics in H2, resulting in slight negative sales growth for the full year. That said, cost savings are supportive while the gross margin is improving, so expects >30% EBIT growth in 2024, in line with its financial targets.

Estimate changes
Based on the Q4 report and on a preliminary basis, we expect consensus to lift '24e EBIT mid-single digit, with lower sales offset by lower costs and higher gross margin assumptions. There is a conference call 13.00 CET.

Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/ework/Equity-research/2024/2/ework-group---improved-gross-margin-in-the-limelight/