Generic: Shows scalability despite lower sales growth - ABG

Sales growth below 10% again, but comps were tough
Delivers 18% EBIT growth y-o-y
DOCS sales have stabilised the gross margin


Q1: Sales growth of 9% and an EBIT margin of 21.3% (19.6%)

Generic reported Q1 net sales of SEK 34.6m (+9% y-o-y, all organic), which was 4% below ABGSCe, as we expected slightly higher price adjustments. In fairness, the comparables from last year were also quite tough. Despite the sales miss, EBIT of SEK 7.4m (6.3m) was 9% above ABGSCe. The beat was driven by slightly higher gross margins and lower personnel costs than we expected. We think the high demand for its digital document transfer services (DOCS) for Swedish municipalities is the main reason for the gross margin stabilising at ~45.5%, as it is sold as a pure SaaS offering. Free cash flow in the quarter was weak from substantially higher net working capital, but this was because of timing effects rather than any structural changes and should normalise throughout the year.

Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/generic/Equity-research/2023/5/generic---shows-scalability-despite-lower-sales-growth/