Green Landscaping Group: M&A shines as Sweden takes a hit - ABG

36% adj. EBITA growth driven by Finland/Rest of EU
'23e-'25e adj. EBITA down 2-3%, 11% CAGR in '22-'25e
10-8x EBITA in '23e-'25e, 7-10% FCF yields


Swedish challenges offset by strong M&A

Green Landscaping's (GLG) Q3 sales grew 22% y-o-y (-1% vs. ABGSCe, +2% vs. FactSet cons.), of which 0% organically (ABGSCe/cons 3%, 4% in Q2'23), where the CEO noted that competition had increased and delays in certain projects had also held back growth. We expect GLG's public exposure (60-70%) to mitigate weaker market activity, but that org. sales growth should still decelerate to -2% in Q4, also in part due to tougher comparables. Although adj. EBITA grew 36% y-o-y (-3% vs. ABGSCe, +6% vs. cons), underlying profitability was down notably (we est. a 19% adj. org. EBITA decline, vs. +1% in Q2) due to challenges in some Swedish units, which we expect will continue until mid-2024. On a positive note, GLG's Finnish and European units continue to perform very well (~25% margins) and should mitigate the org. earnings pressure, which is why we forecast +1% adj. EBITA growth in Q4. R12m gearing excl. earn-outs was down to 2.7x (2.8x in Q2) and should reach 2.2x at YE'23e due to seasonally strong cash flow.

Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/green-landscaping-group/Equity-research/2023/11/green-landscaping-group---ma-shines-as-sweden-takes-a-hit/