Green Landscaping Group: Swedish challenges, German delights - ABG

Organic earnings under pressure, but solid M&A
'24e-'25e adj. EBITA down 2%, 5% CAGR '23-'26e
10-9x EBITA '24e-'25e, 12-11% FCF yields


Clear intent to step up M&A in 2024

Green Landscaping (GLG) continued to benefit from its exposure to public customers (60-70%) and ground maintenance (50%), while landscaping (~30%) was subdued due to a weaker market. This led to a 6% organic sales decline (ABGSCe/FactSet cons -4%, 0% in Q3), where Sweden was roughly stable (-2%). We expect the market headwinds to remain in 2024, but that Q4'23 should have been the trough, and we forecast a 4-2% organic decline in H1'24. Group profitability was solid (adj. EBITA 10.0%, ABGSCe/cons 9.7%), but was largely due to accretive M&A as the adj. EBITA decline of 6% (ABGSCe/cons -7%) was from a 22% organic EBITA decline. We expect organic earnings to remain under pressure in H1 (down 22-1%), before turning positive from Q3, but adj. EBITA should return to growth from Q2 (-9% in Q1, +7% in Q2). Also, cash flow should improve materially from Q1'24 due to the timing of payments, and yield a ND/EBITDA of 2.1x by YE'24e.

Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/green-landscaping-group/Equity-research/2024/2/green-landscaping-group---swedish-challenges-german-delights/