Humble Group: Performing strong in seasonally soft quarter - ABG

Q1 report in line with prel. numbers
Continued strong org. growth of 25%
Margin growth y-o-y reassuring in seasonally soft quarter

Q1 results
Q1 sales were SEK 879m (-2% vs ABGSC 897m), Gross profit SEK 301m (6% vs ABGSC 283m), Adj. EBITDA SEK 102m (14% vs ABGSC 90m), EBITA SEK 85m (0% vs ABGSC 85m), Adj. EBITA SEK 93m (9% vs ABGSC 85m), Net profit SEK -206m (-1% vs ABGSC -204m). Operating cash flow came in at SEK 91m. On pro forma level, Q1 group sales came in at SEK 1,067m, while adj. EBITDA were SEK 127m, corresponding to a financial target fulfillment of 26% and 29%, respectively. Lastly, we note capitalised work increased from SEK 3m to 17m y-o-y.

Q1 thoughts and outlook
Humble’s Q1 report was in line with its prel. numbers, with continued strong organic growth of 25%, well-above its financial target of 15%. We again highlight that Q1 is the seasonally softest quarter for the group. This is reflected in the sequential weaker adj. EBITDA margin of 11.6% (-6pp q-o-q), however the gross margin was stronger than expected at 34.2% (+1.2pp q-o-q, +2.7pp vs ABGSCe). Furthermore, Humble is, like other companies, experiencing surging inflation on raw materials and freights. In the light of this, coupled with Q1 being seasonally softer, we are impressed by Humble’s ability to improve its adj. EBITDA margin y-o-y (+3.9pp). On the outlook, Humble in conjunction with releasing its prel. Q1 numbers also commented on its M&A pipeline, which included ongoing dialogues with c. 25 potential acquisition targets. Additionally, mgmt. says that Q2 has started good with continued sales growth and subsidiaries delivering as expected. Although cost inflation continues posing a threat, mgmt. says it has not yet seen any significant implications from this which we think is reassuring.

Final thoughts
The Humble Group shares is down c. 38% YTD and is on our unrevised estimates trading at EV/EBITA of 14.2x-10.7x in ‘22e-‘23e. Considering that the group already had announced prel. numbers, we ...
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