PION Group - Tighter market conditions in Q4 - ABG

Q4: 4% sales growth y-o-y, but EBITA almost halved
PION Group reported Q4 sales of SEK 532m (512m), up 4% y-o-y (3% organic). That was 6% below ABGSCe: the main deviation stems from Uniflex, which initiated a portfolio review in the quarter where the lowest margin contracts were discontinued, resulting in 4% lower sales y-o-y. QRIOS grew 3% organically in Q4, which was also below our forecast, whereas Poolia increased its sales by an impressive 19% y-o-y and was slightly ahead of ABGSCe. Adj. EBITA of SEK 12.2m (23.3m) was almost halved as all segments struggled to match the profitability from last year. Uniflex saw a negative effect as a consequence of the initiated portfolio review and a weaker overall economy and QRIOS took growth initiatives of SEK 5m in Q4.

Dreamworks added but we expect lower profitability in '23e
We add the Dreamworks acquisitions to our estimates, which we expect to contribute SEK 160m in sales. Despite making negative underlying sales revisions it lifts the total '23e sales by 4.1%. We lower EBIT by 28%, however, as we think both Uniflex and QRIOS will take a few quarters to get back on track in terms of profitability. We previously anticipated Poolia's margins expanding in '23e, but following the report and the slightly tougher market conditions we think that continued profitability improvements will come in '24e.

Road to 5% EBITA margin looks a little longer
The company recently sat ambitious long-term targets: it aims for SEK 2bn in sales for '26 and an EBITA margin of 5%. We continue to believe the most challenging will be to reach SEK 2bn in sales with the risk of a recession in '23-'24. After the Q4 report the margin target looks like it will take a bit longer to reach, but we are cautiously optimistic about PION's ability to get there, especially with Poolia's continued momentum.

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