StrongPoint: Numbers largely in line - ABG

- Q2: Adj. EBITDA of NOK 1m vs. our NOK -2m
- New targets more achievable with Sainsbury's and Mercadona
- Numbers largely in line, estimates likely unchanged

Q2: Adj. EBITDA of NOK 1m vs ABGSCe NOK -2m
StrongPoint's Q2 was another soft quarter, with sales down -12% y-o-y. The market is still challenging as customers are still postponing and delaying orders. Total revenues came in at NOK 297m (-3% vs ABGSCe NOK 306m). Revenues from Norway were down 6.4% while revenues from Sweden were down 16.5% y-o-y, respectively. COGS came in lower than our estimates on lower product sales, giving a gross margin of 44.6% vs our estimate of 39.5%. EBITDA came in at NOK -9m vs. ABGSCe NOK -12m. Higher personnel expenses is still affecting the company, but StrongPoint has implemented measures to reduce costs. As such, the company booked NOK 10m in restructuring personnel costs, putting adj. EBITDA at NOK 1m vs. ABGSCe NOK -2m. EPS came in at NOK -0.47 vs. ABGSCe NOK -0.44. Cash flow from operations was weaker compared to Q1, at NOK -9.7m vs NOK 15.3m, mainly driven by negative operating result. Net debt came in at NOK 105m vs NOK 77m in Q1.

On outlook: StrongPoint reiterates what has been the main topic the last quarters — the uncertainty in the market persists, and it is cautious about expecting significant improvements short-term.

New targets more achievable with Sainsbury's and Mercadona
StrongPoint targets '25 revenues of NOK 1.5-1.8bn (NOK 2.5bn previously) and an EBITDA margin of 4-6% (13-14% prev.). '23 revenue was NOK 1.35bn so the mid-range target implies growth of ~22%. We argue that the new targets are achievable considering the recently signed Sainsbury's contract and the new CashGuard Connect deal with Spain's largest retailer, Mercadona. Note that revenues from the contracts will be negligible in '24 (gradual ramp-up throughout '25-'28). We estimate that full implementation (Sainsbury's and Mercadona) would translate to NOK 800-1,000m in revenue. CashGuard Connect will be made available to other grocery retailers by the end of '25. StrongPoint estimates that the total market potential for its solution is >EUR 250m in Spain alone.

Numbers largely in line, estimates likely unchanged
Numbers were largely in line with expectations and estimates are likely to remain unchanged.

Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/StrongPoint/Equity-research/2024/7/strongpoint---numbers-largely-in-line/