Vestum: A growth journey renewed - ABG

A diversified M&A play on civic infrastructure
1) Rapid growth, 2) deleveraging, 3) >15% growth & >12% margins
9% adj. EBITA CAGR '23-'26e, 8-5x EBITA '24e-'26e, 9-16% FCFy


Ready for phase three

Vestum is a Nordic serial acquirer focused on product (44% of 2023 EBITA) and service companies with exposure to civic infrastructure in the Nordics and the UK. Growth has been strong (119% '21-'23 sales CAGR, of which 11% organic), but macroeconomic headwinds and company-specific challenges have held back underlying earnings (ABGSCe -7% org. EBITA CAGR '21-'23). Following streamlining initiatives (divestment of low-margin units, lower gross debt, repayment of outstanding bonds), rep. ND/EBITDA (ex earn-outs) has declined from 2.9x in Q4'22 to 2.5x in Q4'23 while cash conversion has also gradually improved (~70% of adj. EBITA). We believe this should allow Vestum to return to a combination of organic and acquired (aggregate M&A multiple was ~8x in '21-'23, ~7x excl. earn-outs) earnings growth from H2'24, and lift ROCE from 8% in 2023 to 11-13% by 2025-2026.

Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/vestum/Equity-research/2024/3/vestum---a-growth-journey-renewed/