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Avensia: 2020 net recruitment starts to pay off in 2021 - ABG

Strong sales beat driven by better-than-expected utilisation
While we have previously expected Avensia to gradually return to historical growth metrics due to its rapid net recruitment rate in 2020 and improved utilisation, we did not expect a rapid recovery to prevail already in Q2. Sales were SEK 97m, up 27% y-o-y, and 10% above ABGSCe at SEK 88m. The improved sales led to EBIT of SEK 5.6m for a margin of 5.8% (vs. 0.2% in Q2’20), which was well above our forecast of SEK 0.1m. As capitalised costs totalled a mere SEK 0.3m in Q2 (vs. SEK 1.8m in Q2’20), this was even more impressive. Avensia says that it has recently seen higher personnel turnover, which is why its headcount was flat q-o-q (ABGSCe +7). This statement aligns well with what other industry participants are saying, and we expect the negative impact to continue in Q3 but to improve in the subsequent period.

We raise our sales and EBIT estimates after the report
We increase our ’21-’23 sales estimates by 2-5% after the report, which reflect higher utilisation assumptions. In terms of headcount growth, we reduce our ’21 estimate to 32 from 40, but raise the corresponding 2022 estimate to 50 (previously 40). We also reduce our estimates for capitalised development costs. Ultimately, this drives the 4-6% increase in our ’21-’23 EBIT estimates.

Rapid net recruitment rate in 2020 is starting to yield results
We continue to think that Avensia is well-positioned in the rapidly growing e-commerce market. The firm has recently signed several new customers, and we expect more of this ahead as the investment-willingness of companies continues to recover as the pandemic slows in some areas. With its rapid net recruitment rate of +27% y-o-y in 2020 (which hurt utilisation and thus led to negative financials that year), Avensia looks set to meet this pent-up demand. We now forecast ’19-‘23e sales and EBIT CAGRs of 15% and 17%, respectively. The share is trading at 12x ‘22e EV/EBIT, which is about 33% below its historical forward 12-month EV/EBIT of 18x.
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