SiteBase is now accretive to group profitability
Q2: Sales up 16% y-o-y, EBIT margin of 9.9% (10.9%)
Eurocon reported Q2 net sales of SEK 86.2m (74.6m), 2% behind ABGSCe. The deviation was driven by a lower net recruitment pace than we expected. According to the company, demand remains strong but difficulties in finding the right talent is holding it back in terms of the number of new assignments being started. Eurocon has not witnessed any weakness in general demand following the war in Ukraine and continues to see a good utilisation rate even after the assignments that ended during H2. EBIT was SEK 8.5m (8.1m) in Q2, corresponding to an EBIT margin of 9.9% (10.9%). It was a bit weaker than our expected 11.5%. The company has had some additional opex for education of the staff and for kick-offs after COVID-19 restrictions were finally lifted, and this affected profitability more than we had estimated.
Lower expected profitability the main change to forecast
As demand continues to be strong, we maintain our positive view on Eurocon’s mid-term sales outlook. One quarter of lower net recruitment could be a result of a slightly higher employee turnover and is not a cause for concern from our perspective. As such, we only make slight adjustments to our sales forecast. We revise our EBIT forecast somewhat higher following the higher opex level in Q2. For ’22-‘24e, we lower EBIT by 2.9%-3.4% and now expect the EBIT margin to decline in both ‘23e and ‘24e. Something that could change our view on the margin development is if SiteBase (~5% of group sales) receives a major order. The product company is off to a good start in ’22, with y-o-y sales growth above 40% for H1. In the meantime, it has also turned to black numbers with an EBIT margin for H1’22 of 18.9% (-13.8%), meaning it is now accretive to group margins.
‘22e P/E of 11x, EV/EBIT of 8.5x and div. yield of 6.8% On our forecast, Eurocon is trading ...
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