Continued good performance in recently acquired units while performance was slightly softer on an organic basis. Sales grew +2% y-o-y to SEK 1,656m (-1% vs. ABGSCe/FactSet cons) and -6% organically (ABGSCe/cons -4%, 0% Q3'23), with Sweden seeing fairly stable demand (-2% org.) while Norway (-9%) and Finland/Rest of EU (-15%) declined more than expected. EBITA adj. for acquisition-related items declined 6% y-o-y to SEK 165m (+1% vs. ABGSCe/cons), for a margin of 10.0% (ABGSCe/cons 9.7%, 10.8% Q4'22). Corporate cost was also higher vs. ABGSCe, while divisional margins were stronger in Norway and Finland/Rest of EU, and Sweden's margins continued to be held back by losses in certain units. We estimate that organic adj. EBITA was down 24% (ABGSCe -22%) while FCF was lower than in the prior year at ~40% of EBITA (neg. in Q3, ~60m vs. ~130m in Q4'22). According to the CEO, this was due to certain receivables related to snow & ice removal being paid first in January. R12m gearing was stable q-o-q at 2.9x (2.9x), 2.7x excl. earn-outs (2.7x), and was 2.5x pro forma (2.5x). According to management, more than half of existing companies grew sales and EBITA. Demand was stable within ground maintenance and snow & ice removal, but weaker in landscaping and construction due to a muted housing market and increased competition.
Estimate revisions
We expect consensus to lower 2024e adj. EBITA by 2-4%, due to the slightly higher organic decline in sales and margin pressure within Sweden, partly offset by the continued strong performance in Finland/Rest of EU.
Final thoughts
Impressive M&A performance outside of Sweden but the market, and company, challenges in Sweden will likely be in focus. The share has underperformed the market L1M (-3% vs. OMXSGI +2%) and is trading at 10-9x EBITA '24e-'25e (9-10% FCF yields). We would expect a slightly negative initial reaction on the day. There is a conference call at 09:00 CET, link: https://ir.financialhearings.com/green-landscaping-group-q4-report-2023.
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