Q2 was yet another soft quarter, with revenues down 12% y-o-y to NOK 297m (ABGSCe NOK 306m). The market remains challenging due to order postponements/delays. COGS came in lower than our estimate on lower product sales, giving a GM of 44.6% (ABG 39.5%). Going forward, management expects a GM closer to ~40%. EBITDA was NOK -9m (ABGSCe NOK -12m), but the company booked NOK 10m in restructuring costs due to high personnel expenses. Thus, adj. EBITDA was NOK 1m (ABGSCe NOK -2m). Management reiterated the main topic of the last quarters — that uncertainty in the market persists, and it is cautious about expecting significant short-term improvements.
New targets more achievable with Sainsbury's and Mercadona
StrongPoint targets '25 revenues of NOK 1.5bn-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 800m-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.
Customers remain cautious — look beyond '24e
The recovery is taking longer than we initially expected, as customers remain cautious. We reiterate that '24e will likely be a year when the company lays the foundation for growth for '25e and beyond. Based on its '25 targets, the EPS could increase to NOK 0.48, i.e. a P/E of ~23x.
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