Swedencare’s Q1 was slightly ahead of our expectations, with sales coming in at SEK 378m, which was 6% ahead of our expectations and 5% above Bloomberg consensus expectations. Adj. EBITDA came in at SEK 95m, which was 8% ahead of our expectations and 16% ahead of consensus. This corresponds to an EBITDA margin of 25%, which is relatively in line with the Q1 margin guidance of >25% from the Q4‘21 report, especially considering the cost inflation that accelerated after the guidance was published. Management guided for further price increases going into Q2 and onwards, which should mean continuous sequential margin improvements coupled with the full inclusion of the high-margin acquisitions Naturvet and Innovet. On the back of the report, which beat our expectations due to higher M&A growth, we leave our underlying estimates relatively unchanged, with FX raising our top line by 4%.
Organic growth to pick up in H2
Swedencare’s report was negatively received by the market. We believe this was driven by the organic growth of 7%, which should be compared to the company’s 2022 target of 20%. On the conf. call, management confirmed that a pro-forma organic growth would have looked relatively similar as the reported number. Looking ahead, we believe one could expect a gradually increasing organic growth figure, with Vetio’s high-volume contracts starting to ramp up from H2‘22.
Comments regarding M&A pace
On the conf. call, management commented on the current M&A situation, stating that one should not expect the historical pace of one acquisition per quarter, simply because mgmt. wants to find M&A that adds incremental value to the portfolio – an increasingly difficult task as the company has become more diversified. Hence, despite a high inbound pace of potential targets, the company continues to be picky. On our updated estimates, the share has ...
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