Ready for phase three
Vestum is a Nordic serial acquirer focused on product (44% of 2023 EBITA) and service companies with exposure to civic infrastructure in the Nordics and the UK. Growth has been strong (119% '21-'23 sales CAGR, of which 11% organic), but macroeconomic headwinds and company-specific challenges have held back underlying earnings (ABGSCe -7% org. EBITA CAGR '21-'23). Following streamlining initiatives (divestment of low-margin units, lower gross debt, repayment of outstanding bonds), rep. ND/EBITDA (ex earn-outs) has declined from 2.9x in Q4'22 to 2.5x in Q4'23 while cash conversion has also gradually improved (~70% of adj. EBITA). We believe this should allow Vestum to return to a combination of organic and acquired (aggregate M&A multiple was ~8x in '21-'23, ~7x excl. earn-outs) earnings growth from H2'24, and lift ROCE from 8% in 2023 to 11-13% by 2025-2026.
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