Water and cash flow in focus
Vestum's Water segment (~20% margins vs. ABGSCe ~17%, ~40% EBITA growth y-o-y) and strong group cash flow (~150% of adj. EBITA) were the highlights in Q1 as org. sales slowed from +1% in Q4'23 to -4% (ABGSCe -3%, FactSet cons. +3%) due to slower demand in Services/Infra. This in turn held back earnings (adj. EBITA +4% y-o-y, vs. ABGSCe +19%, cons. +6%, -16% y-o-y vs. restated figures). We expect market activity to remain subdued until H2'24, but we believe solid demand in Water, improving comparables and a gradual market recovery will support 0-3% org. sales in Q3e-Q4e. Alongside improving margins, this should yield 3% adj. EBITA growth FY'24e (-3% vs. restated), which combined with good cash flow means that Vestum is on track towards resuming M&A activity during H2'24, given the YE'24e gearing at 2.4x (2.1x excl. earn-outs).
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