Proact: Resetting estimates after profit warning - ABG

IT market weakness hitting Proact
After showing good resilience so far this year, Proact had to profit warn for Q4 amid weakening IT markets and volatile (as usual) system sales, causing a drop in sales and EBITA y-o-y. The systems business has been growing on average at 2% for the last 7 years, while on a quarterly basis, volatility has been between -20 and +25% (five times) to +30-65% (three times), so the volatility in hardware deliveries is nothing new. Prozac has been more resilient than IT services peers during 2024 and IT hardware peers, such as Dustin, Bechtle and Cancom, which have all profit warned or cut guidances in 2024. Proact announced that it expects sales to decrease by 10-15% and EBITA by 20-30% y-o-y, which was materially below us. Proact mentioned that, except for the weak German market, the drop in system sales is temporary, but as the Q1'24 gross margin was particularly strong, we do not expect a significant earnings growth recovery in Q1'25 either.