Avensia - Well-placed to achieve improved sales
Solid Q1, adj. EBIT margin of 11. 0% (9. 2% in Q1’20) Small underlying estimate upgrades 18x, 13x and 10x adj.
EV/EBIT for ‘21e, ‘22e and ‘23e Sales +4% y-o-y, adj. EBIT +25% y-o-y After two consecutive quarters with disappointments, Avensia started 2021 with a solid report. Sales were SEK 91m (+4% y-o-y) vs.
ABGSCe of SEK 90m, while adj. EBIT was SEK 10. 3m (ABGSCe of SEK 6.
9m) for a margin of 11. 0%. The latter grew 25% y-o-y (albeit against easy comps) and was adjusted for CEO renumeration costs of SEK 3m and a write-down of SEK 6m (related to its Storefront Modern Pay product).
The headcount grew by 13 q-o-q (ABGSCe +5), meaning that Avensia has continued to be active in terms of net recruitment. We had expected a slowdown for its net recruitment given the high pace in 2020, but we view the Q1 increase as positive as it reflects our assessment that demand will continue to recover. We raise adj.
EBIT for ’21e & ‘22e by 6% and 3% We raise ’21-‘23e sales and adj. EBIT 1-0% and 6-3%, respectively, due to the Q1 beat and the higher-than-expected net recruitment rate. Our 2021e EPS is cut by 34% due to the non-recurring items.
Preparing for growth with increase in net recruitment After a period of muted utilisation due to 1) a high net recruitment rate (headcount +25% y-o-y), 2) several internal training programmes, primarily for new employees; and 3) subdued demand amid COVID-19, we believe that Avensia is set to return to high organic growth. We forecast ’21 sales of SEK 371m, corresponding to 17% growth y-o-y. In turn, we expect this to trickle down to an adj.
EBIT margin of 7. 2% (vs. 3.
9% in ’20). Due to the uncertain times, we believe that personnel turnover was low for Avensia in 2020 as well as for other IT services firms. We expect these rates to increase in 2021 as societies open.
On the flipside, increased movements on the market also offers opportunities for firms that are active in terms of recruitment. Ultimately, this should be slightly net po.
