Elanders - Strong margin momentum continues
Solid demand drove 4% beat on sales, 55% on EBITA ‘21e EBITA up 5%, ‘22e by 1% 11x ‘21e EV/EBITA on new numbers, 38% peer discount Strong Q4 across the board Elanders reported strong numbers across the board, with relatively strong demand in most customers segments, combined with good cost control. This led to a group EBITA of SEK 256m, which was 55% better than we estimated. Behind the beat was a tremendous performance in Supply Chain Solutions and Print & Packaging, with both segments delivering record adj. EBITA margins of 8.
1% (4. 2%) and 12% (11. 7%), respectively.
What stands out is the strong performance of fashion and lifestyle in Supply Chain Solutions as it managed to grow 26% y-o-y despite significant lockdowns in its main German market. However, the slowdown in retail was offset by solid ecommerce activity, which we had previously underestimated its exposure to. Lease adj.
free cash flow was strong, driven by further improvements in working capital (now 2. 8% of R12m sales, down from c. 10% historically), which further reduced leverage (R12m ND/EBITDA was 2x, down from 2.
7x in Q4’19). Should reach goal of c. 7% EBITA margins in ‘23e We lift our ‘21e EBITA by 5% to reflect the more rapid trajectory towards its 7% EBITA margin target and raise ‘22e EBITA by 1%.
The margin expansion we have seen this year is a mix of low hanging fruit in terms of costs being plucked, while also benefitting from a positive mix, for example, when healthcare sourcing was booming in Q2/Q3’20. We forecast that the cost reductions are here to stay and should with recovering ‘normal’ volumes result in an EBITA margin of 6. 4% for ‘21e.
Furthermore, we expect the continued work on improving margins for LGI, plus the increased efficiency for subscription boxes, to result in EBITA margins of 6. 9% in ‘23e. 11x EV/EBITA on a 12% EBITA CAGR for ’20-’23e Cash generation has been tremendous this year and concerns over its previously high leverage are gone now, with the lease adj.
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