Empir Group - The transformation continues

Disposal of Advoco and Frontnode Revisions stem from the Apply segment Net cash position of over SEK 60m at the end of Q1 Q1: adj. EBIT -2. 8m (-0. 2m), admin costs burden the Group Empir reported Q1 net sales of SEK 38.

5m (41. 8m), excl. the divestment of Advoco Communications and Frontnode to Infracom as of 31 March.

Our forecast assumed that those businesses would be excluded from Q2, which makes comparison on a Group level irrelevant. On a business segment level, Solve (Frontwalker) came in 3% better than ABGSCe on sales. EBIT was lower than we forecast, however, due to lower margins.

The Apply segment, excl Advoco and Frontnode, reported Q1 net sales of SEK 7. 8m (7. 8m) and EBIT of SEK -1.

7m (-2. 9m), which were both slightly behind our forecast. Following the disposal to Infracom, Empir ended Q1 with cash and cash equivalents of SEK 67.

4m. In addition, it has SEK 27m in an outstanding claim towards Xavitech. Portify ramp up is taking longer than we expected We reduce our sales estimates following the Q1 report, and we now anticipate a slightly longer road towards profitability in Apply.

The ’21e estimate revisions look larger than they actually because as our previous forecast assumed that Q1 would include Advoco and Frontnode. Overall, we see Solve as a profitable segment: we forecast ’22e sales of SEK 139m with EBIT of SEK 8. 9m.

For Apply we forecast ’22e sales of SEK 40m and EBIT of SEK 2m. The problem, however, is that admin. costs of around SEK 10m-11m are weighing slightly on the Group.

In conjunction with NCI (51% ownership of Solve), this results in negative EPS for ’22e. Looking for M&A to bolster the Group Empir mentioned in its report that it would like to use the cash on hand to make acquisitions, and is looking for companies that can either strengthen the Apply segment or add a third segment to the Group. We think this makes sense as Empir needs to increase the size of the Group in order to better distribute the admin costs.