Ework Group: Rougher water – ABG

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• Market saw a further sequential slowdown in Q2
• We cut ’23e-’25e sales 9-3% on the weaker outlook
• We now expect 8% growth ’23e – 13x ’23e EV/EBIT

Significant slowdown in volume growth
As suggested by leading indicators (e.g. Konjunkturinstitutet) and comments in the Q1 reports, the Nordic IT services market saw continued sequential weakness in Q2. Several of its peers Ework’s peers, including Knowit, B3, Prevas, and AFRY, have reported lower y-o-y margins in Q2, while Ework delivered a flat EBIT margin on the back of easy comps. Sales grew 11% y-o-y, of which 5% stemmed from higher prices (prices on new contracts grew 3% y-o-y vs. 5% in Q1), and 4% from increased volumes (vs. 16% in Q1). The gross margin came in slightly below our expectations, mainly explained by an unfavourable sales mix due to a higher share of framework agreements. While we expect a similar sales mix ahead, improved traction for add-on services (e.g. PayExpress) should be supportive. Opex grew 13% y-o-y (vs. 25% in Q1), and we forecast further deceleration in the coming quarters due to the weaker market.

https://cr.abgsc.com/contentassets/67462323070b467ba0466803da8d6410/pdf/rougher-water.pdf

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