Administer - Focus on profitability
Administer is seeking an annual profitability improvement of EUR 7m, with profitability in H1 being rather weak. The margin improvement potential supports valuation upside.
Weak profitability in H1
Administer reported H1 results quite on par with our estimates, profitability as expected was weak due to the impact of cost inflation. Net sales grew some 64% to EUR 39.2m (Evli EUR 39.0m), of which some 10% was organic. EBITDA amounted to EUR 1.6m (Evli EUR 1.9m). The H1 report per se contained little new information given the guidance downgrade and announced profitability improvement programme earlier in August. Administer will seek an annual profitability improvement of EUR 7m, estimated to actualize during 2024, and decided to begin change negotiations, which could lead to a reduction of 31 employees at maximum. Strategy work was also initiated.
Notable profitability improvements expected in 2024
The planned profitability improvement is substantial, corresponding to close to 10% of our estimated cost base for 2023e, but details on how it is to be achieved were still limited. We assume potential one-offs relating to the change negotiations to impact H2, and have lower our EBITDA-margin estimate, now 4.8% (prev. 6.3%), closer to the lower end of the guidance. We for now expect a very minor decrease in the overall cost base in 2024, together with an estimated growth of 6.7% bringing our 2024e EBITDA-margin estimate to 11.4%. Focus will be on profitability, but we anticipate continued targeted smaller acquisitions, which would further boost growth potential. Administer in its growth ambitions apart from Finland now also noted the Baltic Sea region, having formerly noted potential of expanding in Sweden.
BUY with a target price of EUR 3.5
Valuation continues to appear attractive, should Administer reach double-digit EBITDA-margins next year, which should the planned savings be reached is well achievable. Uncertainty still remains high given the more recent profitability track. We retain our BUY-rating and target price of EUR 3.5.
Administer reported H1 results quite on par with our estimates, profitability as expected was weak due to the impact of cost inflation. Net sales grew some 64% to EUR 39.2m (Evli EUR 39.0m), of which some 10% was organic. EBITDA amounted to EUR 1.6m (Evli EUR 1.9m). The H1 report per se contained little new information given the guidance downgrade and announced profitability improvement programme earlier in August. Administer will seek an annual profitability improvement of EUR 7m, estimated to actualize during 2024, and decided to begin change negotiations, which could lead to a reduction of 31 employees at maximum. Strategy work was also initiated.
Notable profitability improvements expected in 2024
The planned profitability improvement is substantial, corresponding to close to 10% of our estimated cost base for 2023e, but details on how it is to be achieved were still limited. We assume potential one-offs relating to the change negotiations to impact H2, and have lower our EBITDA-margin estimate, now 4.8% (prev. 6.3%), closer to the lower end of the guidance. We for now expect a very minor decrease in the overall cost base in 2024, together with an estimated growth of 6.7% bringing our 2024e EBITDA-margin estimate to 11.4%. Focus will be on profitability, but we anticipate continued targeted smaller acquisitions, which would further boost growth potential. Administer in its growth ambitions apart from Finland now also noted the Baltic Sea region, having formerly noted potential of expanding in Sweden.
BUY with a target price of EUR 3.5
Valuation continues to appear attractive, should Administer reach double-digit EBITDA-margins next year, which should the planned savings be reached is well achievable. Uncertainty still remains high given the more recent profitability track. We retain our BUY-rating and target price of EUR 3.5.