Administer - Weaker finish to challenging year

Lowered net sales and profitability guidance
Administer issued a profit warning on December 19th, lowering both its net sales and EBITDA-% guidance. The company now expects 2023 revenue of EUR 75-77m (prev. 76-81m) and an EBITDA-% of 3-5% (prev. 4-8%). The main component of the downgrade appears to be a lower than anticipated net sales in the staffing services business, which has been affected by the weakened economic situation in Finland. Profitability has further been affected by onetime costs relating to Administer’s profitability programme and writeoff of certain software development costs in Adner. 

Estimates lowered on more challenging growth outlook
We have revised our 2023 net sales and EBITDA-% estimates to EUR 76.3m (EUR 80.4m) and 3.5% (4.8%) respectively. With the macroeconomic headwinds we have also lowered our corresponding estimates for 2024 to EUR 80.4m (85.8m) and 7.9% (11.4%). A small positive in the profit warning is the implied cost structure, which compared with our former estimates is already showing signs of easing. Administer has through its cost savings programme already taken measures, but the results are to be more visible next year. Despite the headwinds we still continue to anticipate growth through acquisitions, although organic growth is starting to look more challenging. Moving into the final year of its current strategy period, we expect an update in the not too distant future, which should provide more insight into coming year ambitions.  

BUY with a target price of EUR 3.0 (3.5)
With our lowered estimates, we revise our target price to EUR 3.0 (3.5), valuing Administer at ~14x 2024 P/E (excl. goodwill amortization) and ~0.7x EV/Sales. As a turnaround case valuation still seems appealing despite near-term growth challenges starting to pose a threat.