Talenom - Sights remain set on growth

EBIT in Q4 clearly below expectations

Talenom’s Q4 results were below our expectations. Revenue grew 19.8% to EUR 14.9m (Evli 15.1m), while EBIT amounted to EUR 1.5m (Evli 2.6m). Compared with our estimates the difference was largely due to higher than anticipated D&A and introduction of the Incomes Register. D&A expenses increased as depreciation of the latest implementations of the bookkeeping line began in Q4. One-off items were limited although year-end reviews to our understanding also affected the elevated expenses.

Growth investments pressuring margin improvements

Talenom’s expects relative growth in net sales and relative profitability in 2020 to be in line with 2019. We see that margin improvement potential remains possible in 2020 through enhanced operational efficiency in acquired businesses and from the bookkeeping line improvements. More importantly, Talenom is in our view seeking to maintain momentum on growth and targeting geographical expansion and growth in smaller customer segments domestically as well as growth pick-up in Sweden. Talenom also emphasized focus on customer retention and satisfaction. With growth investments expected to increase we now only expect a 0.4pp EBIT-margin improvement and sales growth of 18.9% in 2020.

HOLD (BUY) with a target price of EUR 41 (37.5)

Talenom is in our view continuing on a healthy long-term track. We have lowered our 2020-2021E EBIT estimates by around 10%. With the outlook still remaining solid we raise our target price to EUR 41 (37.5), valuing Talenom at 30x 2020E P/E. With the share price having picked up we downgrade to HOLD (BUY).