Administer - Profitability to hold, growth ahead
Administer is set to release its Q4 results on Wednesday, March 5th. We expect modest net sales growth, supported by the Kuntalaskenta acquisition, and stable profitability despite a challenging operating environment.
A year of operational improvements
Administer’s positive profitability shift in 2024 appears sustainable, with three solid quarters and a YTD EBITDA-margin of 8.2%, up 128.8% y/y. This reflects successful operational improvements, and we see a sustainable turnaround taking shape and expect this positive profitability trend to continue in Q4. However, growth has remained constrained in a difficult market environment. While Administer has kept revenue stable across its other brands, personnel services specialist Econia has been a weak spot, with revenue down 10% YTD. According to Employment Industry Finland, the personnel leasing market declined 6% in Q4, suggesting that a significant turnaround in this sector is still some way off. Thus, we expect Econia’s net sales to continue declining, but the Kuntalaskenta acquisition should help lift Q4 sales slightly into positive territory.
Inorganic growth to accelerate in 2025
Looking ahead to 2025, Administer kicked off the year with three smaller, strategic acquisitions in its accounting business, which are now reflected in our updated estimates. With cost-saving efforts largely behind and profitability stabilizing, the focus is now shifting toward accelerating top-line growth, particularly through acquisitions. However, profitability remains the core focus, and future growth initiatives are expected to align with disciplined margin management. We remain conservative on organic growth estimates despite some early signals pointing to a recovery in the Finnish economy, given lingering uncertainties around the timing and strength of a potential market rebound. As for profitability, Administer has successfully defended margins in a declining environment, and if tested in better market conditions, we see potential to narrow the gap toward its 15% EBITDA-margin target set for 2026. Currently, we estimate EBITDA-margin of 9.2% for 2025.
BUY with a target price of EUR 3.0
Administer's sustained profitability improvement and disciplined margin defense in 2024 demonstrate its operational turnaround is taking hold. With a conservative valuation of P/E 10-8x (excl. goodwill amortization) for 2025E-2026E and further upside in profitability, we reiterate our BUY rating and EUR 3.0 TP.