Administer - Turnaround slowed down
Administer’s Q4 note was a slight disappointment. Net sales development was decent thanks to an inorganic boost, but profitability remained weaker as a continuation from Q3.
Net sales solid, profitability on the weaker side
Administer’s Q4 net sales came in slightly below our EUR 19.0m estimate at EUR 18.7m (Q4’23: EUR 18.3m) and the y/y growth was mainly driven by Kuntalaskenta’s consolidation. HR & payroll services provider Silta improved its net sales by 2.7% y/y and was the strongest of the company’s four main brands. Administer’s accounting business’ net sales declined by 1.5%, and software service provider EmCe’s sales remained flat. Personnel services specialist Econia continued to be a concern with an 8.5% net sales drop, as weak overall economic conditions in Finland continued to affect it the most among the group’s brands. Profitability in Q4 fell short of expectations, with EBITDA at EUR 0.9m (4.7% margin) vs. Evli EUR 1.4m. The Q4 operating result also fell short at EUR -1.4m (Q4’23: EUR -0.7m) vs. Evli EUR 0.0m, impacted by goodwill amortization totaling EUR 1.2m (Evli est. EUR 1.0m) and unexpected non-recurring impairment charges of EUR 0.6m related to previous acquisitions in the accounting business and the company’s commercial premises.
Outlook slightly more conservative than expected
Administer anticipates 2025E net sales of EUR 72–78m (2024: EUR 74.7m) and an EBITDA-margin of 7–10% (2024: 7.4%. We view this guidance range as somewhat conservative and broad, reflecting limited visibility. The low end of the range suggests no growth compared to last year, prompting us to lower our estimates to EUR 76.1m for net sales and EUR 6.3m for EBITDA (previously EUR 78.2m and EUR 7.2m). Aligning with its strategy, the company plans to accelerate inorganic growth to close in on its EUR 100m revenue target by 2026. In today’s uncertain economic environment, strategically sound acquisitions will be an important driver of Administer’s growth, as organic growth opportunities appear more limited in the near term. However, careful target selection is key, as poorly executed M&A could strain profitability – an outcome the company must avoid to sustain progress in its turnaround efforts.
BUY with a target price of 2.8 (3.0)
Despite our slightly increased concerns, we continue to see long term potential in Administer and see it as an opportunity at these valuation levels, with a 2025E P/E of ~10x (exc. goodwill amortization). However, we revise our TP to EUR 2.8 to reflect estimate changes and retain our BUY recommendation.