Dedicare
Dedicare - Growth returns in a (still) difficult environment (ABG Sundal Collier)
2018-07-19 11:09
Personnel increase q-o-q is back, 7.9%
No new staffing procurement (yet) from SLL
EPS to rebound strongly 2019
Good numbers but worrisome newsDedicare’s Q2 numbers were 5% better on sales and 15% above our EBIT estimates. Group growth amounted to 4% y-o-y, while we expected flat growth. Number of total Dedicare personnel increased by 5.6% (48.5) y-o-y to 682 (646), supporting growth going forward; however, no customer contracts were re-negotiated. Management again repeats tough market conditions with increased competition leading to margin pressure. In addition, the Swedish court has ruled that VAT is to be added to healthcare staffing services (only affects private companies in Sweden) and Norway has decided as of 1 January 2019 to modify the employment law, limiting temporary employment – worst case meaning that companies are forced to find permanent contracts for all staff.
Expectations of new contracts moved to Q4
Previously in our current-year calculations, we anticipated contract re-negotiations to drive growth in H2 2017. This seems to be postponed and we have moved the positive effect from this to Q4 2018, in summary resulting in lowered estimates for this year, but higher for the next. The news of VAT does not change our view as Dedicare only has 20% of sales to private actors, and the effects from the employment law change in Norway is too uncertain for now. Our margin scenario is that price changes of contracts will aid higher profitability next year, which again will be depressed in 2020 by higher wage costs driven by the scarcity of healthcare workers.
Poor long-term visibility remains
For the reasons above we lower EBIT 2018e by 5% while increasing it 3% in 2019e. EPS is currently expected by us to contract -36% this year and to rebound by +29% in 2019, and an additional +5% in 2020. Our estimates still remain uncertain because of the sharp margin decline which began last year and fierce market competition. As a reference, Dedicare’s largest market (SKL)
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