Opus Group
Opus Group - Lower organic growth on tough comparables (ABG Sundal Collier)
2019-08-21 11:02
Overall a solid report but with a few concerns
Strong Q2 in Europe despite challenging market
Cutting ’19e EPS given current situation in Argentina
EBIT beat on strong margin in Sweden & lower amortisationOpus reported net income of SEK 708m (652), -2.4% vs. ABGSCe. Flat organic growth in the Vehicle Inspection US & Asia segment (ABGSCe at 6%) drove the deviation. Opus experienced tailwinds from higher EaaS volumes as well as more open stations in Pakistan, as both contributed to organic growth in the segment, but tough comps on equipment sales and fairly lower inspection volumes worked in the other direction. Group level EBIT was SEK 84.1m (60m), 4.9% vs. ABGSCe, driven by higher margins than expected in Vehicle Inspection Europe and lower amortisation than anticipated. Opus also announced that it aims to roll out the Equipment as a Service offering in the Philippines during 2020.
Higher cost per inspection in Sweden
Opus is facing a challenging market in Sweden following the new vehicle interval inspection regulations that became effective in May 2018; overall, the market was down by 8% in Q2. Opus volumes were down by 3%, but higher price per inspection compensated partly, and net sales were only down by 1% at SEK 186m (188), 5.2% vs. ABGSCe. Cost savings initiatives performed during the last 12 months to compensate for the weaker markets have had the desired effect with the EBITA margin maintained y-o-y. As the new regulation took place in May 2018, we should have comparable numbers in H2. In the meantime, Opus has increased its income from voluntary (non-statutory) inspection services.
H2 EPS likely weak with Argentine peso on current levels
The macro economic situation in Argentina seems to worsen with the Argentine peso (ARS) in freefall against the USD. At end-Q2, it took 42.5 ARS to equal 1 USD; this spiked to 60 on 14 Aug.; the current rate is 55.7. On current levels, it will have a negative effect on net financials in H2. For ‘19e, we raise our EBIT on lower ex
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