Market headwinds continued in Q4

Firm needs a better market to drive profitability

Div. yield of 7.7% for 2019 and 2020e

Q4: Sales -8% and adj. EBIT -33% vs. ABGSCe
Poolia’s Q4 was not much to cheer about in terms of revenues, which amounted to SEK 393m (vs. SEK 476m in Q4’18), corresponding to a 17% y-o-y decline. The sharp drop in revenues put pressure on profitability, and adj. EBIT amounted to SEK 5.9m (7.3 a year ago), -33% vs. ABGSCe. However, the adj. EBIT margin at 1.5% matched that of Q4’18, which we think is impressively good cost control when losing sales of more than SEK 80m. On a positive note, Germany was ahead of our forecast on both sales and EBIT. In January, we saw another downward forecast revision of the Swedish GDP by SEB; it now expects GDP to grow by 1.1% (1.2%) in 2020, going up to 1.7% in 2021. Poolia proposed a DPS of SEK 0.5, corresponding to a dividend yield of ~7.7%.

Another negative revision; have we seen the worst now?
Given the current performance and the later turnaround of the Swedish economy, we continue to make negative revisions for Poolia, which has been the trend the last year. We adjust our sales estimates by 5.1%-5.7% for ’20e-’21e and reduce our margin assumptions by 0.1pp-0.2pp for the same period. This results in EBIT decreases of 11%-12% for ’20e-’21e. Optimistically, Q4 marked the low point of the current market headwinds. We think that Poolia is running out of cost-cutting initiatives and needs a better market in order to improve profitability further from here. However, there will be some easing from calendar effects as there are fewer holidays occurring on weekdays in 2020 and 2021.

Lease adj. FCF yield of 7.4%-11.8% for ’20e-22e’
The stock has performed rather well over the last three months, outperforming the OMXSTHPI by roughly 6%. It now trades at EV/EBIT of 8.9x for ’20e and has a lease adj. FCF yield of 7.4%, which gives room for continued high dividend yields.

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