Net negative impact from customers shutting down

Benefits from accelerated shift towards digital solutions

Cuts dividend proposal: 10.2-7.1x EV/EBIT for ‘20e-‘21e

Negative impact at the end of Q1’20 and through Q2’20
Feelgood announced that it has experienced a lower order intake since mid-March, when large customers started to shut down their operations. The effects of the decline are somewhat offset by an increased demand for care services, but the company expects a net negative effect from late in Q1’20 and through the whole of Q2’20. This has led Feelgood to take the following actions: 1) pull back the previous dividend proposal of SEK 0.15/share with potential reconsideration at an EGM this autumn, and 2) consider short-term layoffs of staff. Feelgood is also in discussions with the Swedish crisis organisation for healthcare workers – a solution that could mitigate some of the lower order intake for Q2.

Rapid shift to digital and major contract renewal/expansion
On a positive note, Feelgood has seen a rapid increase in demand for its digital services. Having established a market-leading position in digital solutions, the company is accelerating its digitalisation journey. Approximately 50% of Feelgood’s employees can provide their services digitally today. This number is expected to continue to increase and is likely to be beneficial for profitability. Feelgood also announced a contract renewal and expansion with the City of Stockholm for a minimum of two years, now covering all of its associated organisations with ~40,000 employees (+30-40% from prev. agreement).

Short-term pain, long-term gain?
We believe lower customer activity and layoffs will cause a net negative impact for Feelgood in 2020, and lower our sales and EBIT estimates by 5% and 15% respectively. This leaves sales and EBIT flat, y-o-y. However, we expect stickiness in the accelerated demand for digital solutions, leading to modest negative EBIT revisions of 5% and 2% for ’21e and ’22e. We cut the divid
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