Q4 above ABGSCe on both sales and margins

Positive revisions as a result, EPS up 6% for ‘21e

P/E 7.7x with 8.4% div. yield on revised ‘21e

Strong end to the year, especially for MC business
Capacent Holding reported Q4 net sales of SEK 53.8m (72.4m); adjusted for the discontinued operations in Iceland, this was a y-o-y increase of 0.5% and 10% above ABGSCe. EBIT was SEK 8.6m (5.4m), corresponding to an EBIT margin of 16% (7.4%) and 35% above ABGSCe. The deviation from our estimates was mainly from Finland, which saw a sharp turnaround q-o-q, and sales grew y-o-y to SEK 9.6m (8.0m) with an impressive EBIT margin of 28.9%, which benefited from new customer agreements . Sweden was also above our forecast but not to the same extent. We note a second consecutive quarter after the restructuring with improved EBIT margins for the management consulting business in Sweden, which we see as further confirmation that profitability is now on a new level in that business area. We also saw a positive EBIT contribution from Capacify and Capasearch despite challenging markets.

Raised profitability for Capacify on the cards
Overall, we think Q4 was another step in the right direction following the restructuring in Q2. We do not think the result in Finland should be extrapolated because of how the business is set up with revenue share projects; however, it shows again what Capacent is able to do in that region over time. Furthermore, the software platform business in Capacify is now a separate business, called Commended. On 26 February, Commended secured external financing for a pre-money valuation of SEK 20m, and Capacent owns 44.6% after the transaction. The change within Capacify should improve the profitability in the segment in 2021.

The new organisation has potential to lift margins more
We saw many positives in the Q4 report and raise our EPS estimates by 6.4% for ‘21e. We believe Capacent is in a good position to grow profitably in the coming years.

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