|
Norway was worse than fearedGreen Landscaping delivered a soft Q3 with adj. EBITA 4% and 5% below ABGSCe/FactSet consensus. Organic sales were -3% (ABGSCe -2%, cons. -4%, Q2'25 -9%), as competition is still high in Sweden and Norway. Adj. EBITA was flat y-o-y, 5% below cons., as Norway (2.5% margin) focused on volumes rather than margin in its tough market environment. There was also a SEK 21m project write-down in Norway weighing on margins (5.9% adj. EBITA margin). Rest of Europe was strong (22.7%) with Finland and the newly acquired companies as the main drivers. As the soft market remains, we expect -2% org. growth, and declining margins in Q4. However, we expect '26 to be a turning point for Sweden. Cash flow was soft, yielding pro forma gearing of 3.0x. GLG's guidance of acquiring SEK 80m-100m in EBITA '25 remains. This is usually done at a ~10% margin, which could potentially raise '26e-'27e EBITA by 5-35%. M&A to drive earningsWe lower '25e-'27e adj. EBITA by 5-2%, mainly on the low margins in Norway that we think will take some time to rebound if the market gets used to a lower level. We expect '25 to be weak for Green, but beyond that, we think gradually improving margins and M&A should support 15% adj. EBITA growth in '26e (-11% '25e) and a 3% CAGR '24-'27e. We continue to believe that GLG's M&A pipeline has the potential to support earnings growth above 10% p.a. over time (45% CAGR '19-'24). Good markets over timeWe believe GLG is well-placed to grow organically over time and to lift margins given its exposure to steadily growing markets and high exposure to public customers. For '24-'27e, we expect GLG to deliver sales growth, margins and adj. ROCE fairly in line with peers, while the share (11-7x EBITA '25e-'27e, 9-19% FCF yields) is trading slightly below peers on '25e-'27e EBITA. |