CMD: Solid M&A runway, improved underlying profitability
Increased confidence in >15% growth potential
11-9x EBITA '24e-'26e, 5-10% FCF yields
Informative on the future M&A runway
Green Landscaping held its first CMD yesterday. The event did not include any new financial targets (10% sales growth vs. ABGSCe/cons 7% CAGR '23-'26e, 8% EBITA margin vs. ABGSCe 8.8-9.1%, cons 8.7-9.3% '24e-'26e), where we had hoped for somewhat higher margin ambitions given Green's continued focus on acquiring >10% margin companies in combination with improving profitability in underlying units. We had also hoped for a quantified target on return on capital, considering the group's improving ROCE (13-15%) and cash conversion (FCF ~95% of net profit '19-'24e). Overall, the event was largely informative, where focus was on M&A, and GLG's ambition to become a European leader in 3-5 years. On the German market, GLG continued to see good momentum, even if we assume a normalisation in margins (we have ~14-13% '25e-'26e vs. 23-18% in '23-'24e). In addition, GLG reiterated its ambition of acquiring 8-10 companies p.a., and to accelerate this to >20 per year in the next 2-3 years. Considering management's increased focus on quality, and that multiples remain disciplined, we believe this supports our view that GLG can deliver >15% earnings growth. We currently forecast a 7% EBITA CAGR '23-'26e vs. cons at 9%, excluding unannounced M&A.
Finwire
28 November - 08:06