• Q1 report due Thursday, 25 April at 07:00 CET
• '24e-'26e EBITA up 4-5%; 6% CAGR '23-'26e
• 11-9x EBITA '24e-'26e, 9-10% FCF yields

Favourable weather, but tough markets

We believe that weather effects have been generally favourable during Q1, and should partly offset lower activity in landscaping and construction (45% of sales), fewer working days and tough comparables. We therefore expect a 4% organic sales decline (-4% in Sweden, -4% in Norway, -8% in Finland/Rest of EU), vs. -6% in Q4, before gradually returning to positive growth in Q4 (+2%). The solid M&A activity has continued, most recently with a sizeable acquisition in Germany (we estimate a 3-4% addition to EBITA). We believe this could hold back further M&A activity somewhat in the near term, given the reported (pro forma) gearing of 2.5x by Q4'23, in line with its target. For Q1, we forecast sales of SEK 1,246m, flat y-o-y, and an adj. EBITA of SEK 79m, -9% y-o-y (-22% organically), for a margin of 6.3% (6.9%), due to normalised margins in Norway and a still-challenging market in Sweden. Finally, we expect timing effects of payments to yield strong cash flow (lease adj. FCF >100% of EBITA).

Estimate changes

We raise 2024e-2026e EBITA by 4-6%, mainly due to recent M&A (3-4%) and FX (1%), and forecast 6% adj. EBITA growth (22% 2023) for 2024. Looking further ahead, our 2024-2026 forecasts (excl. new M&A) imply a 6% adj. EBITA CAGR '23-'26e.

German M&A likely to continue, 11-9x EBITA '24e-'26e

We continue to believe that GLG should be in a good position to grow organically over time given its exposure to stable markets and high exposure to public customers (~70%), supported by M&A and a positive margin trajectory (currently at ~9% vs. ~5% '17-'20). For '23-'26e, we expect GLG to deliver growth, margins, ROCE and FCF in line with peers, while the share is currently trading 5-0% below key peers (FG, INSTAL, NORVA) at 11-9x EBITA '24e-'26e and 9-10% FCF yields.