• Mixed demand between US (better) and Europe (weaker)
• Recruitment market has improved, and could lead to growth
• EBITA cut 3-6% on the Q1 miss, but FY guidance kept

Muted market set to wake up relatively soon

The global consulting market has been under pressure for some time, due to uncertainties regarding a potential recession. Clients have been somewhat hesitant to start new projects, but we are seeing better signs in the North American market, which grew an estimated 1% organically in Q1 after a tougher 2023 (-5% organic growth). We expect BTS as a group to grow 6% organically in 2024e, mainly from strength in North America and Other markets, while Europe is likely to be a drag (-4% organic growth in Q1). BTS' strength historically has been to never waste a crisis, and we would therefore find it supportive for its longer-term prospects if BTS took the opportunity to recruit people in this somewhat cooler labour market, as well as a short-term sign that demand is holding up. In Q1, however, the number of employees was down 1% vs Q4 and 7% y-o-y, which somewhat limits the near-term growth potential although there should be available capacity at current margins.

Estimates cut 3-6%

We reduce our estimates somewhat, mainly on the back of the weaker North American market than we expected in Q1, both in terms of sales and margins, although it performed better than Europe. All in all, we cut group EBITA by 3-6% in 2024e-26e. We estimate adj. EBITA growth of 10% in 2024e, which we find aligns relatively well with BTS' reiterated FY guidance.

Long growth runway at 16.0x EV/EBITA

On our revised estimates, the share is trading at 16.0x EV/EBITA 2024e and 13.2x 2025e, which compares to the last 5-year average of 17.2x. BTS has a 20-year history of growing EBITA and DPS by 15-20% annually, which we find it likely to deliver again long-term given its small global market share (~1%) but strong niche position.