Solwers Q4'24 preview: With the profit warning, the overall picture of the result is clear

Translation: Original published in Finnish on 02/25/2025 at 07:38 am EET

Solwers will publish its H2 report on Friday this week at around 9.00 am EEST. Reflecting the profit warning issued in February, the overall picture of the Q4 result is known, and based on it, the quarter was weak in terms of figures. Following the decline in earnings, we expect the company's dividend to decrease from the previous year. The company has not typically provided clear revenue or earnings guidance, and we do not expect them to do so now either.

Acquisitions support growth, but revenue has decreased organically

According to preliminary data issued in Solwers’ profit warning in February, Q4 revenue is 21-22 MEUR. Following Q3’s revenue accrual (16.6 MEUR) and preliminary data, our H2 revenue forecast is 38.2 MEUR. This corresponds to 16% growth from the comparison period. In our forecasts, revenue growth is based on several acquisitions, the largest ones being the Relitor and Wisegate acquisitions. We forecast organic growth to have been -7% for H2, reflecting, in particular, the factors highlighted in the company's profit warning, namely the low number of billable hours and price competition.

Revenue has a hefty leverage on the result

Our H2 EBITA forecast is clearly below the comparison period at 2.1 MEUR. This roughly corresponds to a margin of 5.5%, which has halved from the comparison period. In the profit warning, the company estimated its Q4 EBIT (IFRS) to be around zero, and our Q4 forecast is in line with this. The reported result has been depressed by non-recurring items, such as changes in earnout payments, write-downs of uncertain receivables, and preparations related to the potential transfer to the main list. At the same time, however, we estimate that the decline in billable hours has weakened operational efficiency, as personnel costs, which make up the majority of expenses, do not adjust to the same extent as demand. Reflecting this overall picture of the operating result, we forecast H2 EPS to have fallen to a loss of EUR -0,02 per share. Compared to the previous year, the full-year 2024 earnings have decreased significantly, and in addition, the company's indebtedness has increased. Thus, we expect the company to cut its dividend significantly from last year and pay EUR 0.02 per share as profit distribution.

The outlook should support expectations of a slightly better market in 2025

Solwers has not typically provided numerical guidance, and we do not expect it to do so this year either. In its outlook, the company has typically commented on its companies’ order books and expectations for market development. In 2024, the company expected the business environment to improve towards the end of the year, which was presumably based on, e.g., the expected increase in activity following interest rate cuts. We believe the overall picture remains unchanged in this regard, and the decline in interest rates supports an increase in activity, although expectations have had to be pushed back. Against this backdrop, the outlook should support our forecast anticipating minuscule organic growth (+1.5%) for 2025, although, reflecting the subdued construction activity, we believe price competition is still present. In addition to the growth outlook, we are particularly interested in possible comments related to profitability, as the company's profitability has declined in the past two years and the absolute level in 2024 is quite low. Thus, we will follow with interest any actions taken to strengthen profitability, although profitability development in the company's business is strongly linked to operational efficiency formed through billable hours.