Relais Q4'24 preview: Challenges to financial objective in current fiscal year

Translation: Original published in Finnish on 2/4/2025 at 8:00 pm EET.

Relais will publish its financial statements next week on Thursday at around 9.00 am EET. We expect the company's revenue to have increased, driven by both commendable organic growth and completed acquisitions. We expect profitability to be supported by a slight recovery in gross margin from the lower level of the comparison period. We expect that Relais, as usual, will not provide numerical guidance for 2025

Expectations for organic and inorganic growth…

We expect Relais's Q4'24 revenue to grow slightly more than 7% year-on-year to 86.9 MEUR. We forecast that acquisitions in the Commercial Vehicle Repair and Maintenance business account for about half (4%) of the growth. We also expect organic growth to be weighted towards the Commercial Vehicle Repair and Maintenance activities, where we do not expect the comparison figures to be particularly challenging and where, led by the Raskone service chain, early year signs suggest a continuation of the commendable growth rate. We expect Technical Wholesale and Products to show more moderate growth, reflecting the timing of the lighting sales season. The EUR/SEK exchange rate has remained relatively stable year-on-year, so its impact on the Q4 figures should be limited.

...and strengthening earnings levels

We expect Relais's Q4 EBITA to increase to 9.3 MEUR compared to the same period last year, which corresponds to a higher EBITA margin of 10.7% compared to the same period last year. This was driven by a higher gross margin than in the comparison period, which we estimate to be below what is typical for Relais due to weak demand for vehicle lighting, the competitive situation and a more challenging pricing environment. For the rest of the cost structure, we expect profitability improvement to be limited by mild cost inflation. We expect the reported tax rate for Q4 to have been 0%, which is in line with Relais's tax recognition practice in previous years, where taxes recognized for Q4 have typically been low. After zero taxes and net financial expenses of 2 MEUR in our forecast, we expect adjusted EPS to have settled at 0.45 EUR. Our dividend forecast is EUR 0.45, which corresponds to 39% of our forecast for Relais' full-year adjusted EPS for the financial year 2024.

Good financial year 2024 will be difficult to beat in the short term

Relais is not in the habit of providing numerical guidance, and we believe it is likely that the company will refrain from doing so for the financial year 2025. We forecast Relais's revenue to reach 325 MEUR in 2025, an increase of 2%. Our organic revenue forecast is close to zero, as the exceptionally cold winter in 2024 led to strong organic growth in the group's revenue in Q1, especially in the wholesale and product business, while the winter of 2025 is expected to remain mild. However, we expect the acquisitions already made to keep the group's revenue growing in 2025. We expect mild cost inflation to slightly erode profitability in 2025, resulting in our EBITA-% forecast of 10.3% being slightly lower than at the end of the financial year, and correspondingly our EBITA forecast being 33.3 MEUR.

Relais’s financial objective is to reach pro forma EBITA of 50 MEUR by the end of 2025. This objective includes possible acquisitions during 2025. We expect the company to remain active on the acquisition front, but given our organic growth forecast and the limited acquisition capacity of the company's balance sheet, we do not expect the company to reach its financial target. Furthermore, at the current valuation level of the share, we do not believe that financing significant acquisitions with treasury shares is a value-creating solution for shareholders in general. Therefore, in our view, updating the financial objective rather than aggressively pursuing it in the current year would be a value-enhancing action for shareholders.