Bedded for profit growth – Carnegie

• Multi-year profitability slump during 2019–2022
• Clear turnaround in 2023 and continued tailwind
• Strong first quarter driven by Finland
• The management indicates a turnaround in Scandinavia from the second quarter
• New target of profit per share above SEK 5.50 in 2026
• Strong cash flows and continued very low valuation
• New repurchase program of SEK 110 million announced
• Can theoretically buy back 25-30 percent of the shares in 2024-2026
• We recommend BUY with target price SEK 65

The care company Attendo, with operations in areas such as elderly care, home care and LSS, has gained steam on the stock exchange of late. Since the bottom in autumn 2022, Attendo’s share price has doubled, but calculated from the peak levels in 2017, the stock is still down around 60 percent. The upturn at the end comes after a multi-year slump in 2019–2022.

At first, Attendo was burdened by a much too rapid expansion rate, especially in Finland. Combine that with bad publicity in Finland and the occupancy rate was too low. The pandemic then followed with a subsequent acceleration of inflation which meant high cost pressure. The result was that Attendo’s operating margin went from 7–8 percent in 2017–2018 to around 1–4 percent in 2019–2022. Last year, the trend reversed, driven by significantly improved profitability in Finland – mainly related to large price increases. And that tailwind persists into 2024.

Attendo’s first quarter was stronger than we expected. The lease-adjusted EBITA result increased strongly year-on-year to SEK 161 million (116), which was 5 percent above our forecast. As in recent quarters, profit growth was driven by the Finnish operations in the wake of last year’s large price increases. At the same time, the Scandinavian operations continued to show a negative profit trend.

The report does not cause any major changes in our profit estimate for the group. Slightly lowered forecasts for Scandinavia are offset by increased forecasts for Finland and a new repurchase program of 110 million. Turning around the loss-laden Danish business has taken longer than expected, but the management speaks of an improvement in Scandinavia already in the second quarter. At the same time, the recently announced acquisition of Team Olivia contributes approximately 100 million to the operating profit in business area Scandinavia this year.

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In connection with the report, Attendo presented a new goal that the profit per share in 2026 should exceed SEK 5.50, which is in line with our forecasts. According to Attendo’s management, the goal is to be reached via EBITA growth of over 10 percent per year as well as further acquisitions and buybacks of shares. Our view is that the target can probably be reached without new acquisitions and buybacks, which means the potential for increased profit forecasts going forward.

Attendo’s new debt target was lowered to a net debt/lease-adjusted EBITDA of 1.5-2.5x compared to previously under 3.75x. Our forecast is that by the end of 2026, Attendo will be down to a debt ratio of 0.6x, which theoretically makes it possible for the company to buy back a full 25-30 percent of the shares during 2024-2026.

We attribute the negative reaction to the report to the share’s strong development ahead of the report, which is why the rebound should be seen as a good buying position. The valuation is very attractive with a lease-adjusted EV/EBITA multiple of 8x and a free cash flow yield of 11 percent for the current year. At the same time, the adjusted P/E figure for 2024 is no higher than 10.5x – far from the levels around P/E 15–20x we saw before the company’s profitability slump.

We recommend BUY with target price SEK 65.

Above, Carnegie Private Banking presents a summary of one of Carnegie Securities’ investment recommendations. The recommendation was distributed to Carnegie Securities’ clients for the first time on April 25 at 07:03.

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