Sitowise Q1 next Wednesday: No relief yet

Translation: Original comment published in Finnish on 4/30/2024 at 7:20 am EEST.

Sitowise will report its Q1 result on Wednesday 8 May 2024. We expect the first quarter to have been below the comparison period, due to fewer working days, system reforms, weak billing rates and a challenging construction market (Buildings business). We expect both revenue and profit to have declined sharply. We do not expect any change in guidance, but in addition to the result, we will be looking out for comments on the market, which was probably still weak in Q1, especially in the Buildings business.  

Revenue turns into a more pronounced decline

We expect Sitowise's revenue to have declined by 10% in Q1 to 50.3 MEUR (Q1'23: 56.0 MEUR), continuing the downward trend that started last year. We estimate that the decline in order book (Q4: -10% y/y), the weakness in Building’s target market, fewer working days (by 1 working day in Finland and 1.5 in Sweden), and currency fluctuations (EUR/SEK) will weaken revenue. To some extent, the systems introduced at the end of last year (ERP, CRM) may still have had a reducing effect on the invoicing rate, which is reflected negatively in revenue and profitability. By business area, we expect Infra to have outperformed the rest of the group, although its growth also slowed towards the end of last year. Growth in Digital Solutions and the Swedish business had already slowed significantly in previous quarters, and in Sweden even started to decline (albeit due to currency effects).

Low earnings level

We expect profitability to have declined significantly year-on-year, as the above-mentioned reasons weaken billing rates and bring additional costs. We forecast Sitowise's adjusted EBITA to decline to 3.5 MEUR and the margin to deteriorate to 7.0% (Q1'23: 11.8%). Upward pressure on wages also has a negative impact on profitability. The wage increases reflect changes over two years, with the increases of 2023 and 2024 taking effect during the quarter.

No material changes to guidance or market outlook expected

Sitowise expects a slight decrease in revenue in 2024, driven by the Buildings business decline (2023: 211 MEUR). Adjusted EBITA margin (%) is expected to be at or above the 2023 level (2023: 8.1%). We do not expect any change in guidance. In terms of market commentary or outlook, we are watching for signs of recovery, although we still expect H1 to be quiet. In our view, the Buildings market has not improved and the Digital Solutions market has also recently suffered from the weak economic environment and increased competition. On the positive side, the market in Infra and Sweden has become more stable.