Translation: Original published in Finnish on 2/12/2025 at 9:19 am EET.

Sitowise reported a much weaker than expected Q4 report on Wednesday. The company's revenue declined almost in line with expectations, but profitability was well below our expectations due to low utilization rate and challenges in the businesses. The order book continued to decline during the quarter and the company is not expecting any miracles yet for 2025. Due to this and the uncertainty in the market, Sitowise did not provide any guidance for 2025, which we view as negative. As expected, the dividend was zero, but on the positive side, the financial situation remained stable thanks to a stronger cash flow towards the end of the year. Sitowise needs market momentum to get revenue and profitability back on an upward trajectory. However, this is unlikely to happen before 2026-2027.

Revenue in decline due to market challenges

Sitowise's revenue decreased by 8% to 48.8 MEUR in Q4 (Q4'23: 52.8 MEUR), missing our estimate by 1%. This is the sixth consecutive quarter of revenue decline, and the downward trend in revenue has not yet significantly slowed down. Organic revenue was down by 9.4% in the quarter. One of the reasons for the decline in revenue in the quarter was the timing of the Christmas break at an unfavorable time for the employer, but operationally the decline was more due to insufficient order books in the Swedish and Finnish Buildings businesses during the year and weak market conditions. The order book was down 8% year-on-year during the quarter at around 151 MEUR, reflecting the still weaker outlook, especially for the housing market in Finland and Sweden.

Very weak earnings level

Contrary to expectations, Sitowise's adjusted EBITA decreased to 1.2 MEUR in Q4 and the margin decreased to 2.5% (Q4’23: 4.5%). Given the weak comparison period, the quarterly result was dismal and adj. EBITA missed our estimate by 65% (estimate: 3.5 MEUR) and margin by several percent (estimate: 7.0%). The weak profitability and forecast miss were caused by lower utilization rate due to Christmas and the weak situation in the housing market, but also by the project challenges that re-emerged in the quarter. According to the report, project costs have exceeded expectations and execution conditions on certain existing projects have deteriorated, resulting in lower earnings in Buildings and Sweden. Both Buildings and the Swedish business reported a loss for the quarter. On the positive side, Infra and Digital Solutions are performing above target (+12% EBITA).

No guidance was given, indicating a very high level of uncertainty and lack of direction

In addition to the poor result, Sitowise chose not to provide guidance for 2025. According to Sitowise, the timing of the construction market recovery is uncertain, making it impossible to reliably estimate revenue. In terms of outlook, the situation is weak for Buildings and Sweden, but stable for Digital Solutions and Infra. Overall, the first half of 2025 is still expected to be challenging and the expected recovery in the second half now looks even less likely. The lack of guidance is in our view a clear negative and with the result below expectations it raises concerns about Sitowise's direction or lack thereof. We therefore expect a clearly negative market reaction to the result and the guidance.