Embellence Group: New CEO makes his mark immediately - ABG
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Q2 in brief: report in line, good gross margin
Embellence Group's Q2 report is in line overall. Net sales of SEK 193m was +2% vs ABGSCe, in line with Factset cons, corresponding to 1% y-o-y growth (+4% org.). Growth was driven by the Boråstapeter and Artscape segments, which grew 8% and 10% respectively, despite -9pp impact from FX in the latter segment (ABGSCe). The External manufacturing segment, which has grown rapidly in the past 7 quarters (by 107% y-o-y in Q2'24), seems to have stabilised around a new higher level with growth of 8%. Gross margins were 62.2%, +2pp y-o-y. To drive growth, the opex ratio (including tangible depreciation) was also 160bp higher y-o-y, for an EBITA margin expansion of 40bp and EBITA of SEK 26m (+4% y-o-y). The 1% beat vs consensus estimates can be explained by the stronger gross margin.
Outlook: Concrete steps toward e-commerce
In Q1, Embellence Group stated that it saw markets stabilising. In the Q2 report, it said it has confidence for the future. Johan Andersson, the new CEO since a bit more than one quarter, seems to move fast in terms of accelerated efforts in e-commerce. He has recruited Kajsa Hjelm as head of e-commerce (previously Director e-commerce at Gina Tricot) and is replacing Cole & Son's e-commerce platform by Q4'25. A larger share of e-commerce sales would be beneficial for profitability, we believe.
The share is trading at 7.4x '25e EBITA
Using yesterday's closing price and unrevised estimates, Embellence Group is trading at 7.4x-6.5x '25e-'26e EV/EBITA vs a historical trading range of 5-9x NTM. It has worked well L3M with a total return of +8%. The Q2 report alone has limited impact on '25e cons, and we believe the market will focus on the accelerated efforts on e-commerce today.
Embellence Group hosts a conference call with the new CEO and the CFO today at 10:00 CEST, find call-in details here.
Embellence Group's Q2 report is in line overall. Net sales of SEK 193m was +2% vs ABGSCe, in line with Factset cons, corresponding to 1% y-o-y growth (+4% org.). Growth was driven by the Boråstapeter and Artscape segments, which grew 8% and 10% respectively, despite -9pp impact from FX in the latter segment (ABGSCe). The External manufacturing segment, which has grown rapidly in the past 7 quarters (by 107% y-o-y in Q2'24), seems to have stabilised around a new higher level with growth of 8%. Gross margins were 62.2%, +2pp y-o-y. To drive growth, the opex ratio (including tangible depreciation) was also 160bp higher y-o-y, for an EBITA margin expansion of 40bp and EBITA of SEK 26m (+4% y-o-y). The 1% beat vs consensus estimates can be explained by the stronger gross margin.
Outlook: Concrete steps toward e-commerce
In Q1, Embellence Group stated that it saw markets stabilising. In the Q2 report, it said it has confidence for the future. Johan Andersson, the new CEO since a bit more than one quarter, seems to move fast in terms of accelerated efforts in e-commerce. He has recruited Kajsa Hjelm as head of e-commerce (previously Director e-commerce at Gina Tricot) and is replacing Cole & Son's e-commerce platform by Q4'25. A larger share of e-commerce sales would be beneficial for profitability, we believe.
The share is trading at 7.4x '25e EBITA
Using yesterday's closing price and unrevised estimates, Embellence Group is trading at 7.4x-6.5x '25e-'26e EV/EBITA vs a historical trading range of 5-9x NTM. It has worked well L3M with a total return of +8%. The Q2 report alone has limited impact on '25e cons, and we believe the market will focus on the accelerated efforts on e-commerce today.
Embellence Group hosts a conference call with the new CEO and the CFO today at 10:00 CEST, find call-in details here.