Dovre’s Q3 EBIT topped our estimate as Project Personnel drove results. We see only moderate earnings growth prospects in the short term, yet valuation is undemanding.
Project Personnel helped EBIT amid high comparison figures
Dovre’s Q3 revenue fell 11.6% y/y to EUR 52.8m, close to our EUR 53.5m estimate. Top line would have been some 5% better than that at fixed FX rates as weak NOK had an impact. Renewable Energy was expected to decline relative to a more favorable comparison period, but its 38% y/y fall was clearly steeper than we estimated. The segment’s EBIT, however, was a bit better than expected. Consulting figures didn’t meet our estimates, but their softness was more than compensated by Project Personnel; the segment’s 6% EBIT margin helped drive Dovre’s EUR 2.7m EBIT above our EUR 2.2m estimate.
We estimate annual EBIT to pick up from around EUR 7m
In our opinion Project Personnel will not find annual 4% EBIT margin too high a hurdle, and hence we view EUR 4.5m EBIT a reasonable level for next year, assuming moderate growth. The segment could even land near EUR 5m annual EBIT, while Consulting’s annual rate appears to be roughly EUR 2m for now. In our view Consulting’s longer-term potential remains closer to EUR 3m should growth and margins pick up again. Renewable Energy still has most long-term upside, but a more challenging Finnish wind power construction market limits its potential for now. Both Consulting and Renewable Energy continue to face high comparison figures also for Q4, and neither were those of Project Personnel soft. We thus believe Dovre’s Q4 EBIT will weaken by some EUR 1m y/y. For next year we expect some reversion as Consulting and Renewable Energy will have room to improve, whereas Project Personnel may remain a bit soft or flat.
Short-term earnings growth modest, yet valuation is low
We estimate FY ’24 EBIT at EUR 7.3m, which would be only a marginal improvement on our FY ’23 estimate of EUR 7.1m. In our view Dovre still has potential to reach above 4% EBIT margin in the long-term as Consulting and Renewable Energy return to growth. Meanwhile valuation implies very modest expectations; Dovre is valued only some 6x EV/EBIT (excl. 49% of Renewable Energy EBIT) and peer multiples have also declined recently. We revise our TP to EUR 0.65 (0.80) and retain BUY rating.
Dovre’s Q3 revenue was close to our estimate as Project Personnel landed significantly higher while Consulting and Renewable Energy were soft. Meanwhile earnings came in clearly above our estimates, driven by Project Personnel’s performance.
Dovre’s Q2 results landed near our estimates. Renewable Energy drags EBIT this year, but demand remains in place and all segments still have room to improve going forward.
Renewable Energy Q2 EBIT proved better than we estimated
Dovre’s Q2 top line developments were twofold: on the one hand Project Personnel continued to grow at a strong rate of 15.7% y/y, driven by demand in Canada, while Consulting saw a slower quarter after strong Q1 (Q2 revenue was down by 13.5% y/y as new Norwegian legislation on temporary hiring affects the public sector market of Consulting more than it does the energy sector of Project Personnel). Renewable Energy revenue declined much as expected, however its EUR 0.5m EBIT was a positive surprise as it improved a bit y/y. Project Personnel’s strong performance pushed Dovre’s EUR 47.3m revenue above our EUR 44.4m estimate, whereas Renewable Energy’s bottom line performance helped the EUR 1.5m EBIT slightly above our EUR 1.4m estimate.
Renewable Energy is likely to drive growth next year
Project Personnel has grown at a CAGR of 18% after FY ’20; the comparison figures are high, but we continue to expect further incremental growth in H2. We see Consulting top line flat or slightly down for the year after double-digit growth in recent years, whereas Renewable Energy should again see growth next year as new Finnish electricity transmission capacity opens construction bottlenecks. We estimate Project Personnel EBIT to develop flat this year and next but note there should be more potential towards an EBIT margin of 5%. We estimate Consulting EBIT down EUR 0.3m this year; the legislation on temporary hiring limits potential, and we have been expecting more moderate growth for the segment compared to the other two.
Earnings multiples remain undemanding
In our view Dovre is likely to land near the upper end of its revenue guidance range, while we note Q3 is important for EBIT due to the seasonality of Renewable Energy. Our group-level estimate revisions remain small while peer multiples have gained recently; Consulting peer multiples are rather high at around 16x EV/EBIT, but we have also revised down our estimates for the segment. Dovre is valued only 7x EV/EBIT on our FY ’23 estimates (excl. 49% of Suvic EBIT), while most peers trade well above 10x. Our new TP is EUR 0.80 (0.77); we retain BUY rating.
Dovre’s Q2 figures came in a bit better than we had estimated as Project Personnel continued to grow at a 16% y/y rate while the profitability of Renewable Energy remained better than we expected.
Dovre revised guidance down due to larger-than-expected challenges in the Finnish wind power construction market.
We cut our FY ’23 EBIT estimate by EUR 1.4m
Dovre downgraded guidance due to headwinds already to some extent visible in the Q1 report but which have since proved more pronounced. Dovre previously expected FY ‘23 top line to improve and EBIT to stay about the same compared to FY ’22, however the new guidance hints revenue to decline by a roughly mid-single digit rate while EBIT may be down by more than EUR 1m. We revise our FY ’23 revenue estimate down by 8% to EUR 190.8m and estimate EBIT at EUR 7.3m (prev. EUR 8.7m). We make only marginal revisions for Project Personnel and Consulting; we cut our FY ’23 revenue estimate for Renewable Energy by 16%, now estimating the segmental EBIT at EUR 1.5m (prev. EUR 2.8m). Our estimates for the coming years are likewise down for Renewable Energy (we trim some EUR 1m in terms of EBIT) but remain intact for Project Personnel and Consulting.
Strong resilient Norwegian results
No softness was to be seen in the performance of Project Personnel and Consulting last year and Q1 showed high growth even in EUR terms despite weak NOK; we expect the Norwegian businesses’ performance to translate to flattish or slightly positive y/y development. Suvic’s long-term demand drivers remain intact as countries like Finland are still far from done building up their wind power capacity, however the lack of transmission capacity may in places limit demand in the short-term. In our view such challenges should be relatively easy to solve in countries like Finland (compared to e.g. the US where there are many other complicating factors besides long distances). We hence believe Renewable Energy is likely to grow again next year; our respective EUR 84m top line and 3% EBIT margin estimates are more likely to be on the conservative side.
Finnish wind power market to add earnings again next year
We expect Renewable Energy EBIT to improve again to EUR 2.5m next year, which would help Dovre EBIT to EUR 8.2m. Dovre is valued no more than 7x EV/EBIT on our FY ’23 estimates (excl. 49% of Suvic), an undemanding level considering the resilient Norwegian performance and temporary softness in Finland. Our new TP is EUR 0.77 (0.82); we retain BUY rating.
Dovre’s Norwegian operations drove Q1 EBIT above our estimate even when there was an FX headwind and Renewable Energy missed our estimates.
EBIT was encouraging despite a few top line headwinds
Dovre’s Q1 revenue declined 4% y/y to EUR 45.8m vs our EUR 48.3m estimate. Top line for both Project Personnel and Consulting came in clearly above our estimates, whereas Renewable Energy missed our estimate by more than EUR 6m. EBIT was in line with these trends as the two Norwegian focused businesses topped our estimates even despite the fact that controlling for FX changes, especially weak NOK, top line would have actually gained 5%. Any softness in the results was thus due to Renewable Energy, where seasonality remains and the fact that the Finnish wind market has been taking a breather after a busy year as e.g. transfer capacity is now a bottleneck.
Business in Norway continues to perform well
Dovre and Suvic are expanding to solar power, Suvic in its capacity as a specialty construction company whereas Dovre has established a project development company called Renetec, which may also expand beyond solar. We make only small estimate revisions after the report; we estimate very decent 5-6% growth for Project Personnel and Consulting (in EUR terms) and some profitability improvement in absolute terms, a slight revision on our previous estimates as new Norwegian legislation on temporary hiring hasn’t proved any major challenge. We make some downward revisions to our Renewable Energy estimates and now expect flat margin development for the year.
EV/EBIT of around 7x not a very challenging multiple
In our view it wouldn’t seem too hard for Dovre to end up improving at least a bit this year in terms of EBIT. Profitability should hold up well especially within Project Personnel and Consulting, and Renewable Energy has a lot more long-term potential even if this year’s margins may remain somewhat low. There have been no big changes in peer multiples over the past few months, and while our group level estimates have remained basically unchanged the relatively strong report increased our confidence in the profitability path’s sustainability. Our updated SOTP valuation indicates value of roughly EUR 0.85 per share. We update our TP to EUR 0.82 (0.80) and retain our BUY rating.
Dovre’s Q1 profitability came in above our estimates despite some softness in top line attributable to Renewable Energy. Project Personnel and Consulting performed a bit better than we estimated, and new Norwegian legislation on temporary work seems to be having only limited effects on business.
Dovre disclosed Q4 figures before the report and thus there were no big surprises. We make some downward revisions to our estimates yet note guidance appears conservative.
No surprises in Q4; FY ’22 growth not to be repeated
Dovre continued to grow at a 14% y/y rate in Q4 and reached EUR 48m in top line vs our EUR 45m estimate. There were no big surprises as Consulting and Renewable Energy both grew by double digits whereas Project Personnel remained flat. An FPSO project in Singapore delivered to Equinor no longer contributed, but otherwise growth continued in Norway, Finland, and North America. Dovre disclosed preliminary Q4 figures before the report and the EUR 2.1m EBIT was in line with our estimate. Last year’s growth is not to be repeated but many Norwegian clients have extended their agreements while Consulting Finland has performed as expected after the eSite industrial VR acquisition. The Finnish wind power market helped Suvic grow 87% last year; growth is likely to be very modest this year relatively speaking however we still estimate a high single-digit figure.
EBIT should hold up at least flat in the short-term
The summer period is important for Renewable Energy and negotiations are still going on. Norway introduces new legislation in Q2 which regulates temporary staffing in various contexts, and it may also affect white collar work. Project Personnel and Consulting are coordinating with clients to make sure they comply. We make small revisions to our revenue estimates and see group growth at just above 3% this year. We revise our EBIT estimate for FY ’23 down to EUR 8.6m (prev. EUR 10.0m); we revise both Project Personnel and Consulting down by EUR 0.2m and Renewable Energy by EUR 1.0m. In our view Dovre’s guidance doesn’t seem demanding and our estimates are conservative. The worst inflationary period has likely passed and wasn’t such a big issue for Dovre, but the lingering level may still limit margin expansion now that growth is much more modest.
There remains earnings growth potential beyond this year
Dovre still trades only 7x EV/EBIT on our FY ’23 estimates while peer multiples, for all three segments, have gained significantly in the past few months. Our SOTP valuation indicates current fair value to be slightly north of EUR 0.80 per share. We thus update our TP to EUR 0.80 (0.75) and retain our BUY rating.
Dovre announced preliminary Q4 figures already on Feb 3, and therefore the Q4 report didn’t hold many surprises. Growth continued in all segments, especially in Consulting and Renewable Energy. EBIT should stay relatively high this year, but there are a few uncertain factors which may limit earnings growth.
Dovre posted Q3 results above our estimates; in our view earnings growth should continue next year, while valuation still leaves enough upside potential.
Especially high growth in Norway during Q3
Q3 revenue grew to EUR 59.7m, above our EUR 54.1m estimate. The 28.5% growth was driven by all three segments. High demand in Norway continued to support both Project Personnel and Consulting, and in our view the latter’s 33% growth was encouraging as it was driven by several larger projects within the Norwegian public sector as well as energy. Consulting continues to grow in Finland, but Suvic’s wind farm projects remain the more significant Dovre business. Dovre's EUR 3.0m EBIT topped our EUR 2.2m estimate (due to all three); Renewable Energy EBIT declined y/y (as the combination of busy construction season and inflation causes some challenges) but was nevertheless above our estimate. Dovre also made an upward revision to its guidance.
Renewable Energy and Consulting to drive FY ’23 EBIT
Dovre says this year has seen extraordinarily high growth (in our view the note concerns particularly Project Personnel) and such a level is not to be expected next year. This is no surprise, and we expect organic growth to slow to 7% in Q4. We have previously estimated an organic CAGR of 5% to be a reasonable long-term pace for Dovre, and we continue to expect such a rate for next year. We also see there to be further earnings growth potential especially within Renewable Energy; Suvic has managed well in terms of profitability despite the inflationary environment, and we see scope for margin improvement next year as wind farm demand remains high while the operating environment should be more normal. We continue to expect flattish profitability for Project Personnel going forward, while Consulting should be able to achieve earnings growth also next year.
Multiples are down, earnings growth potential attractive
We see a 5% growth rate realistic for next year and wouldn’t be surprised by a high single-digit rate, whereas such an organic double-digit rate as seen this year shouldn’t be expected. Dovre’s valuation is reasonable, around 8x EV/EBIT on our FY ’22 estimates, while we expect 50bps EBIT margin gain for next year. Peer multiples have retreated a bit, but we retain our EUR 0.75 TP and BUY rating as we make some upward estimate revisions.
Dovre’s Q3 results were clearly above our estimates as all three segments recorded figures higher than we had expected. Dovre also issued a positive guidance update yesterday; our latest estimates would still be in line with the new guidance, but the very strong Q3 report suggests our Q4 estimates are too modest.
Dovre’s Q2 EBIT came in above our estimate due to Project Personnel. There were no big surprises; we expect earnings growth to continue also next year.
Another strong quarter for Project Personnel
Dovre grew 38% y/y to EUR 47.3m top line vs our EUR 50.5m estimate. Project Personnel and Consulting landed close to our estimates, while Renewable Energy fell EUR 3m short. We reckon late Finnish spring to have caused Suvic project delays, but the segment didn’t disappoint in terms of EBIT as it posted a big y/y improvement despite Q2 being relatively slow and this year also challenged by an inflation spike. Consulting EBIT was as expected as progress continued in both Norway and Finland. Consulting is still mostly driven by early-stage reviews of Norwegian civil & infrastructure projects, however the acquisition of eSite has added a new angle to serve Finnish industrial clients with VR solutions. Extended high demand in Norway also helped Project Personnel to top our EBIT estimate, and as a result Dovre’s EUR 1.7m EBIT came in easily above our EUR 1.2m estimate.
Renewable Energy could still drive another positive revision
Dovre revised its guidance only two weeks ago, so it came as no surprise there was no further upgrade despite the continued high Q2 profitability and demand outlook for H2. Oil prices stay high, which supports oil & gas capex levels and hence Project Personnel, but risks seem to tilt more towards downside from here on. We estimate 4.5% FY ‘22 EBIT margin for Project Personnel, which is more than a satisfactory level yet still short of long-term potential. We continue to expect only flat PP EBIT development for next year. Covid-19 may still cause some sick leaves, while extraordinary inflation rates tend to be more of an issue for Renewable Energy than the other two segments. Q3 is seasonally the best one for Suvic but it may not achieve y/y EBIT improvement this year due to a very strong comparison period.
EUR 7.5m EBIT leaves ample room for earnings growth
We see Dovre headed towards the upper end of its EBIT guidance range. Suvic’s H2 performance could yet lead Dovre to top the range, while Consulting should be able to resume earnings growth next year. Renewable Energy’s expansion is also set to continue. We see potential for EBIT to improve to EUR 9m next year and thus we revise our TP to EUR 0.75 (0.70); retain BUY.
Dovre’s Q2 profitability topped our estimates mostly thanks to Project Personnel, where demand remained high particularly in Norway.
Dovre revised its guidance up earlier than we expected. We make some estimate updates, but we don’t see major news.
We don’t see any big news behind the guidance revision
Dovre specified its guidance somewhat earlier than we would have expected. The old guidance suggested revenue above EUR 165m and EBIT of more than EUR 6.1m, whereas the new guidance is for revenue above EUR 185m and EBIT in the range of EUR 6.5-7.5m. Our previous estimates were respectively for EUR 200.9m and EUR 8.4m. Dovre sees no negative changes in demand, which we do not consider especially surprising considering the three segments’ favorable positioning within energy markets as well as the Norwegian civil and infrastructure sectors. Our updated FY ‘22 revenue and EBIT estimates stand at EUR 199.1m and EUR 7.4m respectively.
Renewable Energy is operating in a busy environment
We leave our FY ’22 estimates for Consulting intact ahead of the report. We make minor downward revisions for Project Personnel; the segment had a very strong Q1 thanks to its favorable positioning within the Norwegian oil & gas sector. We previously estimated 4.2% EBIT margin for FY ’22, but we revise the estimate slightly down to 4.0%. We continue to expect similar levels for the coming years, although we don’t consider 5% EBIT that challenging as a long-term target. Our downward revisions concern mostly Renewable Energy. We would expect the specialty construction business to proceed mostly according to plan as Suvic is set to deliver some EUR 90m in Finnish wind farm projects this year. Materials challenges, including steel availability and prices, have not come as a surprise, but there’s still some uncertainty around execution and supplier networks given the current high demand. We thus revise our EBIT estimate for Renewable Energy down to EUR 2.8m from EUR 3.6m.
Still more earnings potential over the following years
We estimate Dovre’s FY ’22 EBIT margin at 3.7%, down from our previous estimate of 4.2%; in our view all three segments have further potential to improve beyond this year. Earnings growth outlook remains solid as before, while there have been no major changes in peer multiples. Dovre is valued around 9x EV/EBIT on our FY ’22 estimates, and SOTP valuation still implies upside. We retain our EUR 0.70 TP and BUY rating.
Dovre is now in a favorable position in the sense that demand is robust for all three segments, yet we expect earnings growth to continue well beyond this year.
Project Personnel continues to perform this year
The Norwegian oil and gas sector continues to stand in a favorable spot, and Project Personnel delivered solid figures already in FY ’21; performance continued to improve towards the end of the year with no sign of inflation affecting the results. Q1’22 results demonstrated no sign of weakness. Meanwhile there was some softness in Consulting due to a high comparison period, however the segment has always been a stable performer and we expect earnings growth again next year. Project Personnel may be in a particularly favorable spot right now, but Consulting has arguably more long-term potential. This would require successful execution in terms of new customers; Dovre may also find M&A targets to help growth. The new customers will probably not be too far from Consulting’s core Norwegian public sector civil and infrastructure projects, yet the segment could be looking to expand in Finland as well.
Consulting and Renewable Energy have more potential
Inflation does not seem to bother Project Personnel or Consulting, and even Renewable Energy appears to have been able to anticipate certain challenges well enough. We estimate EUR 201m revenue for this year and see EBIT at EUR 8.4m. The 4.2% EBIT margin would already be very decent, and translate to a high double-digit ROI, but we estimate Dovre’s profitability has more long-term potential as the results for Consulting and Renewable Energy are likely to remain a bit modest this year. The outlook for Dovre’s key client sectors is robust; we view our 5% organic CAGR estimates moderate. We also see Dovre’s EBIT margin poised to climb towards 5% in the coming years even when we estimate a conservative 4% EBIT margin for Project Personnel.
Valuation is not demanding
We regard SOTP the most appropriate way to value Dovre with its three distinct segments. We see the fair range around EUR 0.70-0.75 per share based on the FY ’21-22 peer multiples. We tilt towards the lower end of the range as valuations have been under pressure lately. Our TP is EUR 0.70; our rating is BUY.
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