Enento downgrades growth outlook slightly

Translation: Original comment published in Finnish on 10/10/2023 at 7:03 am EEST.

Yesterday, Enento updated its net sales guidance for the current year downwards. The profit warning was not particularly dramatic, as our growth estimate was already at the lower end of the previous guidance range. On the positive side, the company kept its profitability guidance unchanged. However, the downgrade puts some pressure on our estimates for the rest of the year and we will update them at the latest in connection with our Q3 pre-comment.

Weaker-than-expected demand for consumer credit information services behind profit warning

Enento now estimates its full-year 2023 net sales to decline 0-1.5% (previous growth of 0-5%), excluding the impact from the discontinued Tambur service, at comparable exchange rates to 2022. The profitability guidance remains unchanged, and Enento expects the adjusted EBITDA margin to be 36-37%.

The lowered revenue guidance is due to the weaker-than-expected performance of the Consumer Insight business area in Q3. According to the company, the challenging operating environment and the continued weakening of consumer credit volumes have had a negative impact on net sales in the second half of 2023. The market situation is challenging, especially in Sweden (2022: 53% of net sales), where consumer sentiment and related loan volume growth are weak, which are reflected in the demand for Enento's consumer credit information services. Demand for sales and marketing and direct-to-consumer services is also weak. Moreover, the company sees no clear signs of a significant improvement in the market situation in Q4. On the positive side, the company commented that the Business Insight business area has continued its good development, where demand for, e.g., risk management and compliance services is on the rise. However, these are not enough to compensate for the current weakness of the Consumer Insight business area.

Profit warning not particularly dramatic - only small forecast cuts required

Before the profit warning, our estimates saw Enento's reported net sales for the current year declining by around 6%. Our forecast for net sales growth adjusted for FX and the Tambur platform was around 1%. Enento's adjusted net sales growth for H1'23 was 0.5% and, given the still very challenging market conditions, we do not consider the turn to slightly negative growth to be particularly dramatic. The positive aspect of the downgrade was that the company manages to maintain its strong profitability even in a challenging market situation, which the company has proven also in its history. Profitability this year will be supported by, e.g., the company's change negotiations at the beginning of the year and other efficiency measures.

With the profit warning, our forecasts for the rest of the year are under slight downward pressure. For the full year, however, the change is quite moderate (around 1-3%). Naturally, there will also be some pressure on our earnings forecasts, but even for these the changes will be moderate in the big picture as the company maintains its profitability guidance. We will update our forecasts at the latest in connection with our Q3 pre-comment. Enento will report its Q3 results on Friday, October 10.