Enento Q1 next Tuesday: Clear backpedaling in figures still expected

Translation: Original comment published in Finnish on 4/17/2024 at 7:31 am EEST.

Enento will report its Q1 results next Tuesday at around 12.15 pm EEST. We expect revenue and earnings to be significantly lower than in the relatively strong comparative period, mainly due to weak demand for consumer credit information services in Sweden. The company has not yet issued guidance for the current year due to the low visibility of the operating environment, which makes forecasts more uncertain than usual. Any comments on the market outlook and the company's adjustment measures are therefore of particular interest. We also look forward to receiving comments on the positive credit register launched in Finland at the beginning of April. 

Volumes will continue to decline significantly 

We expect Enento's reported Q1 revenue to decrease by around 7% to 37.2 MEUR. The decline in revenues continues to be driven primarily by weak demand for consumer credit information services, which we do not believe has yet recovered significantly. For Consumer Insight, reported revenue is expected to decrease by 10% to 15.8 MEUR. Geographically, the weakness is still particularly pronounced in Sweden. In Finland, business information services account for a larger share of revenue, and we expect developments to be much more stable. However, we believe that the weak market situation is starting to have a greater impact on the Finnish business. It should be noted that the comparison period was still relatively strong, so there is still a significant margin for decline in revenue. We expect currencies to continue to exert a small downward pressure on reported revenue. The divestment of the Tambur platform will also continue to weigh on Q1 revenue, as the service will be migrated from Enento at the beginning of Q2'23. In constant currencies and excluding the Tambur platform, total revenue is expected to decline by around 5%. 

Earnings deteriorate with volumes

We expect Enento's adjusted Q1 EBIT to land at 9.4 MEUR (Q1'23: 12.0 MEUR), which corresponds to an adjusted EBIT margin of 25.4% (Q1'23: 29.9%). We therefore expect a significant year-on-year deterioration in earnings and profitability, mainly due to lower volumes, which have a strong impact on the bottom line of the income statement due to high gross margins. At the same time, however, the company's adjustment measures are helping to support profitability. In connection with the Q4'23 results, the company announced that it will increase the target level of its efficiency program to 10 MEUR (8 MEUR) by the end of the current year. The level reached at the turn of the year was 6.3 MEUR. We expect a significantly lower reported EBIT (6.3 MEUR), which we estimate will be burdened by ongoing PPA amortization and one-off effects related to the migration of the company's technology platform. 

The outlook is still foggy

Enento has not provided guidance for the current year, which naturally adds uncertainty to the outlook. In a positive scenario, the company could provide guidance in the Q1 report, but we also think it is very possible that no guidance will be heard yet. In any case, any comments on the development of the business environment and the company's adjustment measures will be of particular interest. In the big picture, the operating environment remained weak at the beginning of the year, and we do not expect a significant improvement in the coming months. The company said in its financial statements that it sees small glimmers of light towards the end of the year, but we think the company's own visibility here is still quite weak. However, we expect a moderate recovery in H2, and our full-year forecast is for revenue to remain at approximately last year's level of 156 MEUR. We expect adjusted EBIT to decline moderately to 45.0 MEUR (2023: 46.0 MEUR), which corresponds to an EBIT margin of 28.9% (2023: 29.5%).