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The construction company Nordecon released its Q4 figures on February 13. The figures showed a 4.5% y/y decline in revenues, bringing them to EUR 42.5m, while we had expected an increase to EUR 47m. Profitability rose, as the gross margin reached 5.2%, compared to 2% in Q4 2011.
Higher staff expenses pushed administrative expenses up by 6.4% y/y. While EBITDA increased to EUR 1.1m, the combination of lower-than-expected revenue and higher-than-expected operating costs resulted in reported EBITDA being roughly EUR 1m below our estimate.
Nordecon reported a EUR 0.2m loss from associates in Q4, which was the result of the restructuring in its Unigate joint venture. Combined with other net financial charges, Nordecon’s bottom line moved to EUR -0.2m. We had ex- pected a net profit of EUR 1.35.
Although Q4 EBITDA was EUR 1.1m, the company’s net operating cash flow reached EUR 7.2m, mostly due to trade receivables declining to EUR 20.4m from EUR 25.7m in Q3. Accounts receivable increased significantly y/y, part- ly owing to the increased number of projects and to longer payment periods. However, as much of the customer portfolio consists of state-related organi- zations, the quality of the accounts receivable is high, in our view.
Nordecon used its net operating cash flow to lower its debt in Q4 – net debt de- creased by almost EUR 7m, from EUR 27.5m to EUR 20.6m. However, EUR 27m of the total debt is short term (EUR 30m in Q3) and must be refinanced.
We make minor changes to our 2013 estimates, We expect Nordecon to roughly maintain sales y/y in 2013, while we expect an improvement in prof- itability. We lowered 2013e EBITDA to EUR 7m (EUR 7.2m) and net income to EUR 3.7m (EUR 3.9m). 2013e net income of EUR 3.7m implies a 2013e P/E of 9.7x, which indicates some upside to the share price, in our view. We do not expect Nordecon to pay dividends for 2012. We lower our target price to EUR 1.3 (EUR 1.35), but retain our Buy recommendation.
Recommendation: Buy
Target Price: EUR 1.30
Share price: EUR 1.18