• Organic sales decline of 7% y-o-y
• EBIT margin of 4.6% (7.1%)
• Recruitment profitability under pressure

Unexpected drop in profitability, but demand is still OK

Q2 numbers were weaker than expected for sales (-5% vs ABGSCe) and especially for EBIT (-49% vs ABGSCe), as profitability in the recruitment business area was clearly lower y-o-y with an EBIT margin of 20% (34.5%). This could be an effect of a few deals not going as planned, or signs of high competition in a depressed market that leads to price pressure. We think the latter is more likely. There is currently no clear trend in demand: Q3 has started on the same level as in Q2, and in Q2 the demand pictured improved every month, meaning the situation is not getting worse. Rather, it paints a cautiously optimistic picture for H2e. Cash flow was strong from favourable working capital movements, and the company still has SEK 40m in cash after the dividend payout of SEK 37m in Q2.

We cut EBIT by 20% for '24e, less for '25e

Market data shows a similar picture to that described by management. Sales were down 11% y-o-y (sequential improvement from -12% y-o-y in Q1). The short- and long-term outlook also improved slightly versus Q1, when companies in the sector were asked about demand for the coming quarter and year. To us, it does not sound alarming, rather that we are close to a turnaround. We cut our '24e EBIT by 20% on the back of the disappointing Q2, but think Ogunsen can deliver solid profitability in '25e (we forecast an 8.9% EBIT margin), and only lower EBIT by 8% for that year.

'25e EV/EBIT of 7x with a dividend yield of 10%

On our revised numbers the company is trading at a '25e P/E of 10x, EV/EBIT of 7x and a dividend yield of 10%. We argue that Ogunsen is slightly less cyclical than the overall industry because of its focus on specialised assignments within economics and finance, which has historically led to stable profitability over business cycles.