Proact IT Group AB reported mixed results in its Q3 2023 financials, with a 3% dip in revenue to SEK 1,065.3 million and a 7% decrease in adjusted EBITA to SEK 72.8 million. Despite these declines, the company saw an increase in profits both before and after tax, reaching SEK 63.7 million and SEK 50.9 million respectively, translating to a per-share profit of SEK 1.85.
However, the company's cloud service contracts took a hit, decreasing by nearly a quarter to SEK 118.8 million. On the brighter side, recurring revenues from cloud and support services grew over one-fifth to SEK 436.7 million. This growth was attributed to an annualized rate of recurring revenues at SEK 1,746.8 million, boosted by the divestment of their Lithuanian subsidiary which added SEK 3.1 million to the operating profit.
Looking at the first three quarters of 2023, Proact IT Group AB reported over 5% revenue growth and an adjusted EBITA margin of 6.0%. Profits before tax stood at SEK 135.5 million while cloud service contracts were worth SEK 351.1 million and recurring revenues hit SEK 1,255.6 million. However, per-share profits at SEK 3.91 were affected by restructuring costs of SEK 19.8 million from a cost-efficiency program that realized savings between SEK 45-50 million.
In contrast, Ferro (NYSE:FOE) Nordic's Q3 projections showed potential challenges ahead with a projected EBIT rise of SEK 15m being offset by overheads amounting to SEK -22m, potentially resulting in a group EBIT of SEK -7m. Seasonality in Germany could also trigger a minor sales dip to SEK 669m.
Despite all segments being EBIT-positive, Ferro Nordic's post-Russian divestment scale may not be sufficient to counterbalance overheads. The company's strategy for matching its overheads involves aggressive growth via acquisitions, utilizing its SEK 539m net cash. Without an acquisition, the net cash might diminish further, pressing Ferronordic to either upscale operations or downsize costs.
InvestingPro Insights
Based on real-time data from InvestingPro, Proact IT Group AB has a market cap of approximately 4130M USD. The company's revenue for the last twelve months as of Q2 2023 is 24.34B USD, with a quarterly growth of 7.46% in Q2 2023. The adjusted operating income for the same period stands at 16.62B USD, indicating a healthy operating margin of 68.29%.
InvestingPro Tips suggests that despite a volatile stock price, Proact IT Group AB holds more cash than debt on its balance sheet and operates with a high return on assets. However, it's worth noting that two analysts have revised their earnings downwards for the upcoming period, suggesting potential challenges in the near future.
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