Weak Norwegian Contracts And Working Capital Strains May Eventually Support Modest Margin Recovery

Catalysts

About Green Landscaping Group

Green Landscaping Group is a European provider of ground maintenance and landscaping services for mainly public and local customers.

What are the underlying business or industry changes driving this perspective?

• Although demand for maintenance and winter services supported 11% organic growth in Q1 and an order backlog of SEK 7.7b, continued pressure in the Norwegian market and execution issues at key contracts could limit how much of that demand converts into higher margins and earnings.
• The company benefits from a large addressable market with structural growth in outsourced public ground care. However, the recent weak year in 2025 and a rolling 12 month EBITA margin of 6.8% highlight that any slowdown in public spending or tender activity could hold back revenue growth and delay margin improvement.
• The decentralized, entrepreneurial setup has helped Sweden, Finland, Lithuania and Germany improve or keep profitability. At the same time, it increases the risk that underperforming units, such as the two Norwegian companies, dilute group margins and weigh on group EBITA until operational discipline is consistently applied.
• The acquisition pipeline in Germany and Other Europe supports the long term consolidation trend in the sector. Even so, current financial leverage of 3.1x and a recent free cash outflow of SEK 15m may restrict the pace of future deals, which could limit EBITA and earnings expansion from acquired entities.
• Indexation clauses and short average project durations can help offset cost inflation. Nevertheless, the recent drag from working capital, especially receivables, suggests that slower customer payments and tighter public budgets could keep cash flow from operating activities and net margins under pressure.

Assumptions

How have these above catalysts been quantified?

• This narrative explores a more pessimistic perspective on Green Landscaping Group compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Green Landscaping Group's revenue will grow by 3.5% annually over the next 3 years.
• The bearish analysts assume that profit margins will increase from 2.0% today to 3.3% in 3 years time.
• The bearish analysts expect earnings to reach SEK 233.5 million (and earnings per share of SEK 4.14) by about June 2029, up from SEK 127.0 million today. However, there is some disagreement amongst the analysts with the more bullish ones expecting earnings as high as SEK339.2 million.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 10.1x on those 2029 earnings, down from 11.8x today. This future PE is lower than the current PE for the SE Commercial Services industry at 19.2x.
• The bearish analysts expect the number of shares outstanding to decline by 0.15% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.34%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• A prolonged weak market in Norway, with high interest rates, cost inflation and heavy competition for new work, could keep contract pricing and contract wins under pressure, which would weigh on revenue and EBITA margins in that country and for the group overall.
• Execution issues at underperforming Norwegian units, where management has struggled to turn winter services revenue from long term Oslo contracts into profit, may persist despite leadership changes and continue to drag on group earnings and net margins.
• Ongoing working capital pressure, particularly from slower customer payments and higher receivables in a tougher market, could limit the company’s ability to convert EBITA into cash and keep free cash flow and net margins under strain over time.
• Financial leverage at 3.1x and recent free cash outflow of SEK 15m, combined with a focus on deleveraging, may slow the pace of future acquisitions in a consolidating industry. This could constrain long term revenue growth and earnings expansion from acquired companies.
• The need to divest or dismantle businesses, as seen in Sweden with Svensk Jordelit AB and other entities, suggests that parts of the portfolio may not consistently meet profitability goals. This could limit long term improvements in group EBITA and net margins.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bearish price target for Green Landscaping Group is SEK34.0, which represents up to two standard deviations below the consensus price target of SEK44.0. This valuation is based on what can be assumed as the expectations of Green Landscaping Group's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of SEK54.0, and the most bearish reporting a price target of just SEK34.0.
• In order for you to agree with the more bearish analyst cohort, you'd need to believe that by 2029, revenues will be SEK7.1 billion, earnings will come to SEK233.5 million, and it would be trading on a PE ratio of 10.1x, assuming you use a discount rate of 7.3%.
• Given the current share price of SEK26.45, the analyst price target of SEK34.0 is 22.2% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.