• Continued gross margin expansion, but the market remains tough
• We take a more cautious view on the recovery
• We cut '25e-'27e adj. EBIT by 10-15%; 12x-10x '25e-'26e EV/EBIT

Good gross margins, but tough market

The overall market remains challenging, with headwinds from both subdued volumes and price pressure due to an oversupply of consultants. Although Ework's sales mix, with a high proportion of senior consultants, coupled with an increased focus on profitability levels in new contracts, is helping gross margins, this is hurting sales volumes. These headwinds are further exacerbated by continued cost-saving measures in the important automotive end-market (including layoffs at Volvo Cars), resulting in a 7% y-o-y decline in sales. While Ework is managing things well within its control, particularly in terms of gross margins, adj. EBIT fell 13% y-o-y due to lower sales volumes. This was -8% vs. versus ABGSCe on a 1% sales miss, while orders were 8% below.

We lower sales in '26e-'27e

The Volvo Cars-related layoffs were announced in H1'26, but are only now starting to take their toll. Furthermore, leading demand indicators are lagging behind our expectations. Therefore, we are taking a more cautious view of the sales recovery and lowering our sales estimates for 2025-2027 by 2-5%. Due to operational leverage, we cut the corresponding adj. EBIT estimates by 10-15%. While the public sector has started to stabilise, we still note continued weakness in demand in the private sector (albeit telecom is improving). Consequently, we anticipate negative growth rates in H1'26, but expect improvements in H2'26. However, estimate visibility is currently low.

12x-10x '25e-'26e EV/EBIT adj.

The share is trading at 12x-10x '25e-'26e EV/EBIT adj. (vs. peers at 11x-15x), which is in line with its 10Y avg. of ~12x. We continue to expect earnings to pick up well once demand returns, but we anticipate subdued earnings growth in the near term due to the challenging market.