From Switzerland with love😬
Together with a small, but good team from Norway, headed by Petter Kongslie from SpBank1, we met a solid CRAYN team (board+management) to dinner. The following day we met the Chairman, CEO, CFO and others from SWON, plus an analyst team from UBS.
Some lessons learned;
The «tone of voice» was open and honest about the fact that SWON have failed the last years. That’s good, with denial you never improve.
SWONs team argue they are profitable in Services sector in 2024 - they are not! LTM adj Ebitda is around 11% i.e profitable - right? Wrong! If you distribute corporate HQ cost (you must), move to reported Ebitda not adjusted (you should) then go to Ebit you end at an Ebit sized around -8% which I think is unmatched in Europe. You rarely see such poor profitability in consulting companies. A turnaround after 20 M&As last 5 years, to a price of 267MCHF, including 2500 employees across the world is not a quick fix.
The industrial logic behind the bid/merger was very well explained. We learned a lot. SWONS strengths in Corporate segment and CRAYN ditto i SME is better understood.
SWONS new Go to Market model is very very risky. We were informed that 90% of clients have a new KAM - we don’t like the idea at all. In Q3 presentation they shared that this change was implemented to fast. When we asked if they would reverse this back to the previous model, they stated "we will not, we will use more time on implementation". 90 % of the clients will have a new KAM - we think they have been smoking something they should not😬
SWONS cost cut program sized 50MCHF is moving very fast and will deliver better.
The difficulties of a «merger among equals» is not properly recognized and SWONS track record on delivering on synergies are not at all good.
We’ll be back with our Target price on SWON shortly and then then conclude on the bid.
Stay tuned.
Disclaimer:
Hvaler Invest is a significant shareholder so you cannot trust us (or perhaps you can?)
All the best,
Sverre and David
Hvaler Invest AS
Zürich, Switzerland
22.01.25