CEO Kimmo Herranen’s overview from last week’s Annual General Meeting! 
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Juha has written pre-earnings comments as Administer reports its Q1 results on Wednesday. 
The company’s profitability turnaround last year was already visible in the comparison period’s figures, and we are now expecting fairly stable earnings development from Q1. According to our estimate, revenue growth will be tight in the early part of the year (especially organically), but the market situation has not, in our view, deteriorated further either. The situation may improve towards the end of the year if Finland’s economic development starts to pick up. However, Administer relies particularly on the activity of the Finnish economy. The US trade war has cast new shadows over this development in recent months, and we are therefore looking for an update on the outlook for Administer’s various business segments from the Q1 report.
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Here are Juha’s comments on the Q1 results this morning.
Administer’s Q1 result, published this morning, clearly exceeded our expectations due to better-than-anticipated profitability. Revenue remained practically stable as expected in a challenging market situation, but the cost structure had clearly decreased, and through this, the result grew significantly from the comparison period. The guidance for 2025 remained unchanged, and the outlook in general seemed stable, but through operational efficiency improvements, the company appears to have better prerequisites for profit improvement this year, even without revenue growth. A more detailed analysis requires time, and we do not yet want to speculate on possible forecast changes. However, the Q1 result was an encouraging signal, especially from the perspective of profitability.
Juha interviewed Administer’s CEO Kimmo Herranen about Q1 and, among other things, the company’s outlook.
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Here is a fresh company report on Administer from Kinnunen right after Q1.
We reiterate our Add recommendation for Administer and revise our target price to 2.8 euros (previously 2.5 €) after a stronger-than-expected Q1 result. Profitability in Q1 was significantly better than we anticipated, with the positive trend in cost structure continuing, which also supported our earnings forecasts. The stock remains affordable if the company can continue on its path of earnings growth. However, significant future earnings improvements will also require revenue growth, and there is considerable uncertainty associated with market developments.
Excerpt from the report:
There is little visibility into next year
Visibility into next year is currently non-existent, but in recent years, Administer has gradually improved its profitability by streamlining its operations. The task gradually becomes more difficult after implementing the “easier” cost-saving measures, but on the other hand, the market situation should, in all likelihood, gradually ease in the coming years, thereby supporting the continuation of earnings growth. Even modest economic growth in Finland increases economic activity, which should further positively reflect on Administer’s market situation.
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Hello to the Administer thread!
We made a change where I took over the monitoring of Administer from Juha. Going forward, you can direct any questions you might have to me.
A natural time for this handover was with the update of the comprehensive report, and here’s the fresh report for you to read:
Not many changes were needed to Juha’s previous view on the stock, although I naturally aimed to examine the company from a clean slate during this process. It’s easy to conclude that the stock has significant potential if the turnaround in results continues in the coming years, with the emphasis still somewhat on the word IF at this point. I appreciate that the company has clearly stated in recent years the need to simplify and streamline its complex structure, and the strategy’s focus has been shifted towards profitability after acquisition-driven growth. Recent signs have also been promising, and the profitability turnaround has progressed in the right direction.
The report contains much more information and justifications for this view! A video related to the report is also coming on Monday.
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We chatted with Ate about the company to celebrate the recent extensive report: Administer: Tuloskäänne etenee - Inderes
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Frans (Atte on holiday) has written about Administer’s big acquisition.
Administer announced that it had signed a letter of intent for a business acquisition with Numera Palvelut Oy regarding the purchase of Sarastia’s municipal clients’ financial, payroll, and software services business. The revenue of the transferring business is approximately EUR 35 million, which is significant in relation to Administer’s own size (revenue 2024: EUR 75 million). According to the announcement, the most significant part of the revenue comes from municipal financial and payroll services, supported by software services. However, the revenue has been on a weak trend and has clearly decreased in recent years. The profitability of the acquired business has also been weak, and the operating profit is projected to be at a loss of EUR 1.1 million this year. Approximately 350 employees will transfer with the transaction.
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@Antti_Leinonen has written an article about Administer.
Aallon and Talenom can be considered Administer’s peers and partly competitors. Due to profitability challenges, Administer does not appear significantly more attractive than its two peers. However, the EV/S multiple reflects hidden potential if a profitability turnaround materializes. Aallon and Talenom are likely better and more focused companies, and they have more resources for acquisitions.
If an investor sees payroll administration as an attractive business, many alternatives are listed in the United States alone: ADP, Paychex, Paycom, and Paylocity. Judging by their high valuation multiples, these must be so-called quality companies.
Atte has made a new company report after the latest acquisition.
We reiterate our Add recommendation for Administer, but raise the target price to EUR 3.2 (previously EUR 2.8). We see clear value creation potential in the Sarastia acquisition, made at a very moderate valuation, if Administer succeeds in raising Sarastia’s profitability to at least a moderate level in the coming years. At this point, there is still uncertainty regarding Sarastia’s mid-term revenue level, as probable changes to the Public Procurement Act are expected to cause customer churn for certain municipalities in the initial phase. On the other hand, the tenders opening up due to the change also open up many new opportunities for new customer acquisition. All in all, the Sarastia deal adds spice to Administer’s earnings turnaround-driven investment story, which, if successful, would still hold significant potential for the stock.
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They just restructured Kuntalaskennan, so one would think they can handle this too.
The year will be ruined, but then we’ll be a company with a 100 MEUR turnover, and suddenly there will be interest. The free float is probably around 20%, so one can desperately wait for a squeeze :+)
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If the procurement law comes into force as planned, Sarastia will likely experience customer churn, which will cause a lot of extra work. Similarly, if they win new clients, it will take several years to transition them from onboarding to an efficient process, especially in payroll administration. It is a very optimistic estimate that Sarastia could be made profitable in one or two years. Of course, in-house operations generally aim for a zero result, so at least my analytical skills are not sufficient to assess the current true profit level.
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I predict that prices will rise to the industry’s normal level at the turn of the year. This will correct the worst shortcomings.
Costs will be handled within a year by immediately initiating redundancy talks and getting the target organization and processes running. Chaos, pain, and eventually a normal state. I have personal experience with this.
Note. In public procurements, prices may only be raised in the manner specified in the contracts.
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Here are Ate’s preliminary comments, as Administer will publish its Q2 results on Thursday.
Topics:
00:00 Start
00:10 Q2 development by business segment
00:45 Weakening profitability
01:37 Increasing efficiency measures
02:41 Sarastia acquisition
03:50 Sarastia’s revenue development
04:48 Sarastia’s profitability
05:51 Guidance and future outlook
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Atte has published a new company report on Administer right after Q2.
We reiterate our Add recommendation for Administer and a target price of 3.2 euros. The company’s Q2 result fell slightly short of our expectations, partly due to one-off items. The weak performance of the Finnish economy keeps the short-term growth outlook subdued, and to ensure the continuity of profitability improvements, the company has initiated further efficiency measures. Regarding the Sarastia acquisition, which is expected to close in the autumn, the company also has a clear playbook to turn Sarastia’s profitability towards double-digit levels. At this point, we are skeptical of such high targets, but a deal made with an already high single-digit margin at a very low valuation would create significant shareholder value. Administer’s stock still has significant potential if the company manages to continue its earnings turnaround in the coming years, which the Sarastia acquisition further enhances.
Administer is currently flying under investors’ radar, as the stock was not traded at all yesterday on earnings day, and the situation is the same today. Trading volumes are also very thin.
The reason for this is certainly the company’s weak stock market performance to date, which has undoubtedly caused disappointment for many, and new investors may not be interested in a company that has previously been mired in a negative spiral. However, in my opinion, the situation is currently better than what the current stock market curve would suggest!
However, efficiency measures were already initiated in the company in 2023, the effects of which began to show last year, and this year, profitability (EBITDA guidance 7-10%) is already at a moderate level. However, there is still clear potential for improvement, as indicated by the company’s targeted 15% margin, which, however, at this point sounds ambitious in light of historical performance. New efficiency measures were again announced in connection with the Q2 report, and these are specifically intended to secure the continuation of the profitability turnaround.
According to our forecasts, the margin would improve to 12% by 2027, which also requires a boost from an economic recovery in addition to efficiency measures. If this were achieved, the stock could well more than double from current levels, as also outlined in the recent report.
In addition, the Sarastia acquisition, which will soon be finalized, adds its own new flavor to this earnings turnaround story. The company stated yesterday in the earnings info that it sees Sarastia’s profitability potential close to the company’s other payroll and financial administration services, which would indicate double-digit margins. Time will tell how successful the turnaround of Sarastia will be, but a margin of safety is provided by the fact that the acquisition price was so low that with 5-10% margins, the deal would already be very good for Administer. This assumes that Sarastia’s current revenue does not erode too badly in the future.
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Administer provides another piece of significant acquisition news for the late evening.
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Here are comments regarding the new acquisition, or should I say, an arrangement complementing the previous Sarastia deal:
With these Sarastia deals, Administer acquires approximately EUR 58 million in revenue, whose profitability (EBITDA margin 2.2%) is currently low. The valuation of the deal is very low, approximately 0.2x EV/S multiple. If the company succeeds in its goal of raising Sarastia’s profitability to a double-digit level, this would practically mean a tremendous leap in earnings relative to Administer’s current size (2025e revenue EUR 75 million and EBITDA EUR 6.3 million). There is thus plenty of potential for value creation, but naturally, stabilizing a business that has been on a downward trend is never an easy task, even though the company seems to have clear measures for it.
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