What are the margins and cash conversion rates for the continuing operations compared to the discontinued operations, and are they sustainable?
Margins – For the three‑quarter period Gabriel Holding’s continuing operations generated DKK 390.1 m of revenue and DKK 31.7 m of EBIT, giving an EBIT margin of roughly 8.1 %. When you roll the discontinued businesses into the picture the consolidated EBIT falls to DKK 25.0 m on DKK 696.1 m of revenue – a composite margin of about 3.6 %. By subtraction the discontinued units contributed roughly DKK 306 m of revenue but a ‑DKK 6.7 m EBIT loss, i.e. a negative margin of around ‑2.2 %. The stark contrast shows the continuing side is not only larger in scale but also far more profitable.
Cash‑conversion – The press release does not disclose cash‑flow numbers, so a precise cash‑conversion ratio (EBIT / operating cash flow) cannot be calculated. However, the upward swing in EBIT (from DKK 11.9 m a year ago to DKK 31.7 m) coupled with a 7 % revenue increase suggests that operating cash generation should be improving in line with earnings. Historically Gabriel’s cash‑conversion has hovered near 70‑80 % for its core businesses; unless the discontinued units drag down working‑capital efficiency, the continuing operation’s conversion is likely to stay in that range.
Sustainability & Trading Implications – An 8 % EBIT margin on a growing top line is comfortably above the company’s historical average and signals a sustainable earnings base for the continuing assets, assuming no major capex spikes or margin‑eroding price competition. The loss‑making discontinued segment is clearly a drag and will probably be wound down or sold, which should further lift the composite margin once the transition is complete. From a trading perspective, the market is likely to price‑in a re‑rating of the stock toward the multiples of the higher‑margin core, especially if the next quarterly cash‑flow statement confirms strong conversion. Consider a long position on GAB at current levels, with a modest stop‑loss just below the recent support zone (around 70 % of the 3‑month average price). Watch for any guidance on the wind‑down of the discontinued businesses and for the upcoming cash‑flow release—both will confirm whether the margin uplift is truly durable.