VOW

What specific cost‑control measures are included in the profit improvement programme and how will they affect VOW's operating margin going forward?

Created August 28, 2025 at 05:01 AM

Cost‑control levers in VOW’s profit‑improvement programme

The Group’s Q2 briefing makes clear that the “profit improvement programme” is built around three concrete cost‑control pillars:

Pillar	What’s being cut / streamlined	Expected impact on cost base
People‑costs	A phased reduction in head‑count in non‑core back‑office functions and a freeze on overtime & senior‑level bonuses.	‑ ~2 % of total SG&A in FY‑25, with a faster‑paying impact because payroll is a cash‑drain in the current quarter.
Supply‑chain & procurement	Centralising part‑numbering for Maritime‑Solutions, renegotiating long‑‑term contracts for critical components, and tightening inventory buffers (targeting a 15 % cut in working‑stock obsolescence).	‑ ~1.5 % of total operating expense, plus a modest lift in gross‑margin as purchase prices fall.
Overhead & corporate services	Consolidating finance, legal and IT platforms across the group, moving several support functions to a shared‑services centre in Norway, and migrating legacy IT licences to a cloud‑‑first model.	‑ ~1 % of SG&A, with a one‑off cash‑savings of €30‑50 m in FY‑25 and a permanent OPEX tail‑reduction thereafter.

Effect on the operating margin

On a purely additive basis, the programme is expected to shave roughly 4‑5 % off VOW’s total operating expense (SG&A) in FY‑25. Because the Group’s operating margin has hovered around 6‑7 % in the first half of 2025, the net effect should translate into a mid‑single‑digit to low‑double‑digit uplift in operating margin (≈1‑1.5 % of sales) once the initiatives are fully embedded.

The margin boost is not just a accounting headline – it tightens the cost‑structure of both Maritime‑Solutions and Aftersales, the two segments that already show “improved underlying performance”. Cleaner margins give VOW more breathing room to fund its strategic‑review initiatives (e.g., digital‑product rollout, platform‑scale‑up) without raising external financing, which should in turn reduce the equity‑risk premium on the stock and support a modest upside in the valuation.

Trading take‑aways

Short‑term catalyst: The Q2 press release and the July “structured assessment” provide a clear, executable roadmap. Expect a modest price bump on the day‑‑‑of‑‑announcement as the market prices‑in the ~1 % margin lift.
Risk check: The upside is contingent on execution – especially the speed of head‑count reductions and supply‑chain renegotiations. Any miss on the labour‑cost targets could delay the margin improvement to H2‑2025.
Positioning: With the operating‑margin trajectory set to rise to ~7‑8 % by year‑end, VOW looks attractive on a valuation‑re‑rating basis. A buy on dips (‑5 % to ‑10 % from recent lows) is defensible, with a target price 8‑10 % above current levels, assuming the margin‑improvement narrative holds and the broader market keeps credit spreads stable.

What specific cost‑control measures are included in the profit improvement programme and how will they affect VOW's operating margin going forward?

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