Addtech AB (publ.)

Welcome to Adtech's first quarter report presentation. We start with Adtech in brief. If there are any newcomers on the call, a quick summary of the key fundamentals. We are a group of 150 independent and strictly decentralized companies in 20 countries with a clear business-to-business offering in five business areas. The value proposition is centered around high-tech products and solutions primarily to the manufacturing and infrastructure sectors. We have a dual growth ending approach, focused to develop and grow the business organically, together with our entrepreneurs, and then complement and strengthen our strategic niches with acquisitions funded by our own cash flow. Size-wise, we have a turnover of over 22 billion, run the operations with an EBITDA margin of 15%, and employ around 4,500 people throughout the organization. Highlights of Q1 then. In summary, a strong start of the year with continued growth and improved profitability. The overarching activity remained high and we increased our net sales by 7%, of which 1% was organic. We report an EBITDA growth of 11% with a high margin of 15.8 compared to 15.3 in the same quarter last year. Adjusted for revaluation of earnouts still at very good levels of 15.4. Our cash flow remains at satisfying levels and we acquired two companies during the quarter. Some more details on the sales. Solid growth for the group. And as you see in the graph, energy industrial solutions sticks out as key drivers, while challenges within automation remained. As I said, total net sales grew 7%. The strong SEC also generates negative currency effects of 4%. The overall activity remained at high levels, but with continued variation between segments, geographies and companies. However, our backlog remained well filled and we had a solid order intake during the quarter, also with a sequential improvement over the quarter. The electrical transmission and defense markets remained strongest, while most of the other key segments were stable at an overarching level. Small signs of a market improvement within the sawmill industry as well as in the segment special vehicles. I will come back to that shortly. Here you see development on EBITDA and the margin and the strong trend continues. As I said the EBITDA increased with 11%. Also this quarter a strong contribution from energy but also industrial solution had a good quarter with 14% growth. Our EBITDA margin improved to a new record level and also strong long-term trend in increasing our profit over working capital that increased from already high levels and rolling 12 ended at 77% compared to 71% last year and also a sequential improvement from fourth quarter. Some comments on market development in each business area. As I mentioned, the tough situation for business area automation remained in the first quarter. The weak sales development continued, which negatively also affected our earnings and operating margin in the period. And there are a number of things causing this. First of all, this business area is mostly affected of all business areas of the general industry climate, where we have had quite low demand in some segments previous quarters that is affecting sales this quarter. So still an effect of a general bit of a hesitation to invest in the market. However, the market situation and order intake was good in the quarter. It sequentially improved also month by month. So a stable demand for companies supplying to energy mechanical process industry, while medical technology was still a bit on the weak side. A growing share of total sales to the defense segment, approximately 15% now of the business area, and that continued to develop strongly. We take measures, of course, to adjust costs in some of our companies that are still struggling, and we expect to see full effect from that in the later part of our fiscal year. Electrification delivered a stable first quarter, solid demand and sales development. Market situation also here varied between segments. A bit weaker demand in energy, mechanical, electronics, while medical and defense continued on a strong note. Companies supplying special vehicles, customer, had in general a stable quarter in electrification. Energy, yet another strong quarter with very strong organic sales development and a good product mix contributing to high profit margin in the quarter. Key driver as in previous quarters was infrastructure products for national and regional grids and also installation material for data halls continue to be strong. Building installation remained on the weak side, while the market situation for niche products for electrical distribution and also traffic safety continued to be favorable. All in all, a very strong quarter with exceptional growth. And I want to point out that we don't expect to keep the same exceptional growth in the coming quarter, even though it's a really, really good market to be in for the long run. Business Area Industrial Solutions delivered good sales development with solid contributions from acquisitions, also contributing in a nice way to keep up our high margin in the business area. We saw a somewhat improved market situation, as I mentioned in the beginning, in companies supplying to forest and sawmill industry. And also OEM customers in special vehicles segment, we saw an improvement in the quarter. The remaining niche segments like waste management, both stable and subsea had a strong quarter. So all in all, a good start to the new year. And finally, process technology delivered all in all a stable Q1. Sales were affected negatively by timing effects in project deliveries, which were offset by solid contributions from acquisitions. The market situation sequentially improved broad-based with favorable development within marine, medical and the oil and gas parts of process industry segment. Also after market sales to forest industry had a positive quarter. Mechanical industry and also energy was more stable the quarter. To sum up the whole picture, we continue to have a market situation that varied, but broad exposure and strong positions in attractive segments supports stability and good growth also in times of more headwinds and hesitations on the market. With that said, I would like to hand over to you, Malin, and some detailed comments on the results.

Thank you. And as Niklas commented, our profit margin in the quarter continued to improve. The improvement over time is broad-based and is in general thanks to active work to increase the value-add in our value proposition and make sure to charge for it, strategically improve our product mix and not least good leverage from acquired companies as well as from organic growth. We can see that the trend line of total cost still has a good development and our overhead costs in relation to sales are stable. We have a firm grip on overhead costs and as we have talked about during the recent quarters we are taking actions where needed if we see a long-term weakness in the market conditions or the need for organizational changes. But we also invest where we see good potential for future growth which is also very important in this business model. We had a positive effect on profits from revaluations of earnouts of about SEK 17 million and about the same negative currency effect from revaluation of balance sheet items. The currency effect in our operating companies comes mainly from unrealized effects when revaluating the balance sheet items. Last year, the net of these effects, earnouts and currency effects, was approximately the same as this year. Our cash flow from operating activities was somewhat lower than the previous year, but remains at good levels. The change in working capital was relatively weaker compared to the same quarter last year, mainly due to changes in accounts receivable and accounts payable, which are affected by the timing of sales and invoicing during the quarter. Inventory continues to decrease organically, even though not to the same extent as during the beginning of last year. The inventory value remains at satisfactory levels in relation to the order backlog and sales and all in all our long term target profit of working capital continued to improve and reached 77 percent in the quarter. Our financial position remained very strong and our gearing and leverage are in a long-term perspective on very low levels. Our strong balance sheet gives us a lot of headroom to operate according to our growth strategy. And with those short comments, I hand back to you, Niklas.

Thank you. Acquisitions, as Malin mentioned, a very important part of our growth. We have started the year with two acquisitions during the quarter, one UK-based company, Amp Power Protection, and they develop and sell uninterruptible power supplies, so UPS systems and power protection systems for defense, marine and transport industries. And also one Canadian company, Novatec, a leading supplier of analytical instrumentation and engineered systems for measurement of gases and liquids. In total, these companies add 330 million SEK in turnover with good profitability. And we also welcome some new employees to the group from these acquisitions. So a warm welcome to you. We continue to have an unchanged positive view of the acquisition market. There are plenty of possibilities in our niches and we expect to continue to mix both Nordic and European companies. And obviously, we can also buy companies in other geographies where we find really, really good companies fitting into our niches. We will continue to look for normal size and maybe a few larger companies also going forward. Thanks to our scalability and strong balance sheet and also an attractive pipeline with good companies, we expect to keep a high acquisition pace throughout the year. Let's conclude then. I'm very pleased with the start of the new fiscal year, not least on back of the high global uncertainty that we have around us. The high activity continued, solid order intake and order book remains well filled. Cash flow generation is still very good, as Molly mentioned, and a strong financial position that gives us a lot of firepower to support our ambitions going forward. Short-term outlook is good. We have an ambitious growth plan and with our well-proven business model and strong positions in attractive niches, we are well prepared and equipped for continued profitable growth.