Alcadon Group AB (publ)

So, hello and welcome to Alcadon Group's Q3 presentation. My name is Pierre Fors. And my name is Niklas Svensson. And Niklas is our CFO. As you know, I am here as TF, CEO and head of the company. It is a new role for me, you could say. I have been in the company since early 90s, first as a customer and then I started working in the company in the 90s. I was the CEO and CEO for about 20 years and was involved in and employed Sonny Myrvorn as CEO and CEO 2019. Since then I have been the board chairman. I am now entering the TF role in quarter four. I want to thank Sonny for these five years. We have grown geographically. The company is now taking a new chapter. Fredrik Valentin from Bergman & Beving joined the company on January 1, 2025. So, let's see here. A little short about us. Alcadon continues to work with outdoor connectivity and indoor connectivity. And we actually have three business areas, three customer segments. Where the largest, which is about 40-50%, is cabling and other. That is commercial properties. It can be offices, hospitals, airports and so on. There is always a great need to adapt your organization to larger or smaller. So that it happens differently. things here all the time, so it is a constant movement for us, this part, so we think it is very interesting. We also have a housing network. I think most people know today that the housing market has been a bit like it has been, but it is not in any way our largest part, but we are quite convinced that it will continue to be built in the future. We also have a smaller part, which is service, consulting and tools, tools and instruments, which is part of our business, which comes in quite a lot here, which also plays a role in all of our business segments. Then of course we work with broadband or fiber. And this segment with fiber is used in all of our segments. And we see a great need here. And we're talking about both outdoor and indoor, regardless of whether it's a grid or fiber between buildings, cities, countries, through tunnels and so on and so forth. Not least the 5G infrastructure that is still ongoing or just this FTTH or FIBER in general. We also work with data centers that are Egentligen för oss ett nytt segment, kanske inte nytt för oss att jobba med datahallar och så vidare, men det har vuxit enormt det här området och vi ser hela tiden i takt med att mängden data ökar, så ökar ju då också även lagringskapaciteten. AI är en stor drivkraft, varje fall kanske den senaste drivkraften i det, men även säkerhet och lite tuffare miljöer är viktigt att man klarar av här. So that's what we're working with. And just fiber or broadband and fiber and data center stands for about 25-30% each. And cabling and others, as I mentioned, our different cable system parts stands for 40-50%. If we look further, the technology also works like that. When we work with Våra industriella största potentiella växande områden är ju fortfarande, om vi pratar just om fiber, så är det efter till H, alltså fiber till hemmet. Och då har vi även, även om vi exkluderar 5G-utbyggnaden, även om Norden har byggt and done quite a lot and have been in the forefront so far, we see that this last mile and after-end now is starting to take off. New areas are being built and that is of course also driven by a lot of economy. And one of the reasons for the acquisition The rest of the countries on the table here is precisely because we see that fiber penetration has enormous potential for us. Actually in all of these, Belgium, Germany, UK, Ireland and the Netherlands where we are. Germany, if we take them separately, it has been tough. I think the whole Our entire industry and our industry colleagues have felt that it was tough in Germany, but still a fantastic potential there, especially since the German government has gone out with increasing the willingness to invest from 12 to 38 billion until 2028. We also see the data center part, there is also a very big potential for us. Everyone wants to participate, especially in these hyperscale businesses, the very, very largest, the big five. There we are often with, or not often, I can say, there we are happy to deliver as much as we can. But our main focus is on small and medium-sized data centers. And here we also see a lot of help from especially so far in the UK and Ireland, who have contributed a lot with internal help for us as well, and of course also in their own regions. Yes, we look further here at the next slide. Good. So this is how we look today. We are represented in these red dots. We see that since 2019 we have grown quite strongly. Sweden, the Nordic countries are no longer the largest, but we have about 39% in the UK. And we have grown through Denmark, further into Germany and Benelux, and now last with Woods, Ireland. We have a net sales of about 1.6 billion. We have an EBIT rolling 12 of 109 million. We work with about 200 different suppliers, of which several I don't dare to say all of them, but several of the world's leading manufacturers that we cooperate with, both explicitly in some countries, but also where we help each other between countries. We also have our own developed products that we have had in the company for a long time, and that can also apply to countries that we have acquired the company that they have also had a similar profile in that way. So we have a good mix. We have a good collaboration that is improving between countries. So yes, we think that's good. We also work with a large number of customers, about 4,000 customers with a fairly high customer satisfaction. which is the NPS score, which goes from minus 100 to plus 100, and we are at 57. And of course, we are proud of that and it is an important factor for us also when we look at acquisitions that we do, how it has looked historically. This means that we get a little less customer dependence from individual customers. We have a good mix important for us. Vi har ungefär 190 anställda och tillsammans äger vi 15 % av bolaget. Det är vi såklart stolta över, att ha en sådan del av lojala och intresserade anställda. Precis som vi har väldigt många bra övriga investerare såklart. Yes, Q3. Yes, it's kind of a quarter for us. We have a lot of differences between countries. Niklas, would you like to clarify a bit here?

Yes, absolutely. Thank you very much. As you said, we have a growth compared to last year, which is driven by Sweden, but also by the acquisition in Ireland, which we did in the second quarter. At the same time, we are weighed by our smaller regions, which have gone tougher during the quarter. We increase sales by 2.3%, but organically we decrease by 7%. And the decrease is mainly due to Germany, Benelux and then primarily Holland, and also Denmark and Norway. Denmark and Norway, they have had a tougher market for a longer period now, several quarters, and it was still tough in Q3. We could see a little lightening in Denmark, which is growing compared to quarter one and quarter two, but compared to last year, they are still down. When it comes to Benelux, we are decreasing this quarter, and that is due to the Netherlands. We have also decreased in Germany. In common with both Germany and Benelux is that we have had extremely strong growth in the last quarter or the last year. But there we have had a comeback in this quarter. which then keeps our growth down. If you look at EBITDA, then we decrease EBITDA by 36%. But if you look at exclusive revaluations of earnouts, unrealized currency effects, then we decrease EBITDA by 10% compared to the same quarter last year. And that means that the margin has decreased to 4.6%. The EBITDA margin last year was 7.3%. If you look at exclusive currency effects, it is 5.2% against 6% last year. Earnings per share, which is an important key number, is decreasing dramatically from 63 EUR per share to 22 EUR per share. Even there, if you look at earnings per share, exclusive revaluations of earn-out and unrealized currency effects, it decreased from 39 to 32 EUR per share. An important key for us, which we focus on a lot internally, is operating cash flow per share. There we had a very strong quarter last year, which mainly consisted of the liberation of mobile capital, and that was that we reduced our deposits. We have continued to reduce our deposits since Q3 last year, but not at the pace we had during the individual quarter last year. The cash flow is an important focus for us. A key figure we look at internally, which also shows the cash flow generation over time and the trend over time, is EBITDA over Networking Capital. We can see that we increased from 33% last year to 41%. Our net debt has increased during the quarter and is 2.7 to 2.9 times our turnover, depending on whether you count inclusive leasing or exclusive leasing, which is within our goal, which is 2 to 3 times. The increase we have seen during this quarter is equivalent to an increase in net debt, and the net debt has increased because we have paid out earn out from network centers. 67 million. And Network Center has grown very much since we acquired it, and they are up 32 percent, rolling 12, compared to the time we acquired it, which is an incredibly good development, and where even the margins have strengthened strongly.

Good, thank you Niklas. What we have highlighted here is that we see the data center segment continue to grow in most of our markets. And the same thing with our cable cabling, that we see that we are stable there. And the broadband segment, we see that What we know and the signals we get without giving too clear forecasts is that growth should come in the long run and we are on the lookout for the market. Niklas, should we say something about Ireland?

Absolutt. Irland, som vi förvärvade här i Q1, har växt kraftigt under kvartalet i förhållande till Q2 och är upp 42 procent, vilket har varit en väldigt fin utveckling för det bolaget. De har en viss fluktuation mellan kvartalen, men vi ser att det taktar på bra just nu.

Bra. Tack så mycket, Niklas. And if we look at the last page here.

Yes, and here we have our development, where we see that the organic growth has been 4.7% on Forma, including Woods. And we are at a CAGR of 30% compared to 2019, which we have as an annual rate. And that is including acquired and organic growth. If you look at EBITDA, rolling 12, including acquisitions, we are up about 15% per Q3.

Good, thank you Niklas. Vi öppnar upp för frågor och jag ser att det har kommit in en del. Vi får här marknaden. Jag börjar dra igång direkt med de här. Marknaden i Q3 var klart svagare än förväntat. SE Banken hade en prognosomsättning kring 425 miljoner. Ni kommer in på 390. Ser ni även en avmattning och svagt Q4. Niklas, what do you say?

We can't give clear forecasts, as I said, but... No, exactly. We don't give forecasts, but we can say this, as we have also presented in the Delos report, that we have had tougher markets. i ett antal länder som har hållt ner omsättningen det här kvartalet. Vi nämnde bland annat Holland som hade ett väldigt starkt kvartal förra året där vi levererade ett antal större datacenteraffärer som vi inte hade detta kvartalet. Samtidigt så ser vi att datacenter växer inom alla regioner egentligen. And Benelux as a whole, which is now down 17% per quarter, has in total increased to 68% per year. We also see a lightening when it comes to broadband segment. Broadband has had a number of tough years. The interest rates have led to to the fact that the financing has been more difficult for the customers. They have focused more on connecting home than on rolling out new fibre. We are now seeing lightings in Sweden, and we have seen that it is increasing again in England. Även i Danmark, även om det inte ökar i förhållande till förra året, så har det ökat i förhållande till det första halvåret. Så vi är försiktigt positiva där. Samtidigt så är det en svår marknad. Men vi har drivarna på plats, vi har det underliggande behovet kvar. Så vi ser fortsatt positivt.

Bra, tack för det utförliga. Ska vi ta den där då? Du kan läsa den där själv Niklas, du ser.

Ja, skuldsättningsgraden går upp på grund av svagt EBITDA nu kring 3 gånger mål, 3 gånger mål 2 till 3 gånger EBITDA. Ska vi förvänta oss att skuldsättningsgraden försämras ytterligare i Q4? As I said before, the debt is increasing. Not primarily because EBITDA is decreasing, but because EBITDA has increased compared to last year. This is included in acquisitions. Last year, EBITDA was 134 million, while last year it was 12 million. However, our net debt has increased during the quarter. due to paid earnouts for network centers. And that has increased our debt rate during the quarter. If you look at the coming quarter, we are very much focusing on cash flows. We continue to to make our traffic capital more efficient. We have done that, but actually from the end of the pandemic and forward, where we have seen a constant improvement of our traffic capital. We will continue that focus and will continue to make traffic capital more efficient, even if it may not reach the levels we had during 2023. But by freeing the cash flow, we will also reduce our debt.

Good, thank you. We have something here. The broadband segment shows positive signals in some countries. Has the market turned? Yes, spontaneously we can say that the structural need is absolutely still there. And we... It's lower financing costs than before, which have been heavy in this segment. But we hope that this will come to our advantage here in the future. We can take the next one. We have a question here.

How long does the covenant apply for 3.5 bank loans? We have 3.5 times EBITDA. It applies three quarters after the acquisition. After that, it goes down to three. Our goal is two to three times EBITDA. A question, you mentioned Fibroclan's change of owners as a reason for weakness in Belgium. Can you expect that the volumes will return to the levels we saw in Q1 and Q2 already in Q4? As we have said, we are not leaving any forecasts. Q2 was a very good quarter in Benelux and Belgium. We still see that there is a lot of work to be done. There has been a certain impact in relation to with Fiberglass. One shareholder bought out the remaining share. But we still see very positive results in the whole region, Benelux actually. And also Holland, which we have reduced this quarter.

One can add to that, The change of ownership does not mean that we have lost orders in any way, but the change of ownership is more purely the structure of the business, that it should be handled in a different way. So the business is not lost, I just want to underline here. Thank you, Niklas. We have something else here too.

Here we have a question, how do you see the margin goal and what needs to happen for you to be able to get there? And we have with the margin goal here, we mean EBITDA margin of 10%. And we see on several of our markets that we are around 10%. However, we have these powerful growth countries still working on the margins. And we will need an increase to be able to reach the marginal goal, which we also assess that we will do when the markets are mature.

Should we take this one too? We have Germany weak in the quarter and you mention challenging markets and great competition. Ser man tecken på ökad utrullning och i sådan fall när? Jag tror att de tecknen som man ser och har märkt är att det har varit en väldigt utmanande marknad i Tyskland. Som alla de här jättestora marknaderna så tar det ibland väldigt mycket längre tid och det tycker jag har varit någonting som vi har sett hela tiden i Tyskland redan innan vi själva fanns där. Men sedan har ju Tyskland haft utmaningar i sin ekonomi det har väl de flesta läst om men som jag nämnde här inledningsvis också så har ju även regeringen där beslutat att öka det är ganska stor ökning alltså en tripling av den tidigare investeringen så att jag är övertygad om att marknaden kommer och det kommer hela branschen få ta del av exakt när ja det kan vi inte säga det vet vi inte

I have a question about the UK. The UK Q4 2023 was very strong. Is there a seasonality there that makes it possible to expect a sequential increase in Q4 compared to Q1 Q3 2024? And it's true, Q4 2023 in England was very, very strong. We had a larger project that we also press-released during 2023, which we delivered on in Q4, partly also in Q1, a nice data center project. and which have also given business after that. At the same time, as we have said here, after several quarters or actually a whole year of reduced broadband market, we have seen a turn in the broadband market and a lightening in the broadband market, which is still positive. from low levels, there is still a lot of uncertainty about that, but the need in England has not changed and the need to roll out fiber has not changed. At the same time, data centers, which have been a big driver in recent years, and even a quarter before that, continue to grow. Partly driven by AI, but also by other parameters.

Thank you. Here we have a question. But let's see, I don't think we can answer that, it was very straight. But let's see. Then I went through something there. Yes, data centers are getting more and more important. Men hur länge kan vi förvänta oss det? Det är egentligen som jag sa inledningsvis där också. En gång i tiden kallar vi det här för korskopplingsrum och datahallar när stora turorna kom. Now it's a data center, and as we said, AI and increased data amounts drive the need for this. We don't see any sign that it will reduce this time. And especially enterprise data centers, they grow everywhere. very much in financial centers, for example, or above all in London, Frankfurt and so on, different countries. We believe that this market will not see any decrease in any case. There are no signs that indicate that. Good. I think it's starting to take off a bit in the question box here. Thank you to everyone who listened. Thank you, Niklas, and we will hear from you in the future.