Bergman & Beving AB (publ)

Good morning, everyone. This is Magnus Söderlind, and on my side here I have Peter Schoen. So welcome to our financial report for the last fiscal quarter up until March 2025. So we will have, as normal, a Q&A in the end, and it's also possible for you to post questions along the way that we will then answer when we have ended this session. So just starting with some highlights from the first quarter, we have experienced still a sluggish market. I previously said that the best KPI from an aggregated group level is number of employees in the construction and industry sector in the Nordics. And new figures indicate that there has been a 2% decrease in the Nordics. This is a mixture from Q1 calendar figures in Sweden and Finland and Q4 figures for Norway. But overall, This is very representative for how we perceive the underlying market during the last quarter. Despite that, we have increased earnings and profitability and also the earnings per share. So we increased the turnover by 8%. The majority of this is acquisition driven turnover. We also increased the EBITDA with the same figure, 8%. and we were able to maintain the EBITDA margin 9.5% compared with 9.6% last year quarter. And we have now seen the effect of lower interest rates. So the EBIT adjusted has increased 23%. And when I say adjusted, we have adjusted for the goodwill right on we have made this quarter and why I will come back to that later on is related to the agreement of selling skydda Nordic. We have continued to work on capital efficiency. So we have now increased the profit of working capital, our measurement with 5% units in this quarter and this year. This is a roll in 12 figures. And I said earlier, the earnings per share, and this is also adjusted for the Goodwill write-down, has improved to... 805 compared with 715. And we have the board has also proposed an increase in dividend that we have communicated in the report this morning. And last but not least, we have made an agreement of selling skydda, the Nordic part of skydda to Alsell. And I will come back to that specifically later on in this presentation. I've said earlier that diamonds are formed under pressure and based on the underlying market development, we still have challenges in the market. Really, we continue to do company by company according to a capital allocation model that is named focus model, where we adapt the agendas based on their profitability as well as their earning growth potential. So it's really having different agendas for different companies. And some of our companies have actually a good underlying market and good growth possibilities. So it's not about having one recipe for all companies. In some companies we invest for growth, but in some companies we need to improve efficiency. So it's really not a standard recipe across all 35 companies. We didn't make any acquisitions in Q4. I would say, as communicated earlier, we are very cautious in making high quality company acquisitions. So in the Q4, we didn't succeed in meeting those kind of criterias. But on the year in total, we delivered on our acquisition target, i.e. to acquire 50 to 80 million in earning per annum. And as also communicated, we made two acquisitions in April, the Q1 quarter this year. So I don't see, and you shouldn't expect any changes in the acquisition tempo we will have going forward. we will still commit to the acquisition target that we have communicated. I mentioned it, we made six acquisitions last fiscal year. I will not go through them in detail, but it's a combined earning of 385 million SEK. As communicated earlier, we focus on acquiring companies with a profit margin above 15% and a profitability well above 45%. That is kind of the group target as such. And if you apply the 15% profit margin on the 385 million in turnover, you will then mathematically understand that we have reached the acquisition target interval that we have communicated. for the fiscal year. So if we look at the trend, we now had 21 consecutive quarter with increased EBTA. And last quarter we increased 8% as communicated earlier. And we have a CAG now of 26% over the time period. So we have a positive trend and the aim is of course to continue that trend despite we foresee a continued sluggish market going forward at least in the next coming quarters. If we look at the gross margin, as communicated earlier, and as you can see on the graph, we have improved the gross margin significantly, close to 7%, 8% units during the last three years. We have communicated that this is mainly due to we have phased out low margin, high volume products. And we have also communicated some quarters ago that we have more or less finalized that kind of effort. And you shouldn't expect any kind of increase, at least significant increase in the gross margin going forward. What you can observe is that we have a little bit lower gross margin in the last quarter, but underlying, we are kind of on the historical levels. We have had some new customer onboarding during the quarters that had one-off negative gross margin effect. And I will come back to that later on under the core solution division to explain more about that. We continue to focus on growing the own product. And as you can see on the graph now, we are close to the target of 75% set for this fiscal year. We're at 74% now. And I can't see any reason why we shouldn't reach the 75% during this fiscal year as communicated as a target. so with that said uh we have set some targets uh related to the property working capital ebit in absolute terms and the ebta margin and we have said we should reach 45 percent in profitable working capital laced this next fiscal year ending march 27. We are now at 31% and we had had a 5% improvement in percent unit during this quarter. And as you can see, that is kind of the tempo we had last fiscal year as well. So we now see the effects of the efficiency activities we have taken during the last two years. And I expect, and we can also see that rolling free, that we will continue on this improvement path. And I expect that also to accelerate during the next coming quarters and years. So I think still the 45 is reachable as such. We have set the target of reaching 500 million. We ended at 399 during this fiscal year, ending in March. We have now went into agreement to sell Skydda. That is an underlying EBIT level of 45 million SEK. So that will, of course, affect the target of EBIT of the 500 million, but we will come back to that later on. And the EBIT margin is 10%. We are now a little bit behind that, and it will be challenging to meet that, big in the tough market underlying conditions. But still, we were working ahead of that. I don't see any reason why the group shouldn't be able, the potential is there and should be able to reach 10%. For me, it's more like a timing issue now. So with that, I will hand over to Peter talking about earnings per share. Thank you, Magnus.

It's a nice topic, so I'll be glad to cover that. And as you can see on the graph, the EPS is continuing to increase. It's all time high this quarter. Of course, excluding the goodwill costs. But it has, of course, the underlying EBIT result is the main factor for increasing EPS. But it is also boosted, of course, with the lower financial net. So we have both effects and we have an increased EPS both in the quarter and the rolling 12. If we look at the inventory level and look at the quarter, we had an inventory of 1157 and it's lower towards last year. Organically, we have reduced the inventory by 80 million since last year. But you can see also it's lower than in Q3. And there it's a seasonality effect where SV is delivering a lot of spring orders to their customers. So if you look on the history, it's normally a bit lower in the fourth quarter. But I'll come back to the cash flow effect regarding that. So even though we have improved or reduced the inventory, we still are not on the ITO levels that we used to have, even though it's beginning to get closer. so we'll need to continue to reduce the inventory but it will be in a slower pace and and as you can see it has been slower also this year compared to last year so it's a gradual effect going forward And if we look at the cash flow, it's lower this quarter by quite a lot compared to last quarter, but it's mainly due to the normal seasonality effect. And if you go back a bit to 2021 and 2021-22, you can see that the fourth quarter is a really weak cash flow. So that's the normal seasonality effect. Of course, the improved profitability makes it the positive cash flow, but still weaker. If you look at the last two years, we had quite strong cash flow, but then we had larger inventory reductions during these periods. And the main reason for the lower lower cash flow is that SV is invoicing their spring orders. It, of course, decreases the inventory if it becomes accounts receivables and they pay their accounts payables to the suppliers. So the cash will come into the company in June, July for those orders. So that's the main reason for the seasonality effect. And then even now we had some start orders for SV also influencing a bit on the lower side. And as I said on the previous slide, it will be and has been a bit lower pace in inventory reduction. And yeah. So if we continue to net debt, we do have an increased net debt. It's 1278 compared to 1057 last year. So it's roughly 200 million. But then we have made acquisitions of 402. million during the year so a lot has come from our own cash flow so now it's a net that dbda of 2.3 so it's a bit higher than last year but still very comfortable And there's nothing in our debt situation that hinders us to make acquisitions. So we will continue to do that in the pace that we have communicated. And we do have a very strong pipeline, so we don't see any issues on that side going forward.

Thank you, Peter. I will now go into the three divisions specifically. Core solution is still facing a slow underlying market. The majority of those companies is addressing the construction sector. It's specifically not to a great extent new build of housing, but still it's partly reflecting the overall construction industry in the Nordic. And that has been a tough market during the last years, I would say. But SV, who is the biggest company in this division, have made three new large customer agreements. And when making those agreements, you need to make a take back set up where you actually take back the current supplier and replace them with SV in their retail stores. And this is something that then those takebacks is very difficult to get a decent margin when you try to resell them to other companies. So that is the main reason why the gross margin on the group level, as shown earlier, has to be a little bit lower. If we would take back, if we would kind of not count those take back effects, the gross margin will be on a previous level, on a group level. As earlier communicated, we haven't made any acquisitions in the Q4 quarter, but already in April 16, Core Solution made an acquisition in England, Raintight. They are actually making specific products that you use when you build or repair big commercial buildings or installations. to kind of guide out waters from specific building areas as such. So very niche company addressing a very niche market. And this is a very profitable company as such and great growth opportunities going forward. So that's a really good acquisitions. As you can see, this division increased the revenue by 30% and increased the EBTA by 11%, and the EBTA margin is a little bit lower. But if we look at the revenue and the EBTA increase, it's mainly due to acquisitions then. Then SV had some startup orders that was delivered to replace those take-back volumes. That has affected the revenue as well, but has then also affected the EBITDA margin that actually is a little bit lower in this quarter. But once again, this is a one-off effect that we expect to be back on a previous level in the next quarter. If we then look into safety technology, the main event here during the quarter was the agreement that was signed on March 23 to DaVest Skydda, the Nordic companies of Skydda, that's Sweden, Finland and Norway, to Alsell. So this is a venue with a turnover of 550 million with an underlying EBITDA of 45 million. And the reason for us to sell that is that the skydda is a niche wholesaler within personal protective equipment. But mainly they have been addressing independent resellers. because typically the big reseller have that knowledge in-house. And if you know about the Nordic reseller market, that has been partly consolidated over time. So we think that Alsel, that we already have a lot of business relationship through our product companies as well. It's a very good match for the skydda people, employees and the customers and also for the Bergman Vering Group, because we see some good growth opportunities for PPE product companies after this deal has been settled. This is still subject to approval from competitive authorities in all the countries, but we expect that to be cleared in June, July. So the EV we got for this agreement is 300 million SEK and a possible earn out of maximum 80 million. This is something and we have communicated that the capital loss is 270 million, which is goodwill related then. I don't know if you'd like to comment that specifically, Peter, in any way.

No, I don't think so. I think that's the loss we've taken on the goodwill this quarter. It could vary, of course, to minus 270, but around that. So it should be a not so negative effect when the deal comes through. But then, of course, we do have the restructuring cost of 70 million, like we communicated earlier. So it will be an effect.

Skydda has also a company called Skydda International that is selling PPE products outside the Nordic. And that's mainly our own PPE products. And that will remain within the group because that's an important channel for our product companies reaching other countries outside the Nordic. And that company has a turnover of roughly 175 millions. So that will remain in the group. But as Peter was saying, after forming this type of new setup, we will have some restructuring costs that is estimated to 70 million. Also, Safety Technology made an acquisition in April, April fall already, Ontech. It's a Finnish company making systems for controlling hazard liquids. It's about measuring and making sure that the viscosity and the temperature is in line with what is necessary to prohibit accidents or any failure. And this is a very niche company with very, very good margins. So this is mainly a software company enhanced by some physical equipment like sensor and so forth. So this is a company with a strong position in the Finnish market, selling to a lot of chemical related companies, but also selling outside Finland. And here we see some growth opportunities going forward, specifically outside the Finnish region as such. Also, this division have a revenue increase of 7%, but the EBITDA increase is 48%. We had some extra costs during last Q4 quarter doing some changes within this division. So that's one explanation, but also that we have A better performance generally across the group as such has helped us to improve the EBITDA, mainly due to lower costs, but also related to improved gross margin. So we have here an EBTA margin increase and it's now 7.7%. So it's increased by 2% units, even more than that. And this is the division where we're communicated. This should be at 10%. So we are surely but steadily getting to that 10% EBTA margin this quarter. And lastly, then, the industrial equipment division. Here we are facing mainly the construction industrial market in the Nordic, where we saw a weaker demand during this quarter, especially in our wholesaler Luna, but also in Teng Tools and the Finnish company Polarterm, that is selling mobile heating equipment a lot to rental companies. And of course, if the rental companies have a low demand, they typically don't buy new equipment. So this is an effect that is reflecting the underlying market weaknesses. But when the market takes off, of course, they will need to order new equipment and that will then have a positive effect on polar term. So here the revenue was actually decreased to 470 million, and also the EBITDA was down to 45 compared with 51, as said earlier, lower sales and lower gross margin, but partly offset by lower operational expenses, but was not able to kind of compensate for the sales and gross margin decrease during this quarter. The EBTA margin is still above 10%, it's 10.8%, but it's a little bit down compared with previous year of 11.1%. I would say we need to see some improvement here in the underlying market for this division to kind of step up and continue to deliver a growth in EBTA and margin as such. So what is the way then to our target? 500 in EBIT10, in EBIT margin and 45 in profitable working capital. Yeah, as indicated earlier, we need to see some market recovery. And now when we look at the market as such, I think we shouldn't expect any kind of recovery until early second half of this financial year. As you know, there has been a lot of increased uncertainties in the market based on what is related to restrictions in trade and so forth across the world. We have a very limited exposure to the US. But of course, if this affects the total economy as such, we will also be affected in an indirect way of a slower market recovery as such. But we will continue to what we always do. It's focusing on profit expansion over revenue growth. We continue to work with our capital allocation model that makes sure we have a tailored approach to each individual company based on their situation. We will continue to support our companies with our Berman & Beving toolbox to help them to develop, depending on what type of development projects they have. And we will continue to acquire in line with the acquisition targets we had set and focusing on leading a B2B technology company in growing niches. We also have some specific themes. Peter showed earlier the ITO, the inventory turnover, that has improved. But we still are not back to the pre-corona level. So that's still a focus. And that will also, of course, release some cash flow over time if we improve. We have some improvement, but it will be a little bit slower. We have taken the low hanging fruit now. So we really need to kind of work diligent on getting, you know, improvements step by step in many companies. But that is a work that will continue. I have a focus going forward. Based on the underlying city market, we still have a tight cost control. We still make some efficiency programs in some of the companies, but we also still try to ensure we're able to capitalize on an improved economic situation in the future. So it's a balance now to make sure that we didn't prohibit the companies to leverage a future bounce back in the market as such. And as early communicated, I think you shouldn't expect an increase in the gross margin, but we are really focused on making sure that we protect the margin going forward. So some companies has made price increases during this Q4 quarter. Some will make during this quarter. to kind of adjust for cost increases. They are on a much lower level than they were some years ago, but still we need to make sure that we adjust according to the changed environment. And we'll also work on the supply side to improve the agreements and make sure we have good pricing conditions in the supply chain as such. So with that said, I think we're ready for this presentation and open up for some questions.

If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Albin Nordmark from Nordia. Please go ahead.

Hello Magnus and Peter, Albin from Nordea here. So basically just two questions from my side. Firstly, employees, construction and industry in Nordics were down 2% as you showed there, while you had flat organic sales growth. So of course, the difference is not really material, but would you say that this is spillover from Q4 alone, or do you still see yourself grabbing market share in some companies?

in some companies we definitely grab market share i mentioned the sv and they have made three new nordic agreements with with some reseller customers So they are gaining market share. And I would say we have several more good examples on that situation. We have the Cresto, for example, that has been a supplier to Vestas worldwide on safety equipment. They are now starting to deliver to Siemens Gamesa as well. So we have a lot of companies that is gaining market share as such. But we don't see that in the top line figure because The underlying market as such is offset those type of agreements. And SV, for example, you will see that effect on the new customers in the quarters to come. You haven't seen those yet in the figures. And Cresto, for example, in Gemesa, there has been a test order delivered to Siemens. And over time, I expect that volume to increase. So... We have a lot of companies gaining market share, but they tend to be in a build-up phase. And you haven't seen the effect on the total as it's partly offset on the weaker underlying markets.

All right, that's clear. And for working capital, you tied up some capital here, which I haven't been doing the last year really. I think every Q4 at least between 17-18 to fiscal 21-22 you did that. So would you say that this is back to normal seasonal patterns or anything else that we should take into account?

No, I think it's a normal seasonal pattern, I would say.

All right, thanks. And then one last one, maybe you mentioned this, missed it, but The retaking of products, do you expect this to continue in the quarters ahead or was it only for Q4?

The absolute majority was taken in Q4. We have some to be done during April, actually this month. But the majority of that effect you saw in the Q4. But there are some millions to take back in this quarter as well.

Perfect. That's all for me. Thanks.

Thank you.

The next question comes from Zeno Engdahl and Rick Chudy from Handelsbanken. Please go ahead.

Yes, good morning and thanks for taking our questions. Just a follow-up on the FV volumes. It was very clear on the gross margin side that you maybe quantify on the revenue side from how much that was in this quarter?

It works like this. When you get into those type of new agreements with the new customers, you have to clear what's left in the reseller shelf. And when you take back those, you have a start order that you deliver to fill those shelves out with SV product instead. So that have had some effects on the SV revenue as such. It's not a very, very big number, but it had had some positive effect on SV during the last quarter, yes.

Okay. And a question on state solutions. We talked about this before, I think, but customers have now started to fill up their inventories and that might have had a positive effect even though underlying demand is relatively stable would you say that the effect have been taken out in this quarter or do you still see that they are undersupplied for for the quarter ahead

No, I think we now see the actual demand, I would say, in safety technology. Before they reduced inventory, but I think now they can't do that much anymore. So now it's more an image of the underlying demand going forward. So, yeah, it could have been some spillover effect from last quarter, but that's marginal, I think.

Okay, very clear. And just a question on acquisitions. You wrote in the report that you've taken steps to support faster acquisition base. Can you talk a bit about what you've done there?

Yeah, we have strengthened the divisions with some resources to enable the divisions to work broader and more active on the acquisition space. So we actually added some resources within the divisions to enhance the acquisition work. So we are building for stepping up the acquisition pace in the coming years.

very clear and just on the on M&A related to the divestment of skydda do you feel that you have to say equity candidates which you can relatively quickly bridge the gap or so do you say would your acquisition pay to be relatively unchanged if you would not have made the divestments

I wish I had the answer on that question. I mean, we didn't require any companies in Q4. The reason for that was not that there was no company for sale. The reason was that we'd chosen not to make any acquisitions because we didn't think they were, you know, fitting our acquisition criteria and the valuation range we have set. So it's very difficult to kind of make a forecast on what we will be able to acquire in the next coming quarter and when we will acquire. But we still have the aim to acquire within the 50 to 80 million range in earnings per annum. Yes, now we have the capacity. If we close this deal, we will get in 300 million and hopefully some earn out. And that will strengthen our cash position to make acquisitions. But with that said, it's not guaranteed that we will be able to close those deal matching those 300 million extra. That could be an ambition, but we will not hampering on the quality. of the companies and will not hamper on the valuation intervals that we're willing to pay for. Hopefully, we will be able to increase the acquisition pace, but that is not something we are certain of as of today.

But of course, the increase in resources will make that more probable. But still, like Magnus said, it's very hard to say what will happen on that side. It's an upside.

That's very nice. And just a last question for me, the 70 million restructuring charge, can you give any color on the facing of that? Is it all coming in this quarter or will it be when the improvements have come in?

I think the quality accounting effect, you can say, I think that will happen in our Q1. mainly. So I think then we will have to, even though we have not made the deal, we will, I think, set the assets under sale and things like that due to regulations. And also, I think the 70 million will come there too. When it comes to the 70 million, Part of that is, of course, some coverage for empty space in our logistics facility, and else it's some redundancy cost and some other IT-related costs and things like that.

Very clear. Thanks. Back in line.

The next question comes from Ryan Sullivan from Tritex Capital. Please go ahead.

Firstly, you are selling off 10% of your operating profit at a multiple of 7, while you yourselves are valued at 25 times. That simply doesn't make sense, unless you need the money due to excessive leverage. Is this because you are worried about the gross margin? For the past three years, you've operated in an environment of inflation and currency tailwinds that have boosted your margins. naturally your gross margin increases when you have been selling inventory purchased at lower prices so to the question what do you regard as a normal gross margin going forward in a more stable inflationary environment 44 thank you

I think it's very hard to say what the normal gross margin is for us. Since we're doing acquisitions, it's very hard to say what it will be going forward. Even though we do highly profitable acquisitions, their gross margin could be even lower than the group average or a lot higher. So it's very hard to mention a number. So what we're saying is that you should expect it to be fairly stable going forward. That's our best estimate.

Question comes from Emanuel Jansen from Danske Bank. Please go ahead.

Good morning, Magnus and Peter. Maybe a little bit somewhat on the same subject and maybe already answered that, Magnus, but if you were to maybe elaborate or envision a scenario regarding the sale of Skydda Nordic, what do you see as the primary impact on Bermond Behring's potential moving forward due to the sale?

As communicator, I think ASEL will be a better owner to the Skydda Nordic operation than we are. They will be able to kind of leverage the manpower and the presence of ASEL across the Nordic region. Since Skydda is a an important reseller wholesaler for the our product companies within the ppe segment that will most likely increase the presence of our product companies within the in the i'll sell sphere as such so as said earlier i expect that to have a very positive effect on our product companies when skid is a part of our cell but to quantify that is is very very difficult And I think you will not see any immediate effect of that. That will be something that will grow over time. But one important changes that we expect to see quite early is that our product companies across the whole group will be represented at the Alsel central warehouses. in their different countries. And that will make it much more, you know, present alternative for the whole Al-Sale Group. If you're not in their central warehouse assortment, it's a big hinder for product companies to have a present within the Al-Sale Group as such. So once again, we expect to see positive effects. They will not be immediate. They will kind of materialize over time. But also to quantify that is way too early and very difficult to estimate.

I don't know if that will not affect. Yeah, that was very clear, I think. And you don't expect this to change your mind on the way of doing acquisitions since you will maintain on the same M&A pattern going forward.

Yeah, I mean, we have set the target to acquire 50 to 80 million SEC per annum. That interval will, of course, change upwards over time when we grow. So I will not exclude when we're at 500 million in EBIT that we will revise those targets and revise them upwards.

Yeah, got it. And could this... Now, you already have a collaboration or relationship with Alcell, of course, but if your own product brands are entering maybe Alcell to a greater extent now, could that also mean that you maybe will have this start orders effect and take back costs, etc., going forward in the near term?

If we look at our PPE assortment, that assortment is a little bit different than SV. If you go into a reselling store selling, you know, fasting products, you will see, you know, big shelf with a lot of fasting products. Within the PPE segment, that is much, you know, smaller assortment and so forth. So you will not have that take back effect in the PPE segment. I would say it's only within SV and the frosting segment we have those take-back situations. That's not something that is relevant for all other product companies.

Yeah, okay, got it. Maybe a last question from my side. I didn't entirely catch, I think it was Aldin at Nordea that asked the question, but on... on SV and the start orders. Should we expect some orders to also occur in the near term or is this the main explanation why you displayed a flat organic sales growth in the quarter or should we expect this to continue to more stabilize around zero or should we expect it to return to negative organic growth again in the near term or how should we view it?

We had some positive effect of SV during the last quarter due to these replacement orders. So that's partly a reason why we had zero at organic growth. And once again, the underlying market is minus two. So I cannot promise that we will deliver an organic growth this quarter. Or even a zero.

Yeah, I totally understand. Yeah. Yeah, totally understand that, yeah. Well, I think that was all of my questions for now, so thank you very much, Magnus and Peter.

Thank you. There are no more questions at this time, so I hand the conference back to the speakers for any written questions and closing comments.

Yeah, thank you. We received some questions and I think two of them we might have answered already regarding the take back and so on. But we do have one, whether we see any challenges or uncertainties regarding the tariffs on specific portfolio companies.

No, we communicated in the report that we only have 2% of our revenue in the US. So we have a very, very limited exposure there. Some of that volume is going to the defense industry or defense of the US. And to my understanding, it's still unclear if those orders will be affected by the tariffs and such. So it's still a little bit uncertain, but once again, it's a very limited volume. It's about 100 million SEK per annum, roughly. that is going to the North America. And some of that is actually also produced or delivered from the US. So it's even a smaller figure that is actually imported in the US from our companies. So I see for us, it's a very limited kind of issue that will not affect the group as such.

Directly, at least.

Directly. Yeah, once again. We don't know the effect on the underlying market in Europe, but if we look at the tariffs and the volumes going to North America, that will not have an effect on the group level as such.

Good. Thank you. And I think that was it for today.

Thank you very much for listening and looking forward to talk to you next quarter. Thank you.