CAG Group AB (publ)

Hi, and welcome to today's webcast with CIG Group, where the CEO Åsa Landén Eriksson will present the report for Q3 2024. After the presentation, there will be a Q&A, so if you have any questions for Åsa, you can send them in the form to the right. And with that said, I leave the floor to you, Åsa.

Tack så mycket. Kul att ni har valt att vara med C&G här på onsdags eftermiddagen. Titeln på vår Q3-rapport som jag ska presentera på svenska är vinsttillväxt i en marknad under återhämtning och det känns ju bra. Så jag går rakt på sak. Jättekort bara för er som inte känner till oss så är vi We are also an IT consulting company with management and management. An important thing is that we have ten independent subsidiaries in different niches, which is a great structure. On the map you can see where we are and you can see that we have the pleasure of being one of Sweden's best jobs. We have won third place in Great Place to Work two years in a row. If you look at what we do, we do IT things, system development, project management, test automation, BI, analytics, which in extension is AI. The banking sector, anti-penning, payment solutions, anti-financial crime, fraud. And in operation and administration, it is the goal and land storage and storage, many, many goal migrations, as it is so nicely called nowadays. But also financial expert systems such as the portfolio management system, Simcorp Dimension and the like, we work with. So we are very niche there. And the Tilda business also has a SOC, a security surveillance service. which is also backed up by our specialist box within cybersecurity, which can do everything from pen tests to information security, such as ISO 27001 and DORA, for example, within the financial sector, with various regulations. Within defense, we work a lot with systems engineering and lifecycle management, which focuses a lot on handling and handling of various large systems. And within e-commerce, we have common e-commerce solutions and also product information systems. And I don't have a special slide about AI this time, but this goes into all of our areas. If AI is business value, it is very important that you know your businesses out there. So we focus a lot on business value for our customers within AI. We have had a very good development over the past few years and we intend to continue with that. We also have 20% recurring revenues in addition to our consulting services. Then I go straight into Q3. How did it go? Pretty good, we think. We have a profit growth that delivers the highest margin ever in the history of CHG. 7.1% is due to the fact that it is still Q3 that is the semester period in our industry. Otherwise, the margin should be up to 8, 9, 10, maybe even 11%. But for Q3 it is really good and our EBITDA grew by 16% as well. The turnover has been good in a fairly divided market, a little more challenging than last year. So that's what we're happy about. And we also have an increase in profit per share. So far, so good, we think. Good Q3, if we can say it ourselves. And looking at the whole year, we also live up to our reputation as the most stable IT consultant. Vi har en vidmakthållen omsättning med en tillväxt på egen affär, om vi räknar bort underkonsultaffären, som är av olika slag, och en marginal som är hyggligt i närheten av föregående år. So that's where we are. And if you look at our segment distribution, we see that it continues to grow in the defense segment. It is now one third of our revenue. And I'll come back to that a little later. But you also see that banking and finance, for example, is about a fourth, and that we have many other customers also in the public sector and a little else. A good, stable customer base. If you take a quick look at our customer base, you can see a lot of nice names here as well. We have fantastic, nice customers, which we are very proud of. And not only that, we also take new customers all the time. Even when it can be a little tougher out there on the market, we have brought with us Vitamin Well, so we have a lot of vitamins at the office now. We have VetFamily, which is part of Vimian, a large global animal health company. Syre, which is a startup more or less, but which is backed up by, among other things, H&M and Volvo, and works with the recovery of polyester fiber. A really cool company that we are proud to be able to help. Hansen Advokatbyrå, McGregor, which is part of Cargotech, where we help them with product development processes. And then we have many new customers within Pentest and Dora's cybersecurity regulation for the financial sector. But we don't usually talk about who the customers are. But it's nice to see that there is a flow, we think. This is also true for our current customers. We got a new Fintech customer in Q2 that we have started working with here in August and that has already expanded. We think it's a great confidence to get an increase like this pretty soon at the start. We also have several projects within Microsoft's 365 Co-pilot, which is Microsoft's AI solution, where we roll out and help customers get the business value of it. And as you can see, many other customers as well. Finally, as a transition to a little extra section on the defense sector, we also have new projects at FNV within management systems and military health care and also at BAE and SAG. So I just wanted to take this time to talk a little more about defense, as I said, and this is an example of things that we do to the defense authorities above all. And what I want to say with this picture is actually that we work with the business itself. We are deeply involved in the project to build up our capabilities within the defense sector. So it's not like we're sitting with HR systems or administrative systems to some... till en märkbar del alldeles, utan det är liksom Gripenprojektet, det bygger upp flygbördskapacitet, vi jobbar med ytfartyg, amfibiefartyg, ubåtar, stridsfordon, other weapon systems, a lot of leadership systems, both on the ground and on the marine side. And also, as I said, with military healthcare, which we think is really fun, but also cybersecurity and communication systems. We are also working on NATO-compatibility, to help Sweden with further development. We have already had a lot of compatibility, it's a difficult word, but it will be exposed now that we are with NATO. And if you look at the customer side, there are the defense agencies, not only, so to speak, FNV, the defense market. FNV is our biggest customer and as you saw, a lot of interesting projects. But also in Norway, we have the material administration of the defense and the logistics organization of the defense, which we are very happy to work with. Finnish Defence Forces and also Denmark. NATO is an area where we don't have as many concrete deals as we do now, but we have approved suppliers to NATO's procurement agencies, which we hope to be able to expand here in the future. And then we work with other authorities within the sector. And we have many framework agreements with these customers, both in Sweden and Norway. So it's a very good base to stand on and very interesting tasks. And if you look at the industry, we also work broadly with Saab's various businesses, with BAE as I said, with Scania, which also has a military part with trucks. In Norway, Rheinmetall, Kongsberg, Danmark, Weibel and also a lot of other equipment manufacturers in the Nordic countries. Of course, we have a framework agreement with Saab and a strategic partnership agreement with BAE, which we are very happy about. So it's a very broad base of customers. And this is a sector where we see a good future demand, I should say, in the long term. Increased budgets, full order books. So we feel a strength for us, and it feels good to contribute, if one should be a little generous, to maintain our democracy. It is extremely important, I think myself. I think you agree. I will end the presentation with a picture that is quite similar to the one I took in the last two quarters. Good demand in the defence sector continues. We see a recovery on the general market. I mean specifically the public sector and system development, Inflation pressure and sluggish budgets have made it slow if you look back a year and so on. Now we see that it will come to life and there are enormous needs. And then a little lower price and wage inflation and still regulatory requirements, many of those. And we see that the M&A market can also get a little more speed next year. So that was really what I was going to say here before we open for questions.

Thank you very much for your presentation Åsa. And I think we'll go straight into the questions here. How has the expropriation law affected you now after the introduction? What are the effects of it in your industry?

Ja, jag ska försöka ta det här kort för att jag är själv personligen ganska enerverad över den här frågan. Vi har inte haft någon påverkan rent konkret men däremot har vi behövt hantera väldigt mycket frågor och situationer kring det här och alla kunder... do and think a little different, and that's because this is so ludicrously written. It is so that this law was intended to meet manpower companies, that is to say those who work perhaps with to pick things up in a warehouse or was hired shop staff or so, who may need better protection on the labor market. It was absolutely not intended to meet such project assignments and consultants as we have, and also lawyers and HR consultants, or whatever it can be. So it's very wrong, and the customers are of course eager to do the right thing, but I think maybe what they're not thinking about is that it requires that a worker complains about it being a job offer or so, because it should... What we do is that we meet every customer situation in itself and present our view, which is that we and our tasks are not met by this law, because we basically always have specific deliverables, timely projects. Våra konsulter har uppgifter även hos oss CAG och det är vi som är deras yttersta arbetsledning med kompetensutveckling och så vidare. Vi ska inte träffas av den här lagen och jag tror och hoppas att kunderna kommer förstå det här stegvis. Men det är ett olyckligt krokben som vi har satt på vårt näringsliv och våra myndigheter. Det hade vi kunnat låta bli och ändå tillse bättre skydd för bemanningsanställda.

Tack. Det har kommit in en hel del frågor kring just det här ämnet. You wrote that you haven't lost any business because of this law. Have you seen any effect on your existing businesses?

No, we haven't. But just the thought that our consultants will have to be threatened by what the media industry calls extortion. It's terrible. Instead of getting better protection on the labor market, they have gotten worse protection. If the customers don't think about it, it can be done with the skills they want, in an unnecessary way, so to speak. And it will be bad for everyone. It will be bad for the customers, it will be bad for us, and it will be bad for the consultant who gets a worse situation. So, yes, not good.

And another question on the subject, Lina. How much of your business goes through consultants? And do you think these actors are more affected by the lease law than pure consulting companies?

If it goes through a consultant, it has no bearing on the issue. The point is what kind of tasks the consultant has out there. If you work with specific suppliers who are time-consuming and where you are part of a team and where you are employed by us and so on, then you are not met by this law. So, yes, we... Vi ser ju att vi, om ens något uppdrag, det är klart att vi har många konsulter med långa uppdrag och det är där kunderna blir osäkra. But that's not the point, the point is what you do and in what way and who is in charge of the work. So so far we haven't had any consequences other than that it takes a lot of energy, both of us and customers, to make sure that we document and that customers can land in a process where they feel so safe that they are actually doing the right thing.

I understand. How do you work to meet the weaker development in the market of system development?

Yes, it is, as I said, under recovery, so we have an advantage in that we have very senior consultants in the very, very most cases that the demand is still there, even if it also affects us because the competition increases a lot. We work with very active sales, of course, and a broad customer base, and we have also succeeded in that. We have taken a bigger challenge, for example, on this fintech customer and so on. So we work very actively, and we have also been very careful with withdrawals when we have not wanted to do them, so to speak. And we will get paid for that now. Now we can hang on, so to speak, when the market goes up again.

Thank you. How do you balance investments with your growing segment and the segment that has had a weaker demand?

Yes, investment and investment. We are very capital-efficient, so we may not have investments like that. But it is that we recruit as much as we can in the areas that are growing and wait a little bit until demand turns to other businesses. But we have balanced that out quite well anyway.

Thank you. You mentioned some customers in Norway. Do you have any plans to expand internationally or strengthen your presence in other markets to drive growth in the future?

We really have a focus on Sweden. We think there is a lot left to do where we are. But Norway is still perhaps closest in terms of since we already have active businesses there and two companies at least that are active. Our e-commerce part and the defense part. When we look at acquisitions, we would like to complete the activities we have. with a complete knowledge area, or more capacity, or possibly a new location. But we look more at the customer side, that we want to be able to serve our customers better, with more and better services.

Thank you. And you are in a strong position with good cash flows and low reward. Can you develop how you evaluate potential acquisitions, and maybe are there any special segments you find extra attractive right now?

Ja, vi har väl egentligen haft den intentionen ganska länge, men vi tittar ju såklart på försvar- och säkerhetssidan, men också kan man säga på saker som ligger nära systemutveckling eller cybersecurity och så. Vi utvärderar förvärven väldigt mycket ur det här pusselbitstänket, men också extremt mycket, såklart, hur vi ser att verksamheten rullar. Kulturen, passar den ihop med oss? Kan man se att de som leder bolaget är fortsatt engagerade? Jag brukar säga att man ska kunna presentera både en rekrytering och ett förvärv i köket på bolaget och se De existerande medarbetarna blir glada för att vi har gjort något bra som bidrar. Det måste man ha i huvudet när man både köper bolag och rekryterar personer.

Jag förstår. Stort tack Åsa för att du tog dig dit att presentera här och svara på frågor. All lycka till framöver och tack till alla som har tittat. Ni får ha en fortsatt hele vecka här.

Tack så mycket och tack alla. Ha det bra.