AB Fagerhult (publ.)

Hello everyone and welcome to the presentation of Fargolt Group's second quarter results for 2024. On the call today we have our President and CEO, Bode Solersen and myself. The presentation will start with Bode giving us a brief update on our results for the second quarter and then Bode will then continue to update us on some strategic highlights today focused science-based targets plus innovations launched during the quarter. After that I will follow with more details about the financial performance of the group and Bode will conclude with a brief recap and afterwards we will open for questions. We will first allow questions from the conference call, then we will allow for questions from the webcast. You can post questions in the chat window on your and I will read them up for Bode and Michael. Before we start let me also remind you that today's session is being recorded and will be available on our website later today. With that I hand over to Bode, please go ahead.

Thank you Michael and welcome everyone to this Q2 2024 webcast. So in the second quarter we saw a return to growth for us in both order intake and net sales on the group level. The market conditions remain the same and we continue to focus on the renovation market where as you know our solutions are well positioned and where we continue to secure projects. We are contributing to renovating Europe's energy inefficient buildings and that is one of our ambitions and our solutions and local footprint makes this possible. This is also balancing a new build market that still is constrained by high interest rates although there are regional variations and indications of a more positive outlook from next year. We also heavenly involved in outdoor projects for urban spaces which is one of the focus customer segments in business area collection. We continue to see mega trends supporting and remaining favorable for our industry providing a solid foundation for our strategy and future growth. And the gross profit margin has continued to improve but the operating margin has been impacted by higher operating expenses in the quarter. We have started to address this and we have seen some positive results at the end of the quarter and this will continue in Q3 and Q4. Product innovation activity continues to be high and I will share two examples in my presentation today. One retrofit solution from BF and another truly innovative product from Egozini that is playing with the boundaries of light. And as you know sustainability is an integral part of our strategy and what we do and later on in my presentation we'll have a closer look at our science-based targets, the numbers behind and what our focus is going forward. And part of sustainability is also new partnerships and one example is what Fargahog does together with Hydro to recycle extruded aluminium. But let's have a look at the numbers first. So order intake in Q2 was 2.1 billion Swedish crowns which represent an organic increase of plus 0.8%. The organic net sales increased with .9% and in numbers we achieved almost 2.2 billion Swedish crowns. At EBIT level we delivered 169 million Swedish crowns with a .1% EBIT margin. Earnings per share was 0.62 Swedish crown and as expected we started to see a reduction in interest costs from the second quarter. If we then look at the year to date and the half year result was very similar to prior year and in numbers it represents order intake of 4233 million Swedish crowns compared to 4286 million Swedish crowns in 2023. And net sales declined organically with .7% to 4347 million Swedish crowns compared to 4371 million Swedish crowns last year. An operating profit is at 470 million Swedish crowns compared to 446 million Swedish crowns last year which represents an operating margin of .6% and earnings per share is at 1.40 Swedish crowns. And as always Michael will give you more information when we come to the financial section and first I will show you some things that have happened in the quarter. So you know that in our quarterly report we try to give you a flavor of our strategic group focus areas and today's focus will be on our sustainability agenda and you know it's an integral part of our business strategy and when sustainability and business goes hand in hand it becomes a win-win situation and gives a clear direction for the group. And this time we will focus on our SPGI targets and what we have achieved so far, what our goals are and in brief our focus priorities to achieve the goals. And I will also present some selected innovations in the group that was launched in the quarter and those this time it's from EGZE and and VF. So let's jump to the sustainability agenda and in the Q1 webcast we spoke about what's happening on the market with regard to sustainability related topics and legislation and the European performance of buildings directive and also explanation behind our taxonomy numbers. And all of these topics are of course driven from the need that our buildings in Europe have to be renovated as they stand for almost 40 percent of the carbon footprint and the majority of the buildings are energy inefficient. Without this we have no chance of achieving the Paris climate or fit for 55 to reduce emissions by at least 55 percent until 2030. And this time I will focus on how sustainability agenda relates to our validated SPGI targets and I'll just give you a quick recap with regards to the SPGI targets. You might remember they were validated in October 2023 for both scopes one two and three as well as for net zero in 20 2045. And we did an extensive mapping of all our factories and our complete footprint in 2021 and therefore we use 2021 as our comparative year for data our so-called base year. And on the slide you can see the results for 2023 where we have reduced our total emissions combined in all scopes with 24 percent since 2021 and that is the meaning of that is of course that we are in a good way towards our SPGI goals for 2030. And in this slide we see a full view of our carbon footprints and this is of course coming from the research that we did in 2021. So when we look at our footprint we can see that by far the biggest impact is in scope three and particularly the youth phase that represents 88 percent. Of course this is normal as lighting solutions have a long lifetime and when light is on energy is consumed and we know that lighting is 15 percent of a building's energy consumption. The second biggest number is related to suppliers and material use in our products accounting for eight percent where the highest part is coming from electronics. The footprint from our factories is a very small part only one percent pertains to direct emissions. So we have established short and long-term targets to reduce direct and indirect emissions and the short-term targets that apply from 2021 to 2030 are reducing scope one and two by 70 percent and scope three by 30 percent. And to reach this we have defined and prioritized around 20 activities based on the insights we gained in 2021. So we are leaving so there's actually 24 projects that we're working on and I will highlight two of the major ones today. And in scope one and two the most important levers in our factories is our internal heating and paint plant that consumes a lot of gas and electricity and represents 50 percent of our direct emissions. And as you might remember we're already on 75 percent of usage in renewable electricity in our own operations. The reduction of 30 percent in scope three is a very ambitious goal and this is where sustainability and smart go hand in hand. And we have a vision to be 100 percent smart by 2030. This implies that by 2030 we need to have sensors in all our lighting solutions that go out of our factories and that is a big undertaking from our side both internally but also externally to spread the understanding for the why and how of smart lighting. With a sensor in each light connected to the network or to the cloud we can optimize the energy consumption for the user during the full life cycle of our products. And our scope three is our customers direct emission meaning scope one and two so that means we are to a large extent in this together with our customers. And all this technology is in place today with the organic response and city grid solutions. So that is why it's so important to spread knowledge about smart lighting. If we go back to the basic assumptions we know that lighting is 15 percent of the energy consumption and that the energy consumption already today can be reduced with up to 90 percent with the combination of LED and smart lighting compared to a traditional installation. We should use the light where and when it's needed and as we spoke about in the last webcast call we will get help from legislation in the European performance of buildings directive that will be implemented in local legislation by the latest in spring 2026 and that implies smart lighting and also implies higher renovation rates. This is only the first step in our journey towards net zero where the usage of smart lighting will play a major impact together with a circular approach. So when developing new products and solutions we strive for modular development and this is to achieve standardization and from a circular perspective enable us to simplify renovations and upgrades. And we gave you some examples of these models at last time. But this also takes us to new partnerships and I mentioned Hydro in my first slide. So this is an example where Fargaholt is cooperating with Hydro Extrusion in Sweden and they together have made a pilot project to explore circular processes for the use of extruded aluminium and this was done for Telenoil's headquarters in Oslo where a product of Fargaholt was installed in 2002 and now renovated with the goal of saving 50 percent energy. And in the pilot project for Hydro Extrusion the goal was preserve material properties and not downgrade the aluminium and we want to be able to recycle extruded aluminium as it's a very common material in our light fittings and that has so far not been possible. So therefore this pilot project has been very important to us. So what we did was that we took back the light fitting to our factory where they were taken apart and sorted and then they sent to Hydro Extrusion where the aluminium was melted and then extruded again. So for us this is a big step forward because it enabled for a circular process when using aluminium and lighting solutions. So another step towards circular solutions. Then let's leave sustainability and go to the two innovations I promised you for the quarter. And the first one you see here is TRIQ-E up to EM which is from Iguzini and I would say this delusion really takes innovation in how you can play with light and push the boundaries to a completely different level. It showcases the group vision statement a world enhanced by light and it really gives lives to architectural buildings at with a lot of possibilities to play and doing tricks therefore the name of the product with light both in indoor and outdoor applications. And as you can see on the picture if you look closely you can see there is a diamond like part of it and that is one of Iguzini's core strengths being optics. And this product is difficult to describe in words so I would really recommend you to go to the internet and have a look at the film TRIQ-EM at the iguzini.com. The next product I want to share with you is an upgrade kit or so-called we call them upgrade kit or retrofit kit from BF which is in line with us helping renovating buildings and cities in an energy efficient way. So this kit can be used on luminaries dating back to 2014 and it takes only five minutes to upgrade thanks to pre-configuration done in the factory. It's a very easy and sustainable way to enhance the lifetime of your solution and also an example of that what I said before that modular thinking has been with us for quite a long time. So you can get 40% more light output with a new version and you can choose whether to get the higher output or decrease the power consumption and therefore reduce your energy cost. And this luminaire can of course also become smart by using the SAGAS based smart controller from CityGit that we announced in Q1. And with this I'm sure you're curious about the numbers I will soon hand over to Michael but I know that we have a lot of light coming in for the summer so with this picture from Stockholm and Riddarholmen where you can see the traditional beautiful lights that have been updated with led modules from Atelier Lyckten and with that I hand over to Michael.

Okay thank you Bode and leaving those for the second time a very good morning from me also. It's great I think Bode to see that we've got such a high rate of innovation and new products constantly coming through across the group. It's part it's testament to our strong view of the future that we have. I think in many aspects the second quarter was very similar to the comparable period from 2023 and in the report we mentioned higher operating costs. I see some of you have already mentioned that in your updates so I will try to deal with that now and give you a little bit more flavour around our commentary there. In the early part of the quarter we did get ahead of ourselves when it came to revenue investments. We took immediate actions in the early part of June and these actions will continue during the third and fourth quarters and where they will enhance the operating margin in the second half of the year. It is a significant benefit to the groups decentralized operating model that we can react so quickly when the need arises and we already notice an improvement in the situation in the month of June. Let us see what the second quarter brings was what I said to you guys at the end of Q1. Let us see what the second quarter brings. Well the second quarter did bring growth we returned to 1.1 percent overall order intake growth and to me this is a signal that perhaps we see the renovation growth and no longer a declining new build market because one is beginning to pass the other so that to me is another positive sign for the following group and with lead times now back to normal it is expected that some of the order intake growth translates into net sales growth and the group delivered another solid 2.2 which was ahead of last year. The group our ability to meet customer delivery expectations is good across all brands and again this is another strength of our operating model decentralized make product close to where our customers are. The growth in the second quarter was also delivered at an improved gross profit margin and we shall remain active in portfolio management pricing and management to support this in the future. As mentioned the operating profit was short term affected by higher operating costs and we are confident of a somewhat lower operating cost level in the second half of the year. Operating cash flow was was good almost sufficient to neutralize the dividend release that we did in early May and we expect that lower interest rates would come through in the second quarter this was our expectation and in the report we note that this was in excess of 10 million swedish crowns in the second quarter. Unfortunately the impact from currency movements are not controllable we expect the net debt to further reduce in the rest of the year. Looking at -to-date now for us looking at -to-date position the second quarter order intake and net sales began to close the gap from the first quarter so for us it was a better second quarter as far as the activity level went. Order intake net sales the gross profit margin also improves compared to last year and we have initiated actions where we have needed to in order to improve the operating margins in the coming two quarters. Operating cash flow for 2023 if you recall was that was a record and we also see a very good performance on the cash generation side during 2024. The net sales for H1 2024 January through to June shows a 3.7 growth compared to the net sales for H2 2023 and this is why we begin to see the rolling 12 months no longer continue to slightly decline but now more positively it begins to improve a little bit. We look to continue this with the market opportunities that present themselves. Looking at the margin I'm not going to dwell no longer dwell on the operating margin we've clearly now communicated in the report and in my earlier words what actions have been taken and will continue to be taken in the second half year to address this and we do expect a resurrection of improved operating margins as we go through July through to December. Collection we reported quite an optimistic view of collection at the end of Q1 and that optimism continues for second quarter. Business area collection continues its strong overall start to the year that we reported in the first quarter. The year to date collection has delivered order intake growth, net sales growth and the trends for operating margin and operating profit remain very positive. For us this is critically important it is our largest business area. The .1% operating margin is by a long way not only .3% ahead of last year but also raises the bar further with a new quarterly record for the businesses in collection. The steady migration from family-owned businesses, accepting Attilia Lipton of course, takes time as we have previously reported and now we begin to see good progress in the Gazini-Ledlinia and VF. Once again we continue to win some great projects. Coming to premium. For business area premium I would like to clarify one point you can see the slide for yourself I'm not going to talk through each individual part but I would like to clarify and explain a little bit and that is the fact that the business area premium takes the full impact to EBIT of our growing investment levels in our smart lighting solution organic response. That has accelerated this year. The future lighting industry we are convinced will be shaped by smart lighting solutions of that we are very very sure. We continue to invest and we do not take the investment to the balance sheet nor do we adjust the operating result. When we say EBIT we mean EBIT what you see is what you get from Fargo Group. I think this is important in the understanding of results compared to our peer group in the industry but just as an indication how we see things going in premium looking at the .1% -to-date operating margin that you see in the report I can tell you that the operating margin for the two luminaire brands in the business area combined is a very healthy 13.9 almost 14%. Coming to professional. Last quarter we reported a very high comparable order intake in period Q1 2023. To Q4 2024 the professional business area has delivered strong order intake almost 14% ahead of Q2 last year. The growth in net sales of .7% included the delivery of some of those large projects from Q1 last year and that sometimes is an indication of how long the delivery programs are. Some of you will remember the names Everton Football Club and Hinckley Point Power Station that happened in Q1 order intake last year and now in Q2 2024 the deliveries have taken place. The business area has grown its order backlog position in recent months and that provides confidence for the future. The two and a half year operating profit and margin trend the line to the right hand side remains positive and here we also see good projects for renovation and growth in smart lighting solutions. In business area infrastructure I have less good news to report although the order intake in the second quarter did show growth compared to last year. However we clearly see the impact of the day order intake in business area infrastructure lags last year by 11%. The softer market conditions that we reported last quarter do continue particularly for Vaco business in Holland where we take a full business structure and strategy review during the current quarter. The long-term design plan investment in the German transport and custodial segments begins to make a significant difference and we see higher and increasing levels of order intake for design plan in their German operation. We will come back to the Vaco situation in the Q3 report but for now we will take a full review as we go through July August into September. Cash flow. On the cash flow side we continue in a very positive way. The chart remains positive. Now with nine quarters of generating a positive cash flow it will as previously reported be difficult to match the 1.2 billion from last year but we still see room for improvement in some of our businesses. Net debt. As you can see the net debt increased in the quarter due only to the dividend release. The operating cash flow was as reported very strong. We do report a net debt of 2579 million adjusted to 1842 million for IFRS 16 and the net debt EBITDA ratio of 1.9 means we are in strong position for our new M&A opportunities with the recruitment of head of M&A from last September. Before handing back to Bordel for closing and Q&A I'd like to end as traditional with a quite short summary message from myself. The group for ourselves where we are in good control and we're in a strong market position with healthy margins and a strong balance sheet. We see increasing traction of the mega trends. Bordel's talked about these earlier on this morning and with tailwinds for growth from the ban on fluorescent lighting and anticipated pick up in the construction market and through M&A further consolidation activities in the industry. There is no reason for us to lack confidence in what we see in the next one to two years. Thank you and with that I hand back to Bordel.

Okay thank you Michael so I'll also give you my conclusion and a picture before we move into questions. So the conclusion for the second quarter is that it is a good return to growth on both order intake and net sales. It's good to be on the positive line and together with high and improved gross profit margins. It's also very positive with the improved results in collection in combination that we are securing projects on the renovation market. And also renovation projects often have a strong sustainability angle and often the user or the owner of the building is involved. So therefore we actually see a higher adoption of smart lighting in renovation projects. And also as an additional benefit organic response is a wireless system which makes it very easy installation in a renovation project. So today we focus on how ambitious our SPGI targets are and what we are going to do on our journey towards smart and circular as we continue to renovate Europe. We are well positioned with regards to the market trend and we continue step by step to work towards our ambitious and ambitions and this is making us well positioned when the new build market again turn positive. So with that before we open up for questions you can see another nice picture and this is the Kabukishu tower in the Shinjuku area in Tokyo and the Kabukishu tower is a 225 meters high building that was completed last year and the lighting you see here is some lead linear and I hope you can see that the lighting is enhancing the architecture of the building and it's a vertical entertainment complex and actually the first great building in Tokyo that is designed by a woman which is the contemporary architect with the name of Nagayama and with that I hand over to Magnus and questions from the phone line.

Thank you Boodil and hello everyone on the call I am Magnus Hagmark and I am the head of M&A here at Fogwood Group and I will take care of the Q&A today and I will now ask the operator to open for questions from those on the telephone line.

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 Nikola Kalinowski from ABG Sundial Koliya please go ahead.

Morning all I hope you're doing well just a couple of questions from me I'm a little curious regarding the stronger order intake momentum towards the end of the quarter could you perhaps say anything about which segments this affected and maybe even provide us with some additional color?

It's a good question I would say and I think if I look into the quarter as such I don't think there is anything that stands out specifically so you know we're referring sometimes to bigger deals in the different parts but I think in the Q2 it was more what I said before we see a continued good uptake in renovation projects so we see that continue and we also see I would say it's more a continuous trend on that side and also the same continuous trend on the smart side. I also highlighted in my initial presentation I think we see that continue as well in addition to the renovation products we see quite a lot of urban spaces projects as well which if you look into the collection this quarter we had quite a good and many nice projects on that side. I don't know Michael if you have anything to add specifically if you come to think of any specific events for the quarter?

Well I think you saw in infrastructure and professionals they had stronger quarters than they did in the first quarter so the comparisons were better for professional infrastructure. Year to date we've said that collection and premium remain ahead of order intake compared to last year to date which is good. I'm not aware either like Bode love individual large lot mega projects I do think we see quite some increased activity on that order intake side subject to the comments that were said in professional it was quite a good rebound from a poor Q1 for them so generally I think in the report I think Nicola we talk about business as usual in the second quarter and that's quite how we see it.

Yep understood very helpful thanks and then a quick one on the gross margin. Could you perhaps provide us with some detail on what has been the driver of the gross margin expansion year on year?

Sure we everybody knows that the supply chain cost pressures that we faced in late 21 through to 22 when we were encouraging our businesses to think about pricing and price improvements this took place during 2022 into 2023. You guys as well as ourselves we were keen to see the impact of this coming through in the income statement it did quite strongly come through in the last two to three quarters of 2023 and that was mainly through pricing to recover the cost impact in the supply chain but also as well on the employment costs that are part of the margin calculation. We've been through a period of higher employment cost levels and what we see in 2024 Nicola is a little bit of a combination of it did take a long time for some of these pricing improvements that we've made to impact our results and that has continued partly in 2024 but also on the supply side we do see now input costs beginning to reduce. So in this year it's a combination of continuing to benefit from the pricing improvements that we've done it takes anywhere between six and 12 months for them to be fully through into the income statement but more quickly we get into the EBIT number the impacts of any input cost reductions and we've had those in two broad areas on base metals steel copper aluminium but also in lead electronics across our businesses. So this year different than last year last year was about pricing and cost increases that we had to overcome this year it's been about price continuing of pricing and input cost reductions.

Yeah thanks Michael I appreciate the detail and then finally on on smart lighting would you say that you continue to experience positive business momentum and client reception or is it perhaps a bit stagnant because investment sentiment is perhaps generally dampened?

I think it's what I said before I wouldn't say it's dampened under I mean that's more relating to when you look into renovation and new build and for us as I said smart lighting very often is very very good when we do renovation projects we are closer to the decision makers that will have the benefits the energy reduction and also it's very good for doing easy installation as it's wireless on the so I see a higher uptake on the renovation side I think then otherwise it's more it's what I said also this is a question about education and knowledge and and that work we have to continue for for many years to go on the smart side and and then I the other point which I think is important here as well is we all saw the reelection of Ursula von Leyen and and one of the first things she did was to reinstate the or to re to push on the on the green deal and and that is important for us because that goes in line with renovating Europe and then we need the smart lighting and in the last webcast call we spoke about the Europeans performance of building directive and there is actually legislation in there for for smart lighting that as I said goes international legislation in into 2026 so maybe that will give us a little bit of an additional push from 2026 but I don't see any reasons why we shouldn't in the meantime continue to see good inflow of projects it is also a question about what I said that we saying that we having everything being smart in 2030 having the sensors in the lighting solutions going out of the factory that also demands a lot of work internally to make sure that that happens around our product portfolios so there was an example of in the in the report this quarter in White Craft where we first circular products which now has the organic response also included into it so we also take step by step in terms of making it available and evade a wider product portfolio so I think I would actually say it's more depending on ourselves and how we make steps forward than the general market sentiment and then I think we get help from the renovation market

yeah I think that I think that last point that Bode and Mait sniff are there is quite important the current form factor the shape size of the existing organic response sensor node is incorporated very well into many of our indoor luminaires remember it's an indoor smart lighting solution and we were in southern Germany our LTS business recently late June and they were very proud to show us their development of integrating the organic response technology into into a smaller round luminaire some too that Bode refers to with with the White Craft launch in the in the second quarter so a lot of it does depend upon ourselves by being able to integrate and offer a wider array of our portfolio with the with the organic response technology and that that we can see taking place across the whole group

yeah wonderful that's all from me thanks for taking my questions and for answering in great detail

okay thanks Nikola

the next question comes from Matt's list from Kepler Chuvriaks please go ahead

yeah hi good morning a couple of questions first I mean you mentioned that you have implemented some measures to improve profitability and operating mode in the second half could it be a bit more specific regarding what measures you you have in place yeah

no we we we think we've moved early and we saw the need and we jumped on it straight away and I think that was the right thing to do the benefit of our operating model says that once we jump on these things it can happen rather quickly and we did see quite a good impact of this in the June result obviously you guys don't see the June result but but we do and what we've done is we've taken early action on those discretionary spend areas that's not going to hurt the future and we've also slowed down our recruitment of of roles around the group we've not said stop that that would be the wrong message that would be too harsh but we've just said make sure that we get the right person 100 percent every time and I think that will have an impact of slowing things down a little bit which which which won't damage us in any way so discretionary spend areas has been one topic and then on the on the head count growth is a second one and we know that those things will will come through with with impact we saw it already in in the end of the second quarter we're not we're not looking at we're not looking at cross group restructurings or anything like that that that's not on our agenda because that would be damaging for the for the longer term

okay great thank you and the second one is sort of I mean in premium there you you mentioned investments in in smart lighting and organic response and if I well got it right I guess you have sort of some four or five percent of the margin affecting in that segment affecting well the costs that relate to to to smart lighting will this level continue in the second half uh let me

just let me just understand we we talk about the -to-date operating margin in the q2 report that you see at 11.1 lifting to 13.9 uh once you come once you look at just the luminaire in in premium so we we see a two two and a half to three percent delta there and that that that will continue in the second half year uh there will be some discretionary spend controls as well brought into all of our businesses no nobody is uh is deserving of special treatment that's part of our model so when we are all asked to to help and then everybody is asked to help and the expectation is that everybody contributes to that that help um so it will continue at its current level um and it will continue to grow but not not as rapidly as it has done in that first quarter

uh and at least this sort of a trend that affect you I mean you have these 2030 ambitions so it's sort of necessary to to do this to stay competitive I guess

yeah we in that same slide I mentioned that you know we do see the the lighting industry in the future will be shaped by by good robust open uh smart lighting solutions um and and organic response technology is very definitely one of those it's it's robust it's easy to it's easy for the installer community to install uh it's very robust um and it is capable of a lot more we've talked through before uh I think in the q4 uh presentation uh the the 70 savings by going to led and another 20 savings making 90 savings overall by going to smart led with organic response so that that's and I think

and I think there is another another few points here which are very interesting I mean it's for us it's completely logic that this is the way we go but there is also I think there is also a large competitive benefit with it because if you look into we do same smart lighting solutions for all our brands that they're able to benefit from and and if we take a step back and look at the lighting market we know it's still extremely fragmented and I think when we look into that it's going to be interesting to see how the dynamics of smart lighting will change the the industry dynamic because it will be more difficult if you're a small player to be able to also have software development so I think there is there is also when you take a little bit of a longer perspective there is many industry dynamics which are interesting and also for us it's very good I think we've we've mentioned before that we have an average sales value which is 30 to 40 percent higher when you do a smart lighting solutions but if you look into the payback times of that because if you go back to the matrix of that when you have a traditional lighting solution and you go to led you save 70 percent and when you go from led to smart you save another 70 percent and that makes that that we have quite short payback times on this then of course it's depending a little bit on the on the electricity pricing but we are down we are at levels which is I would say around it's depending on application but let's say around two years so so that makes it a very very interesting investment from a company and at the same time they decrease what I said before they decrease their carbon footprint in scope one and two so all property owners who have sbti targets this is a very very easy move to do for them so I think there is there is many benefits in it I think I've said it before it's more the knowledge about how to do this and what the benefits are that we need to make sure that that we work

with okay great great and and yeah and looking at the infrastructure I guess I was a bit disappointed on the margin there but now orders are improving somewhat do you see about increased volumes to to support margins going forward I guess

yeah I think we do so you know despite what we mentioned about infrastructure and the review that we are embarking upon in in BACO we do see a more positive order intake position in the second quarter and that will help of course and we talk about some of the activity that the design plan does in in in Germany with Deutsche Bahn in particular on the refurbishment and renovation of the the railway estate in Germany it's an activity that they started many many years ago that's now coming through to through to benefit we we we will be taking a long hard look at BACO and realigning their strategy for with them and we do hope that maybe not Q3 maps Q4 but we're certainly in 2025 you should you should see improving margins coming through in the in the next year period

Great, finally just about I mean M&A the gearing is down to pre-Egocene levels and and the market is sort of maybe a bit slow for some competitors do you see opportunities to to move forward and make some some additional acquisitions or is it sort of a wait and see game?

It's a little bit of both it is wait and see because we can't say too much of course but but we are moving forward with with second and third round conversations with with contacts and opportunities that we have been discovering in the first six months of 2024 Magnus who's on the call with us he's he's he's hard at work doing that So we are we are optimistic for for the future in our new M&A agenda but it but it is as you say Max wait and see

Okay great thanks a lot

Okay As a reminder if you wish to ask a question please dial pound key five on your telephone keypad There are no more phone questions at this time so I hand the conference back to the speakers for any written questions or closing comments

Thank you we have some written questions here and I start with one here to perhaps maybe to you make reference to the new build market possibly at the bottom with a pickup expected when do you see this pickup and can you add some more here?

I mean it's always difficult to look in the prediction on the in the future but if you look at the building market in general I think we also need to see that our global footprint makes the fact that we see differences in different regions you have some regions that haven't been impacted which is good and positive but if you look into the the latest statistics from Euro constructs we see a positive on the renovation market which you hear a lot about speak about loud and clear but going into 2025 which might be also natural seeing the development and or the hope development on the interest rates for the fall there is a discussion starting about that the new build market will become positive from 2025 again and of course that would be that would be very good I think we see some regional differences there as well I think one very good thing is that speak about good activity in the UK where I hope we now have some stability and as you know UK is is our single biggest market so it's an important important market for us I think that is that is how much I can say about it

Thank you and the other written questions we have here are already answered during the call I think we have a question still from Carl it looks like he's trying to add via the phone here so I asked our moderator to to see if you can help him to ask the question

The next question comes from Carl Norn from SEB please go ahead

Yes good morning I just have some clarification questions and the first one is from the operating cost here in the quarter would you say that there's any specific like one-off impacts or is it a quite clean cost base in the quarter?

Quite clean we would no one off in that first quarter yeah

That's clear and then just a question here on the cost measures taken I mean it looks to me like your number of MPGs has declined quite a bit or declined in the last quarters but they were up a little bit sequentially so I'm just wondering a little bit regarding how much you think that it's going to impact I think I know you don't guide but could you say anything regarding what you saw in June?

Yeah you're right I'm glad you had to mention that we don't guide so thank you for that Carl. No I mean we had an impact in June and the immediate impact we were pleased about because it showed that the message had landed well and people had jumped to it but we expect once the message is taken a little bit deeper into their businesses we do expect that we can perhaps improve in the second half year over what we did in June because June was very very new very recent so we expect a little bit more I would I think I'm entitled to expect a little bit more in the second half of the year than what we got in the immediate reaction in June. Yeah so I'm sorry

and then I have a question regarding the seasonality in the business could you just remind us a little bit there how the summer impacts etc?

Yeah we used to be quite seasonal in that you if you go back quite some number of years and I'm going back to maybe the early teens of the current century Carl here and it was very very clear that the Q2 Q3 were by far the our strongest quarters back then but I think with the shape and size and dynamics of the group now and by dynamics I mean northern hemisphere, southern hemisphere, global businesses, European businesses, indoor and outdoor I think the seasonality that we used to see is not as clear as it is it's not that clear today so I think I think it's it's more evenly spread today across the application areas and across the geographies within our businesses so we've not really had a seasonality conversation at group for for quite some number of times now and I suppose I've just had one part to that though Carl the last two to three years have been heavily um what's the word I'm looking for disguised shall we say the quarterly performances in the last two to three years have been heavily disguised with one the recovery coming out of covid and two the the impact on first of all order intake and then on net sales from the supply chain crisis so um I remember talking about Q4 2022 was was was an all-time high quarter and for that to happen in the Q4 you say is that realistic is that repeatable in Q4s to come in the future no it's not because it was a catch-up period from the supply chain so um so it has got a little bit guys and and quite unclear we look forward to 2024 being a normal seasonality quarter and then when we get into next year we'll look back at it and then decide where we go

yeah I'm sorry and then is the last question if you could say anything regarding the growth within new builds compared to renovation in the quarter is possible to quantify that

I would know it's very difficult to quantify it what you can see is if you look in general on the market if you look at the building markets as such it's it's half half almost in Europe if you quantify the new build construction market and the renovation market and we are more renovation than we are new builds and if you look also on the growth rates on the market you have a growth rate on the renovation market which you don't have on the new build market so okay it gives you a little bit of a feeling for it that's why I say that it will be positive having growth again in the new build market

yeah and it sounded in the co letter that new build disrespect would be a bit more stable going forward maybe

yeah I think that's what that's what the research is saying and I think I mean it is dependent on interest rates as well so so let's hope they're right and I think you hear me also saying that for the renovation side there will be legislation that I think we will get more of a boom on the renovation side if you look from relative yeah

that's good that's all for me thank you thank you

We are done for questions for today. Baudil any last comments from your side?

I'll make a very quick one because we're running out of time so it's very nice to have so many questions today we enjoy that so but I think in a brief conclusion is that we delivered positive numbers both on order intake and net sales combined with very strong gross profit numbers and we are as you've heard us focusing on balancing net sales and the cost levels for the reminder of 2024 and we're expecting an improvement positive improvement here in the second half at the same time even more important in line with our strategy we continue to make progress in all our initiatives being sustainability and smart lighting that we spoke a lot about today but we also are working really really hard with the talent development which you know people first is what makes the difference in the end so we continue to see many opportunities and that makes me confident for the future and I think with that we'll wish you you all a continued good summer and hope you'll get some deserved vacation.

Thank you everyone for joining today's conference call next we will publish our Q3 results on October 28th and we will host a webcast on the same day. Have a nice day everyone thank you thank you