Fagerhult Group AB

Thank you all for joining us today. I'm Niklas Willstrand, Head of Communications at Fagerhut Group, and it's my pleasure to welcome you to our Q3 2025 resource presentation. On the call, we have our President and CEO, Buril Sonneson, along with our CFO, Oskar Wallsten. Buril will begin with a brief overview of our third quarter results, followed by highlights focusing on the business area infrastructure, OSCA will then provide a deeper dive into the group's financial performance. To close, Bodie will summarize the key points before we open the floor for your questions. We'll start with questions from the conference call participants and then take questions from the webcast. If you would like to ask your questions in the conference call, please press pound key five. You can also ask questions in the chat windows on your screen and I will then read them up for Bodie and OSCA. Please note that today's session is being recorded and will be available on our website later today. So with that, I will hand over to our CEO, Bodil. Please go ahead.

Thank you, Niklas. And welcome to everyone joining us today for our Q3 2025 results presentations. I'm also pleased to welcome our new CFO, Oskar Wallstein. This is Oskar's first quarterly report within the Fagold Group as a CFO. And of course, we look forward to the experience and fresh perspectives he will bring as we continue our journey. And I will start by saying that market conditions remain challenging with the overall macroeconomic uncertainty still creating unpredictable environment across several regions. However, I would say that we start to see some very, very early signs of recovery. And I think one part of that is that we've seen a stable order intake during the quarter. And it's supported by broad based daily activity across markets rather than individual large and specific projects. And for me, this indicates a consistent and balanced level of demand within our core segments. Also important for us is that the integration of Trotter, TLV and Capelon is progressing according to plan. Both companies are being incorporated into the group in a structured, measured way, ensuring continuity for customers and employees. We've also started to work on sales synergies with the two new brands in the group. The work supports our strategic ambition to strengthen our position in key European markets and expand our capabilities within selected segments. We continue to maintain strong cost discipline with ongoing efforts to manage expenses and maintain efficiency. The third quarter also includes certain acquisition-related costs. So let's have a look at the numbers for the third quarter. So the order intake for the third quarter was 1.952 billion Swedish crowns and showed actually an organic change of zero, so very stable. And order intake was higher in the first and last months of the quarter, while activity was a little bit slower in August. And at the same time, we saw signs of stabilization in the overall trend. You might remember that we started to speak about a year ago last summer that we saw big swings between the different business areas, almost like a roller coaster. And this has been more stable in the third quarter. which is one of those signs of stability. And net sales for the quarter increased with 5.6% to 2.027 billion Swedish crowns, and the gross margin before AAC decreased slightly to 39%. Selling and administrative expenses increased with 7.7% to 659 million Swedish crowns, There are some different reasons for that. One of them was the recognition of the acquisition related transaction costs, who totals 19 million Swedish crowns as an expense in the quarter. And also both Trato TLV is consolidated in the group throughout the quarter and Cape Elan from August 1st. So operating profit before EIC was 147.1 million Swedish crowns, which is a decrease of 18.9%, with an operating margin before EIC of 7.3%. And earnings per share before EIC were 0.47 Swedish crowns. We're not happy or not satisfied with the operating results. We fell short of our own ambitions. While the underlying business remains solid, there is clear room for improvement, and we are taking firm steps to strengthen performance in the coming quarters. So if we then jump to the year-to-date numbers, the order intake so far has been 6.084 billion Swedish crowns for the period from January to September. which is minus 0.4, or adjusted for currency and acquisition, also 0%. And the group's net sales of 5.815 billion for the January to the September period were down 7.2%. or 7.1 when adjusted for currency effects and acquisitions. So they take out each other. And the group's operating profit before AAC was 412 million Swedish crowns for the January to the September period, resulted in an operating margin of 7.1%. And earnings per shares before AACs were 1.23 Swedish crowns. And of course, as always, Oskar will share more detail when we get into the financial section. And I will, as usual, give you a little bit more update and view of our businesses. And this year, we have decided to go through each of the different business areas to provide a clearer picture of how the group operates. I also want to give you a deeper understanding of our market position, the strength behind it, and how we differentiate ourselves through innovation, sustainability, and close customer collaboration. The group is as is today built around 13 strong lighting brands. As you know, we've added one shown on the slide. And today I will be focusing on the last business area. We've gone through the other three, which is business area infrastructure. So if we look at infrastructure, I think it's very much what the name says. It's a business area which is built on deep expertise and market leadership across specialized industrial segments in Europe. The brands deliver advanced lighting solutions tailored to the environments with strict requirements on installation, durability, and robustness. And as leaders in their fields, they bring very long standing experience in designing the right solution for each project and customer. And growth opportunities are being realized in both transportation and security related projects, alongside strengthening positions in heavy industrial environments. So the business areas include three businesses, being Ivalo, Weka and Designplan. And most of the sales takes place in Europe, but there are some global installations. And I would even say with a Northern European focus. Product development and production takes place in the UK, Finland and the Netherlands. So let's have a brief look at each of the brands. So we start with the smallest one, which is Ivalo, that was founded in Finland in 1963. And I think you all know from design, you probably know the famous Itsela glass factory. And that is actually the origin and it's also still our neighbor. And during the 1970s, Evalo started looking into reliable industrial lighting, mainly driven by a need within their own glass factory and the surrounding paper mill industry. At the same time, nobody was making a luminaire that was suitable for harsh industrial conditions. So Evalo focused on luminaires built to withstand dust, corrosion, extreme temperatures and mechanical stress. And from the start, they've been recognized as a trusted partner for heavy industry and demanding environments. While firmly rooted in the Nordics, they have delivered projects in more than 40 countries worldwide. And actually, they have had very strong sales in Finland. But for the first time this quarter, export sales is higher than the sales in Finland as a result of focusing sales reasons on selected European markets. Then we have VECO, that was founded in the very difficult to pronounce name in the Netherlands, in 1975. And from the beginning, the company is specialized in linear LED lighting for industrial spaces with a very strong focus on energy efficiency and durability. So over the years, VECO has introduced several industry firsts. including the world's first linear lighting system with integrated cable ducts and IP65 protection, so meaning suitable for tough environments. And their unique approach means that products are manufactured to order for each product supplied with codes and delivered pre-assembled without packaging. And this concept greatly reduces both installation time and waste. So they were very early out from a sustainability perspective. And vacant solutions are widely used in open environments such as distribution centres, warehouses and light industry, but are also trusted in more demanding settings, including swimming pools, freezer facilities and retail spaces. So last but not least, we have DesignPlan, who was founded in the UK in 1963 to meet the need for robust and waterproof fittings in demanding environments. And those of you who have heard me speaking before know that I normally say if you're sleeping under a DesignPlan lighting, you are not in a good space. because they are in very harsh environments. So from the outset, the focus was on creating luminaires with high ingress protection and exceptional vandal resistance. And the original vision still guides the company today. So DesignPlan develops lighting solutions for some of the most challenging applications, including transport. They've done a lot of all of the new metro stations in the UK, for example. They do a lot of prisons, so a lot of custodial and social housing, secure health care and urban exteriors. So their products are built for longevity with removal gear trays that allows easy maintenance and technology upgrades, ensuring that fittings remains reliable and future ready. And there again, very good for sustainable perspectives. so in previous calls we're going to wraps i've shared examples of how we combine innovation with sustainability across our brands and i think we are a very good example of when sustainably sustainability meets business needs and business strategy it really makes sense so i want to highlight that today with one of our more exciting new solution which is called wrapped and it's from our fargo brand in harbour and wrapped is actually the world's first cardboard pendant luminaire and You can see it here. You see it on the first page of our report. And I can assure you when you see it, you can't see it's made out of cardboard. It's impossible to see. So it combines sustainability and functionality through careful material choices and design precision. So to ensure strength and stability, we have put significant effort in testing into the Luminar body, and it fully meets our quality standards. It's produced in our Swedish factory in Fagerholt in Harbo, using recycled and renewable material sources from local suppliers. And when the time for recycling comes, which is first after 100,000 hours of use, the luminaire can easily be dissembled and all materials recycled. So WRAP reflects very much our continuous work to reduce environmental impacts while maintaining high quality and long product life. It also demonstrates how responsible design and local production can strengthen our competitiveness and create long-term value for both our customers and the group. So we're also very happy that two weeks ago, RAPT was awarded the best lighting innovation in 2025 in Sweden, in the so-called Elmessan. And with that, I will hand over to our CFO, Oskar Wallsten, who will provide a much more in-depth of this quarter's financial. Please, Oskar.

Thank you, Bodil. It sounds like it has been a busy period. I would also like to welcome everyone to the call. So good morning from me as well. Whilst many strategic topics continue to make very good progress, we are, as Bodil has already stated, not happy with the operating results. From an organic decline of 6.5% in the second quarter, we deliver a flat organic order intake for the third quarter. As Bodil mentioned, the market seems to stabilize. In the quarter, the order intake is positively impacted by FX and acquisitions by a total value of 78 million SEK. Sales is organically growing by 1% in the quarter. FX and acquisitions have a positive impact of 89 million SEK. As mentioned, we are disappointed with the Q3 7.3% operating margin, which is a reduction compared to last year, but an improvement compared to Q2. The Q3 cost is impacted by acquisition transactions of 19 million SEK, which is of a one-time-off nature. The operating cash flow was improved compared to previous quarter and almost on the same level as last year, Q3. Year-to-date order intake is the same as last year, which confirms a stable market. Sales is lagging behind last year by 7.1% organically. The lower sales are partially explained by longer lead times between orders and deliveries. Operating margin is 7.1%, which is lower than last year and is mainly a result of lower sales volume. Cash flow year-to-date is 395 million SEK. It's down because of lower profitability. The rolling 12-month net sales shows a slight increase in the quarter, mainly due to acquisitions of Capron and Trato. The margin development is positive compared to previous quarter, thanks to increased sales volumes. And now we're moving into the business area dimension. We start with collections. The third quarter order intake of 860 million SEK entail organic growth of 9.5%. The order intake for the January to September period of 2,722 million SEK entail an increase of 7.7% in organic growth. Net sales for the quarter total 890 million SEK corresponding to organic growth of 8.4% and operating profit before IAC increased to 86.3 million SEK. For the premium business area, order intake for the quarter is 551 million SEK, entailing an organic decline of 11.1%. And the order intake of 1,940 million SEK for the January to September period showed an organic decline of 7%. Net sales for the quarter totaled 603 million SEC and operating profit before IAC of 90.2 million SEC, resulting in a decrease in the operating margin before IAC of 14.9%. The business area is seeing an increasing number of customers choosing retrofit solutions with smart technology. Professionals. Order intake for the quarter increased to 357 million SEK, mainly through acquisitions. Business area order intake for the January to September period of 866 million SEK entail organic growth of 0.7%. The order backlog remains much improved at 492 million SEK. Net sales for the quarter total 410 million SEK, up 60.1%. of which 6.3% was an organic increase and operating profit before IEC amounted to 31 million SEK. Within the business area, we have Whitecroft that has made a full recovery from the IT incident that took place in the second quarter. And Trato is including the business area, as Bodo mentioned before, from 1st of July. Now over to infrastructure. Order intake for the quarter total 223 million SEK, corresponding to an organic increase of 8.3%. For the January to September period, the order intake decreased by 11.8%. Net sales for the quarter total 180 million SEK, an organic decline of 9.3%. And operating profit before IAC was 6 million SEK. Beko increased its order intake to its highest level for over a year, while concurrently delivering a smart lighting project at one of Europe's largest logistics centers for Daimler in Germany. In the second quarter, the cash flow improved to 162 million SEK, as working capital was better controlled. In the third quarter, we continued to the good trend. work and deliver 208 million SEK in cash flow. The group has a good cash generating process. During the last three to four years, you can see our strategy has been to reduce the net debt. This has enabled us to invest in new acquisitions. Investments in Trato and Capelon has increased debt. Earnings per share. We repeat the message about not being pleased with the earnings per share, and we are working very hard to improve the earnings. And due to the recent and earlier acquisitions, we are considering to start to report EBIT A instead of EBIT. This will give a clear view of the operational profitability before factoring in the non-cash cost or amortizing intangible assets. That was all from me and now back to Bodo.

Thank you, Oskar. So I will do a very quick conclusion and recap before we opening up for questions. So summarizing, I would say that Q3 was a stable quarter and underpinned by a very resilient business and a well-qualified order book that provides a solid foundation for future growth. However, as we said, we are not entirely happy with the overall results. We see some signs of recovery where we see mainly renewed activity in key segments and a gradual slow improvements in customer sentiment. Still, global macroeconomic uncertainty remains all around us. I think we have also, as I said last time, we are focusing a lot internally to see how we can increase cooperation between the brands, because we believe this is our fastest way to increase revenue. So that is very much ongoing within the group. Also, the integration of Traton, TLV and Capelon continues to progress well and further strengthening our market positioning. And throughout the quarter, we maintained a strong focus on cost discipline and our operational efficiency, and this work will continue. And looking ahead, I would say that we have very favorable structural trends and continued together with the continued calibration across the group positioned us very well for the progress in coming years. So that was my short summary of Q3 and the situation. And with that, I will hand over to Niklas and Inderis for the questions we might have in the call.

Thank you very much, Bodil and Oskar. And with that, I will ask the operator to open up for questions from those on the telephone line. Thank you.

Thanks. As a reminder, please press pound key five on your telephone to ask a question. The first question comes from Lara Motadi from ABG Sandal Collier. Please go ahead.

Hi, just a few questions from my end. Firstly, just a clarifying question. Were the acquisition-related costs of 18.1 million accounted for in the IACs in Q3 or were they left out?

Hi, Lara. Can you repeat the questions? If they were included, were they included in the normal results, in the operational results? It's not taken as an IAC.

Yes, if they were included in the operating profit before Ajax.

Yes, that is correct.

Okay, and you also mentioned some signs of recovery in the market. Have you seen any changes in the sales cycles during Q3 or would you say that momentum is the same as before?

I think if you look into what Oscar said before, we still continue to see that there are long cycles, but there will be differences between our different businesses. in that because they have very different markets. But I think what you see when we see our order intake, which has been very stable with a little bit less fluctuations, I think that is for us a sign. And of course, we also monitor a lot what we see into future projects, etc. And I would say that indicates a first very slight improvement compared to what we saw a year ago.

Okay, sounds promising. And would you say there were any particularly large orders in any of the segments that left maybe a large positive impact?

If you're looking Q3, no, not in the order intake. That's what I said before is that it was a very, there was no huge orders taking into the quarter that gives those. It was very much of the underlying stable business that we see. So many projects, because we are a project business, but none that stood out specifically. So for me, that's also a sign of stability and that the underlying business is there. And when we speak about very big projects, we are sizes around, I would say, from 40 million Swedish and above.

Thank you. That was all from my end.

Okay. Thank you very much, Laura. So, Back to Indurance, do we have any more questions in the conf call?

Sorry, the next question is from Mats Lis. Your line is open, thanks.

Yeah, I think you're right, sorry. Mats Lis, Capital Chevrolet. Well, coming back to this question there about one regarding acquisitions, just to get it... That is included in the 147, I mean, the topic before. That is correct. Okay. So, and they sort of affect the professional business area segment, I guess.

It is, that's correct.

Okay.

Just to clarify, the only thing we've been taking IACs in the past is when we've been doing structural program changes in the businesses. So restructuring programs. We haven't been taking IACs for anything else.

No, no, great.

Yeah, and this is a one-time-off item, which is tied to legal fees and so on in relation to acquisitions. Yeah, I understand. So it's really a one-time-off that is not coming back.

And just looking at the orders, I mean, they were sort of unchanged organically. Could you say something about the mix, the margin mix? And you mentioned that demand has stabilized or maybe slightly up in some areas. Should we expect this to be a sign that pricing is also improving? Or could you give me some framework there?

It's depending what you mean by pricing improving. I think when you look into the market, I think everybody asks themselves the questions, are we at the end of the cycle? Do we see that we're bottoming out? And of course, we're all looking for those signs in general. I think, as I said, it's always difficult to look into. Everybody wants to look into the crystal ball and nobody really has it. So therefore, we can only say what we see. And this is what we've seen in this quarter. When you look into price in general, I would say that we, as you know, we've been good all the way through the cycle to keep our pricing. I don't see, if you look into the current market conditions, I don't think you should expect Of course, we try to compensate for efficiencies, but we don't do currently any high price increases because that's not the temperature which is out there. I mean, there is tough market conditions if you look in general. If you look at the lighting market as such, it's not growing. So, of course, that also creates some strong competition. So we do what we can to fight. But I think in terms of how we are and our customers and our stability, I think we are very well positioned. in the segment where we are. Does that answer your question?

Yeah, good. And then, sorry, you mentioned that, but the trade acquisition, what was the contribution? I mean, besides the 19 there, what was the contribution during this first quarter with them?

I think if you look into, I don't have the exact numbers here, but I think in terms of, you can see it in terms of the sales, but I think what we have seen is in line with our expectations. So the performance for Q3, I think was exactly what we expected.

And seasonality there, what about that? Should we expect a fourth quarter in line with that or is it?

Yes, I think that's also what Oscar said. Maybe you want to say something more about the EBIT-A, Oscar?

Yeah, no, absolutely. So, I mean, we're having, given that we have done a number of acquisitions, not only recently, but historically as well, I don't think EBIT is a fair trade. metric to use to describe our business because of the amortizations of some of the intangible assets. So in order to get a more fair view of the operational performance, we would like to focus more on EBITDA going forward. Is that answering your question?

Yeah, that's good. And yeah, maybe I should. Yeah, thanks. I think that's good enough for me. Thank you very much.

I think that will help you seeing through the underlying business and also what the new acquisitions are bringing. You will see the operating result here, I think.

Thank you. Good.

The next question is from Oskar Rönnqvist from SCB. Please go ahead, Oskar. Your line is open.

Hi, good morning. Thanks for taking my questions. So just two questions on the cost side. So the first one is on the adjusted gross margin at 39% in Q3, down a little bit from the last few quarters. So I just wanted to hear if you had any color on why that's coming down a little bit. And also just wanted to see if you could elaborate a little bit on the savings progress, what you've done year to date, and what you expect going forward into Q4. Thanks.

Yeah, no, absolutely, Oscar. I think that's a good question. When it comes to the margin, it's a result of a product mix, if you like, and business area mix. So it's not necessarily fluctuating if we compare the business year on year, but it The product mix simply generates a slight fluctuation, but we don't expect any decline going forward. As Bodil mentioned before, we don't see any big price increases, but we don't see any decreases either coming. And then when it comes to the cost reduction program, we are... Making good progress there and we're aiming to deliver according to the plan by end of the year. So I would say we're very much in line with the previous plan that was communicated back in Q2.

Got it, thank you. So 160 million in OPEX reduction year-over-year in 2025 in total, and I think you were aiming for 180 when the full run rate kicks in in the early part of 2026, I suppose. So can you say What's the run rate at the moment?

Just wanted to get some sort of impact into... Yeah, so it's a little bit... Yeah, you're absolutely right. But it is a little bit complicated because we're having the new acquisitions coming in, which is impacting, of course, the spend. But we're also having the one time off and then a few fluctuations, seasonal fluctuations between the years. But I would say you're referring to the right numbers, and that's what we're aiming for and what we expect to be delivered. Got it. Perfect. Thank you very much.

There are no more questions at the telco at this moment, so I hand the word back to you, Niklas, for written questions.

Thank you very much, Einar. We have a few written questions and I will navigate to the first one. Do you see any impact of the EPBD that mandates smart lighting in commercial buildings early 2026?

For everybody, EPBD is the European Performance of Buildings Directive, which is the new legislation which was taken and that's supposed to get international legislation by May. which is very positive both for renovation rates, which is where we see a steep increase, and also has some parameters about smart lighting in there, which will help the development on the market. So I would say that... We are in the very early beginning of it. I think there are many differences between different countries. I think some countries are quicker to get the legislation in place, Sweden being one of those. So in Sweden, we see more concrete plans of what the country wants to renovate, and that is mainly in office education and healthcare, which are good markets for us. What we see very strongly is that when we see renovation, we see an uptake of smarts. And we've actually seen that also in Q3, we have had an uptake in our sales of organic response, which I think may be an early sign of the European performance of buildings directive as well. People start to prepare. Then having said that, I still think there is a lot of people who's not aware of that this is coming. So we need still to help out in terms of helping our customers and help out in terms of education.

Thank you very much, Bodil. And what initiatives are you taking to strengthen sales and again turn to positive organic growth?

That's a very good question, Niklas. We initiated a program across the company a few months ago that will... drive the collaboration between the different brand companies and business areas that we we named the cross-selling essentially utilizing our market presence by selling more from our sister companies in in the sales engagements with our clients so we have set up um a good pricing structure that will enable easier collaboration between the companies. We will also tie incentive system to it to incentivize the sales organization to really drive this more as a partnership towards clients and enable us then to sell more to the same customer base. And we are communicating that out to the organization later this week. And then we're aiming for launching it by mid end of Q4. And hopefully already during Q1, we should be in full swing with it. And we should see a good result from that increased collaboration between the companies going forward.

Thank you very much, Oskar. And that is it with the questions from the chat. And before we conclude the webcast, and thank you everyone for joining, I will hand over to Bodil for a final word.

Yes, and just to comment on what Oskar said, I think that we are working very actively with this because we think from a growth perspective, this is by far our lowest hanging fruit. So we've increased the temperature and the work on this, which I'm very happy about. But then if you look at the quarter, as I mentioned, it's been a stable quarter, not as strong as we would like to, but one that shows that we are navigating very well in a complex environment. We've been training on this. We know how to do this. So we continue to stay very focused, very cost conscious, and very close to our customers, which I think makes a real difference in today's market. And I think also we have, you can also look at our order book, who is... It gives us a good platform for the quarters ahead. And also there, the integration of Trout and TLV has contributed because they came with a good order book. And of course, also Capelon. capable of that continues to move us in the right direction so looking into next year our priorities remain very clear to build on the collaboration as oscar just explains between our companies to stay close to the market and to capture the opportunities that comes both with sustainability and smart solutions i think that was a quick quick summary of what we've heard today

Thank you very much, Budil. And with that, we will conclude the webcast. And once again, thank you to everyone tuning in and joining us today. And as always, the recording will be available on our website. So thank you very much and goodbye.

Thank you, everyone, for listening.