Fasadgruppen Group AB (publ)

to this presentation of Fasallgruppens Q4 results. We released the year-end report this morning. In the room today we have Martin Jakobsson, CEO, Casper Tam, CFO and myself, Adria Bestman, Head of Com semester relations. We'll start off with the presentation. Martin will take you through the slides and then we will conclude with a Q&A session. So please Martin, go ahead.

Thank you Adrian and good morning also from me. Glad to present this report to you today. We have a comprehensive report to go through today. And first of all, I'd just like to highlight that we have stable development in Denmark, Norway and Finland. But what stands out today is clearly the Swedish operations. And it has been a weak, unusually weak fourth quarter for us, especially in Sweden. And with that said, we've also implemented a new organisational structure from today. And we are looking into improving the Swedish situation from here. I will get back to that further in the presentation. Another thing that stands out is the implementation, the integration of Clearline, which have gone well. They have been in this report with us two months and have clearly affected results positively. And I would like to highlight that there's plenty of projects to calculate on in the Clearline facilities. So there's plenty to do for them, which is very positive. And that affects also the order backlog, which has increased here even if we exclude Clearline and the project margin or the backlog margin has also increased from Q3. However, with the weak results, we have seen an increase on our important covenant net debt to adjust the DVT pro forma, which is around 3.3 times. Then the board also proposed to have no dividend for 2024 and remove the dividend policy. And hence we are very focused on taking back leverage back below 2.5 times. So some further details on the net sales. First of all, it was a total decrease of roughly 1.6%. However, organically it was down sharply by roughly 50.6%, where the Swedish operations, as I mentioned, continue to decline. It was a very low activity, usually low. And it was a combination of low demand in new construction and also some seasonality effects in December here, especially with less working days. And we have also experienced a continued tough competition throughout the quarter. However, as I mentioned, pretty stable development in the rest of the Nordics. And then we have the organic growth for, it was organic growth in 2024 for all of the other countries except for Sweden. Then looking at Clearline, they were part of the group for two months, as I mentioned, and managed net sales of roughly 126 million. Then looking at the adjusted EBITDA margin came in at 6.4%, decline versus last year, which was at 9.1%. Here was once more the Swedish operations that stood out. We took a hit in conjunction with the bankruptcy of Savnecke and we have roughly 10 million Swedish. However, there are some possibilities that we can maybe start up on those projects again, but that's not included in our books. But we have been working closely with bankruptcy lawyers there. Then as I mentioned, December was very unfavorable for us. It's usually quite a good month, but we once again had a disappointing end to a quarter and that spins over them to the results clearly. Then we've had some subsidiary specific challenges such as the low demand on the new construction, as I mentioned, very weak activity. We've had some extra works that usually have pretty high margins, as I've spoken about historically, which did not have quite as good margins as usual. Some, we say, minor customers have also had problems with paying up. With that said, it is a super tough situation in Sweden. We're very humble about that. With that said, it is back to what we said, I think, in Q2, Q3 that we took a diversification path where we chose to grow into the other Nordic countries, which we're very glad for today and of course into the UK market diversifying our portfolio and adapting to the various markets that is throughout Northern Europe. Then clearly came in a bit stronger than historical figures, around 57 million on these two months in beta. Then looking at the order backlog, as I mentioned, it's on historical all-time high. However, there was some drop organically of roughly 8%. Then you can see the clearland acquisition also had an increase here of the order backlog. It was a lot of some, roughly one billion SEC. As I mentioned also, we've seen an increase in prices that is affecting the order backlog margin. We've seen roughly one percentage point increase in the order backlog margin compared to Q3 of 24, excluding clearland, which have obviously a much higher order backlog margin. With that said, since we are mainly focusing on renovation, as you know, it is also some variance when exactly the products will start. It can be some delays when they start. Usually with the order backlog, it starts roughly at maybe six to nine months ahead from when you sign the order. With that said, it's very hard here to see exactly when the increase will come. But clearly positive that the order backlog margin is growing. Then on the cash flow side, we had an increase in the order backlog margin. We've seen a decrease here in the operating cash flow, mainly due to the lower earnings. However, it was a much lower decrease, mainly affected by the working capital improvements. That I would like to highlight that's been a continued focus for us. We've seen longer payment terms as an example from our suppliers, which is clearly affecting us positively here in the cash conversions. We're roughly at 118% cash conversion for the full year, 220% in the fourth quarter. Then looking at the important numbers here in the financial capacity and net debt, the average interest rate here is around .1% for 2024. We still have a very short interest rate period, one to three months. Then our key covenant here is, as I mentioned initially, is around 3.3 times, which we're monitoring very closely and focusing to decrease, of course. Then we've also converted our credit facilities into a sustainability linked loan. Then we've added the two new acquisitions. First of all, Clearline, which I'd like to highlight once more. A very strong foundation for this company, located in the United Kingdom, and performs services on facades, focusing on often complex high-rise buildings, plenty of facade fire remediation projects, but also more classic facade renovation projects. The thing with Clearline is that it's a total solution company, which provides design, pre-contract service agreements, delivery and execution to the customers, from start to finish, which also stands out due to the fact that they have all of the competences in-house. With Clearline, they also have a very established customer base and a great network in the UK and also outside of the UK. But the focus is now, of course, in the UK for Clearline since mainly due to the Grenfell Tower fire disaster, which was in 2017, which then led to a huge increase in the number of facades in the UK. So, it's a new focus on facades in the United Kingdom from the government, not to say the least. And it is a huge problem in the UK where these kind of facades are dangerous. And Clearline is one of the experts that are assisting the United Kingdom with implementing new, better facades. And I would like to stress that this has led to a more professional market in the United Kingdom and ultimately leading them to better margin possibilities in the UK for our kind of work. Then roughly for the, we mentioned when we acquired Clearline that they had revenues of approximately 49 million pounds. Then I'd also like to highlight a new acquisition we made in Q1, which is called Liab Plotbyggarna. And a fantastic company situated in Södertälje, focusing on sheet metal forging assembly work for steel hauls throughout Mälardalen, Stockholm area. And they have plenty of industrial customers and various, say military sector also, customer groups. So, required 80% of the company existing management and holds the rest of the shares, which we think is creating a strong incentive. They had revenues of approximately 80 million, 24. And this has then also a minimal impact on the net debt to the proof form. We've spoken to Liab, I would say more or less first contact maybe three years ago. So it's been a long process for us ultimately leading to this great acquisition. Then of course, I would like to highlight that we are implementing a new flatter organization as of today, in order to create a more efficient governance. So we have removed one level between group management and the subsidiaries and each subsidiary will report to a chair of the board. And also to further optimize our governance, we've also then taken a small number of subsidiaries that would be a part of the larger subsidiaries in order to optimize and make the governance as efficient as possible. So that will lead to decreasing the number of units and roughly 10% or sorry, 10 units. Then looking at the cost side with this setup, we've also seen that there's some possibility here and opportunity to reduce costs and profitability over time with this new setup. So I'm also very glad to be able to present our new group management team, which will then be including myself, Casper Tamsi, Daniel Bergman, Jan-Erik Pedersen, Peter Andersen, Johan Fegelin, Dave Higgins and Petri Mahonen. So we are then, as I mentioned, creating a flatter organization and this group management is also then directly, some of them are also directly from our subsidiaries and representing all of our nationalities within the group in form of where the companies are situated. So with this setup, I'm certain that we will work in a more efficient way and closer to our subsidiaries, which is the key to our success. Then looking at our financial targets and how we have been faring in 2024, we'll go down to history as one of the toughest years, at least in our history, if not the toughest. As you remember here, we have a net sales growth target to grow of at least 15% per year over a business cycle. We managed them in 2014 to decrease by 3.6%. On the profitability side, we have a target of at least 10% per year over a business cycle, managed 5.7%. Cash conversion stood out, of course, as I mentioned, on a good level. Capital structure wise, we have our targets not to exceed 2.5 times and it's currently at 3.3 times on a performer level. Then we've had a different policy, as I mentioned, which has then been removed by the board yesterday evening. And just to focus on that a bit more, then I think it's clear that we want to create shareholder value, mainly then through our previously announced strategy where we focus on taking down debt, improving profitability and then growing through the year. Mainly through acquisitions, but also organically. So with that said, we've clarified the dividend policy here, meaning that as of now, we would not pay any dividend. Okay, so priorities 25 to 28. This is, as you may recall, a slide from the capital markets day, which we held last year, where we had profitability and leverage in the top focus areas. And now we're stressing that once more. It is truly our focus areas now. And we want to focus on ensuring continuous improvements in our subsidiaries, our efficiency in operations and the cooperation within the group. And with that, I think we'll lead also to a more healthy leverage levels than we're at currently. So with that said, before we open up for questions, I would like to do some concluding remarks. So we see 2025 as it is now, it would be a year of the leveraging and the profitability measures. We need to conclude 24, it was disappointing, even though it was a very, very tough market situation, especially in Sweden. We made a strategic acquisition clear line back in the 29th of October, which I think is a very clear line that stands out for Vassar Group in its history, the largest acquisition as of yet. And have been welcomed very warmly into the group. And we feel very glad to welcome such a fantastic company to the group. We have seen some positive signs in the order backlog, as I mentioned, both in say quarter over quarter, but also margin wise. So some positive signs also on the pricing side. We have created a new flatter organization with more efficient governance. I would like to stress here also that the chair of the board of our subsidiaries will be working very closely to the companies and have plenty of experience of running companies themselves. On the profitability improvements and the de-leveraging, that's top priorities now for 2025. And with that said, we will also introducing segments reporting in the first quarter of 2025, which will reflect them more closely, with more granularity on how the group is fairing, which I'm very glad to announce today that we will be doing. But we'll get back to that in the next quarter. And with that, we would like to open up for questions. Thank you very much.

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 Elvin Roelder from Carnegie Investment Bank AB.

Good morning.

Good morning, Elvin.

Good morning, Martin and team. I hope you are well. I have a couple of questions here initially from my side. If we begin a little bit about the organizational measures that you're taking, especially in Sweden, can you give a little bit more color on why you take these measures now? I mean, the margin trend in Sweden and the competitive landscape has been troublesome for quite a couple of quarters now. Is there anything specifically that happened in Q4 and now in Q1 that makes you want to take these measures now or can you just comment a little bit more about that?

I mean, good morning, Elvin and Martin here. Well, I would like to say that what stands out is of course, Q4 was not what we planned for. And of course, we aim to be as close to the subsidiaries as possible. We implemented a new structure in November 23, as you may recall. And our purpose was to work even closer to the subsidiaries with these operations units. And that was not, I mean, it's impossible to know if those measures that were taken then led to worse result or better results. It's hard to tell. But with that said, what we are doing now is implementing a structure where we are getting even closer to subsidiaries. And I think that is what we are seeing as the most efficient way at the current times. And I think we're very humble about the market situation. Still, we've seen some positive signs, yes. But there is, let's say, all hands on deck at this moment because the subsidiaries are the Fossil Group's total operations. And we want to come as close to the operations as possible at this time, especially. And that's why we are implementing these kind of measures now.

Okay, perfect, thank you. And I mean, roughly, what type of cost savings could one expect from this? And it's the beginning now, entering Q1, or will there be some delay before we can see those measures take action, so to say, if you can comment a bit on that?

Yeah, I mean, not really quantify that. But I mean, it's, let's say, in the range of 10 to 20 million. But maybe full effect is what we're seeing. Maybe a year from now or something like that because it's also hard to tell on how much it will affect on the, let's say, efficiency side where we're working even closer to the companies. But that is yet to come. But we will get back to that regarding how the new organization will fare.

Okay, perfect, thank you. Then a little bit of a question regarding the acquisition of Liab, which you announced a week or so ago. I mean, because I understand that you now want to focus on getting the profitability right for the existing subsidiaries and that you focus on efficiency and trying to navigate this market. But was there any specific reason why you went ahead with the acquisition of Liab? In any way, was it a unique asset in that sense? Because I mean, the picture from someone looking on the outside is a bit bifurcated when an acquisition was announced last week. And then we see that you want to stop or not stop, but pause it for a while to get the efficiency out of the existing companies. If you could comment a bit on that.

Yeah, absolutely. And as I mentioned, we've spoken to Liab several years. It is a unique asset in that sense, where we feel that this opportunity is too good to pass on. And we mentioned also that it's minimal impact on the important covenant figures here. So of course, I can see that it can look like that from the outside, but we have been discussing with them for several years and wanting to do this acquisition badly. And it is a unique asset in that sense. And we're very glad to have Liab on board and welcoming to them, to the group. They also have very strong order backlog, which we are happy to take part of, so to speak.

Perfect. And then just the final question for me, while we're on the topic of the order backlog, you mentioned if I didn't hear you, I had quite a bad line there in the beginning, but you said that the order backlog margin was up 100 basis points or something like that. Is that on a year over year sense or a Q on Q sense? I mean, how should we think about the increased margin within the order backlog? Because I want to recall that you, during the beginning of last year, also mentioned that the margin within the backlog was strengthened, but then, I mean, with the picture we've seen during the second half of the year has been, I mean, obviously, quite a weak margin in Sweden, regardless. So if you just can comment a bit on how we should think about when that margin is executed, and yeah, just some more color on that.

Yeah, absolutely. Yeah, so what I said, Elvin, was that, yes, if we exclude clear line, the order backlog margin is up roughly 100 basis points, quarter over quarter, Q324 compared to now then Q424. And yes, we've also seen some strengthening during 24, but remember here that the order backlog margin does not give the full picture. Usually, a project that we get, grows by roughly 20 to 30% on extra work. And there's, I mean, there's still the same amount of extra works in properties, but the customers are more price-sensitive in a sense. So with that said, it is hard to determine where these kind of extra works are going. But what we've seen historically is when, let's say in better times, there is plenty to do for all players, meaning that once you have a project, you're kind of inside the loop. But in tougher times, there are, let's say, more players, more competition are also around extra work, where the customers have a possibility to take contact with several competitors to bring the pricing around these kind of extra works down, which leads to ultimately a weaker profitability for players. But so with that said, we've mentioned that on a new-build basis that, yes, we are renovation, but the total market is still affected by the weak activity on the new-build side, meaning plenty of players still in the loop for these kind of works. However, we've seen some easing, yes, but obviously then not enough to distort the kind of, yeah, current numbers.

So, yeah. Thank you so much. I'll get back in the queue and see if there are any other questions. Thank you so much. Have a good day. You too. As a reminder,

if you wish to ask a question, please dial pound key five on your telephone keypad.

Yeah, so, what do you think about this? It's a good thing, but it's not a good thing. Yeah.

There are no more questions at this time. So I hand the conference back to the speakers for any closing comments or written questions.

Thank you. So we have received two written questions. It sounds like you have closed the line of Elvin, maybe. But we'll continue. So, and they're on the same theme. What was clear line EBITDA contribution and adjusted EBITDA contribution from clear line in the quarters? So two questions.

Yeah, so EBITDA for clear line is quite close to EBITDA. They have very little depreciation. And on an adjusted EBITDA contribution, it was on the same level. There were no adjustments for clear line in the quarter.

You will follow, we could add also, you can find the performance for fourth quarter for clear line in note eight, business acquisitions.

We have also received another question here. Well, at least two, actually two questions. So we can take them both at the same time. So first one, when do you expect to see an uplift in the Swedish market? And the other one on a bit different theme, can you give some more details on the tax expense in the quarter?

Yeah, as you have seen, probably we had quite a high tax in the fourth quarter here and also on the full year here. And this is then the reason is the non-tax deductible cost that we have. And that makes up mainly of our write down, of goodwill and trademarks, which was approximately 45 million. And then also acquisitions cost that we have had during both the quarter and the full year. So that's the main reason. And then the comparison between these costs and the weak result before tax, then that's the reason that we have this abnormality.

Yeah. Yeah, and then the other one then on the Swedish market, Martin, maybe you want to comment

on that. Yeah, so we are humble about when we see an uplift in the Swedish market, of course. I mean, if we should, let's say, look into some kind of directions where we see customers uptake and more demand, I would say in the second half of 25, we see some improvements, but it's too early to tell.

Then actually we are receiving a few more questions now in writing, so we'll continue. So there are quite a lot of one offs, 35 million for M&A, 10 million from the Seneca bankruptcy. Would net profit be positive without them?

It is, maybe we'll have to double check that, but I think on the net net, yes, probably.

And then looking at the interest rates, Q1 2025, how much will they decrease?

Yeah, I would say on the interest rate level, of course, the style board which we are connected to is on the lower level than a year ago. But at the same time, it is, let's say, some, we have a range where we see, let's say, a range between how our leverage current is compared to the underlying style board, 180 days. So with that said, it's a bit too early to tell exactly how much it will decrease, but we can double check that if you want to write us to our emergency relations mail. Okay,

then I think we have reached the end of the Q&A session. So Martin, if you want to make any concluding remarks. What's more?

Yeah, no, I think we've gone through it all. Of course, super tough 24 all in all. When I've spoken to, let's say, entrepreneurs that have been with us for a very long time, they also bring some memories back to the situation in Sweden, which was at the beginning of the 90s to compare it to the 24 levels. So that says something about the tough situation, as I would like to say. But with that said, we are positive on the future. We are full of confidence that we will get through this even stronger. And I would also take an opportunity to thank all our employees for their outstanding work. I know it's tough out there, but together we will make this fantastic company. So thank you for that.