Fasadgruppen Group AB (publ)

and welcome to Fasadgruppen's second quarter result presentation. Here in the room, we have our CEO, Martin Jakobsson, our CFO, Kasper Tang, and myself, Magnus Blomberg, head of investment relations. With that being said, I hand over the word to Martin, so go ahead.

Thank you, Magnus, and good morning also from me. First of all, I would like to highlight that we had a tragic accident here during the summer where a colleague actually passed away during the line of duty in one of our subsidiaries. Tragic loss that has affected the entire organization. Our thoughts are, of course, with the deceased family, his friends and colleagues. We are actively working to minimize the risk of this ever happening again. With that said, I want to dive into today's presentation. So, some highlights for the second quarter then. We saw continued decline in the organic sales, which was mainly then continued affecting from new build and we also saw here in q2 that the results increased the adjusted EBITDA up to 132 up from 81 the same quarter last year the margin also increased by roughly 300 basis points up to 9.2 percent in the quarter so we saw rather flat organic development in the order backlog we'll get back to this later and in england we saw some delays from something called the building safety regulator but at the same time we saw an increase in the order backlog for clearline we'll get back to this later in the presentation Then looking on the important covenant fixtures, we saw that the net debt to adjusted EBTA pro forma came in at 3.36, up somewhat compared to Q1, still a continued focus to take leverage back down to 2.5. We also updated our agreement with our banks here, so we managed to push the covenant step down two quarters. We'll get back to that. Then looking on the net sales, in total there was an increase of 10% compared to last year. It was mainly on the positive side from acquisitions, roughly 18%. And organically, we saw a decrease of roughly 6%. It was mainly Sweden and Norway that stood out on the weak side. And Denmark and Finland stood out on the positive side. But in general, we saw continued low activity within new build, as I mentioned, especially in Sweden. Taking a look at our segments, the total solutions segment saw a decrease organically by roughly 12%. In total, it was down roughly 9%. Specialist solutions actually saw a total increase of 7.4%, but a small negative organic drop here by roughly 1%. and clear line sales came in at roughly 162 million somewhat affected by the bsr which i mentioned here initially so the bsr is the building safety regulator which is an authority in england that you could say more or less gives out building permits it's quite a new concept from 2022 And that authority has had extremely busy times and affected project starts for Clearline. Then looking on the adjusted EBITDA, as I mentioned initially, we came in at 132 million. Strong development compared to last year. Margin was also up. So I'm very glad to see the positive development of the results. Taking a look at the various segments, we saw margin decrease here for total solutions down to 6.6% compared to 8.4% last year. And a total adjusted EBITDA for the quarter of 48 million roughly. And for specialist solutions, we saw an adjusted EBITDA of roughly 51 million. But here we saw the different side where we saw an increase in the margin up to 9.4% compared to 6.4% last year. And Clearline came in on an adjusted beta level of 48 million roughly, a margin of close to 30%. In the quarter also we had some adjustments of roughly 11 million, which was mainly related to the earn-out revisions. On the order backlog side, we saw roughly a flat organic development. It was somewhat down then to 0.8%. We saw a continued healthy demand from housing associations and the public sector. The order backlog came in at all-time high, 4.3 billion, following especially a strong development for Clearline. In the various countries, we saw strong development in Sweden and actually negative development for the rest of Norway, Denmark and Finland. But in Sweden, which we've had some struggles with during the last couple of quarters, I'm very glad to see that development. And it's a team effort into being able to land all of these orders, which I'm very glad to see. We've also seen some indirect effects of the Swedish tax authorities that had a tax reduction incentive program started here in May, which is going through the full year of 2025. And when I say indirectly, it's mainly then because it's related to smaller villas, which is not our focus areas, but to some smaller competitors could focus more on that than leaving more for us, so to speak. We also saw that the order backlog margin increased compared to Q1 2025. That was especially then following the strong contribution from Clearline. and going into our segment segments we saw an decrease for total solutions was down roughly 6.2 percent organically on the order backlog site that is and then on the specialist solution side we saw a different development that increased roughly 5.4 percent organically and of course a strong order backlog for for clear Moving on to cash flow, we saw strong cash flow following a negative Q1. And I would say that it's following the seasonal pattern, more or less, where we see usually a ramp up from the start of the year until finalized at the end of the year. But we've also seen working capital improvements throughout the company, but especially in Sweden. So I'm very proud of the work that has been done in Sweden regarding capital development. Then looking on the financial capacity and the net debt, we saw that our average interest rate here in the first six months of 2025 decreased somewhat compared to the same period last year. We still have an interest rate period of one to three months, which is nothing unusual. And then on the important covenant we saw and somewhat uptick from 3.25 in q1 up to 3.36 here in q2 and as you can see on the bars in the bottom left corner here you could see that the new orange dotted line is the new agreed level meaning that the carbonate level is then pushed to quarters compared to what it was before. Then I want to stress once more our priorities. and the focus for 2025 here is profitability and the leverage until we give the full focus to growth once again so it's it's a re-affirmation of our priorities then moving on to some concluding remarks before we open up for questions so We have an all-time high order backlog, but I want to stress once more that there are still issues in the market, and I am cautiously optimistic, but the Swedish market is still having some struggles. Yes, we can see that on the modernization side it's improving, but on the new build side it's still very low activity. Then I want to highlight that once again, we saw some delays from the building safety regulator. There are still delays in the system going forward as well. This is not only for Clearline, it's a systematic problem for the full sector in England, not only on renovation, but also on new build. But at the same time, we saw strong demand for Clearline and the order backlog was clearly up. We had a covenant step down push to quarters, as I mentioned. We are also focusing on profitability improvements and deleveraging, as I mentioned. So to sum it up, we have a lot to be proud of, but much left to prove. I think with that, we open up for questions.

If you wish to ask a question, please dial pound key 5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key 6 on your telephone keypad. The next question comes from Max Baco from SEB. Please go ahead.

Thank you and good morning, Martin and Kasper. Very sad news this morning. I hope you are all right under the circumstances. With that said, a couple of questions from my side, starting with Clearline and the regulatory bottlenecks. You alluded to this yourself. Do you have any indication from your side, how long do you expect this to remain a bottleneck? And has it been more pronounced during the summer due to vacations and so on? Have you seen anything related to that?

Good morning, Max, and thank you for your kind words. Well, looking on to the BSR, it was actually on the last of June, the government, the UK government sent out an announcement where they are doing, you could say, a fast lane to improve the activity. So that's a net positive for the full sector. And I would say that the most dangerous kind of facades are still on the top of the line of the queue. So the clear line projects, which is all renovation, is of course in high priority and top of the queue here. So we have seen some approvals of project starts, but it's been delays in the system, but the government has sent out an announcement where they are pushing this through. This is on very I would say prioritized agenda for the government in the UK. So things are being done. I think they mentioned here that they are hiring another 100 people to improve, let's say, the BSR administration. They are clearly focusing on this area and henceforth we are positive that this will play out, but it's hard to tell exactly when. You can't expect it to be some kind of flood gates that open, but I think you can see that there will be some some small improvements uh hopefully from from the summary when they mentioned this it's it's a public information on the on the government's side you can see that that on the last of June they sent out this announcement okay understood um and then looking on on clear line we have three quarters now where it has been part of the group not all of Q4 but some of it

And we have seen that the profitability has come down each quarter somewhat. And of course, I suspect some seasonality into it. And then, of course, also impacted by the regulatory bottlenecks. But going ahead, you did some 29-30% margin here in the quarter for Clearline. Do you expect the profitability to stabilize at these levels? Or what are you seeing in the order backlog? I think you mentioned that the profitability for the group was up in the order backlog here in Q2 sequentially, and I guess that's much driven by Clearline as well.

Yeah, that's a correct statement that it's a strong margin for Clearline's order backlog. But of course, the BSR delays is a factor that is affecting If you're planning to start a large project in April and you can't start until August, that's a big difference in our world. But I've said it before, we are confident within the margins for Clearline. I'm not worried in that instance, but we're still, let's say, focusing on the margin for clear line. It is a key focus area, of course, but I'm not worried regarding that it should be deteriorating from these levels, so to speak.

Okay, understood. That was all the questions from my side at the moment. I might come back, but thank you very much.

Thanks, Max.

The next question comes from Elvin Rolder from DNB Carnegie. Please go ahead.

Hello and good morning, everyone. I hope you're well and I just like to reiterate the message that Max said before me. Really sad to hear. I have a couple of questions that have been answered during the call here, but maybe some If we begin maybe with the new or should I say updated covenants, is it possible in any way to say how the discussion is now or how firm these are? Do you still have any leeway to push them again if the ever so changing world were to change in any sort of way or how firm would you say that these levels are now?

compared to previously when you've been able to push them yeah yeah good morning elvin and thank you also for your kind words um well if you take a look on the on our let's put it like our dialogue with our banks it's of course as i've mentioned historically a good dialogue and um uh it's everything is an uh you could say in a discussion and of course as we see it this should be enough but but of course we will we have this continuous dialogue so of course no one wants to uh end up a place where we don't want to be so to speak so uh I think with that said, we have very good dialogues still. So I'm confident with our banks and they obviously with this agreement, they also have an understanding for our situation, if you put it like that. And yeah, so continuous dialogue. And I have strong beliefs that they could assist should we need so.

Okay. Perfect. And then we talked a little bit about our own clear line and the building safety regulator, but is it possible in any way to kind of isolate if there has been any significant impact here in Q2 on both top line and and I guess earnings and how much of the backlog would you say is quote unquote at risk of not being able to execute on if this situation were not to ease for the rest of the year at least?

Okay, we can start with the order backlog. I see no risk that that that should not be done because it is still very high on the agenda to fix all of these dangerous facades. It's a big, big issue in England. By the way, I mentioned that this is still only in England. Now there are talks that this should go to Scotland and Wales next. So there's plenty of... They have not even started. So that's on a side note. But of course, there has been an effect on both on top line and on the results from these delays. I mean, you could say that if you're not able to start your projects, you have too large overhead at that time, if you understand what I mean. But since the job will be executed, I'm not worried in that instance, so to speak, but it is a government delay that is affecting us.

Okay, perfect. And then just the final question that hasn't been asked yet. Relating to these working capital improvements primarily in Sweden, can you Can you comment a little bit more on what you have done to improve that compared to previously? And does that change the overall cash flow profile of the company in any meaningful way? I mean, you usually have a more backwards tilted cash flow generation profile, but now it was quite strong here in Q2, which it has been some years as well, but how should we think about Yeah, cash flow as well for the rest of the year.

Yeah. Well, you can put it like this. When we acquire a company, usually cash flow has not been the top of the agenda for the entrepreneurs. If they've been able to pay the salaries and maybe a dividend, They've been quite happy with that. So when they enter Fasal Group and we want to shift the mindset and that's not done overnight. So what we do is we sit down, have talks around what could be improved. What are the payment terms to suppliers? How does the contract look to to the customers. It's a long, long list of what you could improve. And then you could also learn from the rest of the group. And we also compare various companies. How could one company have this kind of cash conversion and the other one have the other cash conversion? So it's a long process to improve. But I think there's more to be done here in the future, even though we've come some way now. But I think in order to fully reach the full potential, I think we want to continue this work where we compare, we learn from each other, have the best practices. focus on this i mean as soon as possible before you start a project before you i mean even calculate on how could we improve on these kind of figures it's it's a long process but i think there's more to be done so well yes you could say that hopefully you could could tilt it into a better um cash position in general for the company. We always want to strive for development and enhancement. So that's what we are doing, Elvin, and we'll continue to do.

Okay. I think that was all for me. Thank you so much for taking my question, and I wish you all a nice rest of the summer.

Thank you, Elvin. Same to you.

As a reminder, if you wish to ask a question, please dial pound key 5 on your telephone keypad. There are no more questions at this time, so I hand the conference back to the speakers for any written questions and closing comments.

All right. We have some written questions here for you, Martin. The first one, if you could elaborate a little bit on the covenant step down and if it has resulted in additional costs for the group.

Yes. Okay, yeah. Of course, when you reach a new agreement with the banks, that's often connected to some additional costs. So yes, there have been some costs connected to this. But we saw it as necessary costs in this case.

All right. Thank you for that. Could you also please elaborate on the ROT, the tax authorities deduction that you talked about a bit earlier?

Absolutely. So that's in Sweden. I think as many people know, at least in Sweden, on the 12th of May, they introduced this new tax reduction where I think the labor cost was increased from 30% to 50% tax reduction on labour. So that has affected us, as I mentioned, and indirectly positively because that's to let's say to private individuals, that's tax reduction, not to businesses. We are mainly focusing on business to business, remember that. But as these small competitors that could focus on business to consumers or business to business, they are then tilting, of course, towards the most profitable. And as we see that this kind of new tax reduction incentive program is then clearly positive for the B2C market. So they have then tilted away from our main focus area of B2B. and henceforth leaving also what we've seen an improvement in the order backlog. And there's been some media coverage around this as well. So it's a net positive for the whole sector, actually.

Thank you for that. And the multiple development regarding acquisitions in the market, how have they developed in the last, let's say, three years?

If we take it in a longer perspective, I think I mentioned it before, started fasogrippen maybe multiples around closer to three three times and in the heydays around 2021 or 22 maybe around five to six times but we've seen a decrease in the multiples the last couple of years here so maybe around three to five something like that um if that's And if that was the question, I think so.

Thank you for that. I think we covered it all. We don't have any more written questions here. So with that being said, we finalize this call with maybe a few.

No, no more from the telephone conference. No questions there.

All right. Okay. There are no more questions at this time.

Perfect. Okay. Then I'd like to thank you for your time and hope to see you again on the next quarterly call here in November. So thank you a lot and have a nice day.