Green Landscaping Group AB (publ)

Karl-Fredrik Herre. Today I am joined by my long time colleague, Jakob Körner, part of management team and head of M&A instead of Johan. Johan is temporarily on leave due to an accident in his family. He is expected to be shortly back. And Jakob will present Johan's parts in this presentation and we will then answer questions together. Jakob.

Perfect. Yes, I'm Jakob Körner, as Karl-Fredrik just mentioned. I've been in the company for plus 10 years and would say I know our company really well. I'm head of M&A in the group since 2020 and I've been a part of the management team at Green for a long time. Well, before we dig into the numbers, I would like to say that we started the year really, really well. Our model truly shows itself being resilient, both because of the characteristic of our business, but also because of the super skilled entrepreneurs we got inside the group. Sales and profit margins were up, or at least on par with last year for all three segments. Apart from the first quarter being a pronounced low season for us, it is really the quarter where weather impacts our financial outcome most. And snowfall was a bit heavier than normal this year, at least in parts of the Nordics, and that contributed, not at least, in sales to our performance. Apart from that, we have announced two acquisitions, both in Germany, and we do have a solid M&A pipeline. And I believe that really indicates that who we are and how we do things works really well with entrepreneurs also in Germany and on the DAH market. Okay, presenting Green Landscape being grouped then, where we are and what we are. So we are actually on a super attractive market. It's large, it's steadily growing, driven by mega trends as urbanization and sustainability. It's got low cyclicality, it's highly fragmented, and a big part of the market consists of demand from the public sector. And to this market we're applying what we believe is a really good business model. And the main thing about the model is that it is decentralized. This is about local decision making in our plus 50 subsidiaries. We're entrepreneurs, we're large owners, we've got an evergreen horizon. We love the public customers being number one on the money, and we also like to learn from each other between the subsidiaries. We say we are decent people making decent money in a decent way, and we are working really hard. Okay, other than that, I would say we've got a proven M&A strategy. We've done like plus 40 companies since 2017. We are disciplined regarding segments and some other criteria of ours. You could say, I mean, we're looking for success and successful entrepreneurs, successful companies. We're looking for companies with long-term customer relations. We're looking for entrepreneurs or people that really like what they are doing. We're looking for culture, culture, culture, good culture, because that is what makes the good companies really, really successful. To sum it up, we're looking for the best. So, summing up where we are by the end of March 24, starting off with RTM, we increased net sales by 15%, EBITDA by 19%, and our RTM EBITDA margin by end of March increased from .3% to 8.7%. Looking into the same figures, but for Q1 in 24, well, net sales increased by 11% to SEK 1383 million. 8% of the growth is organic, partially driven by snow, and 4% come from acquisitions. EBITDA increased by 5% and reached SEK 90 million in the quarter. And our EBITDA margin amounted to .5% compared to .9% same quarter last year. The decrease in margin is due to slightly higher overhead, since all our three segments are performing better than Q1 in 2023. Financial gearing is at 2.4%, with other words, in line with our targets. We repurchased shares during the quarter to the amount of SEK 32 million. And regarding our expansion, we could say that it continues as it should. We acquired two companies in Germany, one in February and one in April. And I'll get back to these two companies shortly. Okay, zooming out on our financial performance over time. We are pleased to present that we are trending well above our targets. By the end of 2022, we decided to take a step back in our M&A growth, just to monitor the market and our development. We also invested that time into building the infrastructure in Germany needed to reach our long-term goals, basically. So because of this, there is a decrease in our growth rate, both regarding sales and EBITDA as of today. But I think it's fair to say that we expect to get back on track during the quarters that lie in front of us. By acquiring, well, around eight to ten companies a year. That's the pace that we really like. So again, the long trend of net sales and EBITDA is just as we like it. Digging into our segments then, starting off with Sweden. First, the RTM numbers. Net sales increased by 1% and EBITDA decreased by 14%, ending up with an EBITDA margin of 6.1%. As we have disclosed during previous calls, this is because of substantial loss making in one subsidiary, especially in Q2 and Q4 2023. Furthermore, it's basically about one really loss making project that will end in Q3, in the end of Q3 this year. Actually, most Swedish companies are doing really good. Looking into Q1, net sales increased by 4% to SDK 729 million and EBITDA increased by 3% to SDK 59 million. It gives us an EBITDA margin of 8.1%, in other words, stable compared to last year. Regarding Sweden then, I said in the beginning that we had a little bit more snow than usual in the southern part of Sweden, driving our sales in our maintenance companies. But on the other hand, our landscaping companies struggled a little bit more because of snow and cold Q1. But this is basically how we designed our group to decrease the dependency of winter. So I would say all good and according to plan. Jumping over to Norway, looking at net sales, RTM increased by 17% where acquisitions contributed by 20% and organic growth by 2%. EBITDA increased by 2%, which leads up to our RTM EBITDA margin of 10.4%. Regarding Q1 then, net sales increased by 10% to 549 million SDK and EBITDA increased by 31% to SDK 48 million. So our margin, EBITDA margin in the quarter reached .8% compared to 7.4 in Q1 in 2023. And regarding segment Norway then, it's basically the same story as in Sweden with a high amount of snow, really rewarding our maintenance companies and it drives both sales and margin in the quarter. Even though our landscaping companies are affected somewhat in the other direction. And of course, it must be said that we got really, really skilled entrepreneurs and managing directors all over our three segments. And they are acting very well to adjust their business according to external circumstances, regardless if it's weather or something else. So very well done. Okay, last one. Rest of Europe. Our net sales, RTM is up by 153% and EBITDA increased by 527% leading to an EBITDA margin of 20.8%. These dramatic growth numbers is of course mainly driven by acquisitions. In this quarter, net sales increased by 121% to SDK 105 million and EBITDA decreased to minus 7 million, which gives us an EBITDA margin in Q1 on minus 6.6%. So regarding this segment then, I would say that the absolute majority of our companies in this segment are landscaping companies. And because of that, I mean, the first quarter, it's basically loss making by design. But if you take a look at the graphs on the right hand side of the slide, one can immediately see like the seasonality within this segment. And we expect the segment to follow the same pattern as previous years basically. Overall, good growth by design in this segment and we expect the growth to proceed in this segment during the quarters that lies in front of us. So let's take a look at what we did on the M&A side of the business. In February, we joined forces with Lesle Landschaftbau and Tiefbau. It's a stable landscaping company in Offenburg, Germany. That is just east of Strasbourg, but of course on the German side of the border. It's a well-run company founded back in 1968. Herr Rainer Lesle, who is running the show over there, is a skilled entrepreneur providing landscaping services, including some water and sewage services in and around Offenburg. They're also working with a pretty advanced recycling business regarding soil and got around 25 employees within the company. Then just outside of Q1 in the beginning of April, we agreed with Herr Wolfgang Kuschler to be a part of Green Landscaping Group. He is running a company named Gartenide Kuschler just outside Munich in Ingolstadt with his around 100 employees. Gartenide Kuschler is a very well-known and well-reputated brand on the landscaping scene in Bavaria. So really, really glad for this one as well. The company provides services within landscaping and maintenance. To sum it up, we are super delighted that both Gartenide Kuschler and Lesle Landkampfbau and Tiefbau are on board in the Green Landscaping Group by now. So that's all for me for now. So, Charles Hedrick. Thank you, Jochob.

Looking at the key financials, we talked about net sales, 1.4 billion, and we're just below 6 billion on a rolling 12 months. A bit of margin, a bit lower this quarter due to the normal seasonality. And as Jochob said, all our segments were actually performing slightly better than last year in terms of margin. But we did have higher overhead costs of 10 million versus 3 million last year. Part of that is due to higher M&A cost of 2.5 million this quarter. But we've also taken a look at the routine for accruals for various compensation so that we actually accrue it more evenly distributed between the quarters than we had before. So it's not a step up in overhead costs that we're looking at here. It's likely this quarter will be impacted. We have a strong cash flow this quarter in line with normal seasonality. I will get back to that in a few slides. We had return on capital employed of 38 percent, if you exclude goodwill, and return on equity of 14 percent. Our order backlog is solid. It varies slightly over time. And financial leverage, 2.4. It's expected when we have a strong cash flow that we will de-leverage. And earnings per share were 0.4 SCK per share versus 0.63 last year. And here it's worth reminding that we had 0.38 SCK in exchange rate gains last year in Q1 as the Swedish crown gained value versus NUKE in Europe. And we actually highlighted this in the quarter last year. Looking at the cash flow, it's mounted to 366 million on a rolling 12 months and 208 million in the quarter versus 221. And we had 368 million cash and cash equivalent at the end of the period. And if you look at the chart to the right, you will see that it varies quite a lot between the quarters. But it's usually strong in Q1. And this was what we expected this quarter as well. Definitely having the last of March, 31st of March on Sunday and also having Easter before that weekend impacted payment patterns from our customers. So we did again see a large amount of receivables being paid in the start of April. Looking at the cash flow bridge, we have 90 million in e-bit. We had net depreciation of an interest and tax of 30 million. Positive change in networking capital, so releasing 148 million, meaning we had those 208 million from cash flow operations. We spent or used 36 million on acquisitions. We did investing in capex of 39 million. We took up new loans of 9 million, but we repaid loans of 165 million. And then as Jakob mentioned, we used 32 million to repurchase our own shares during this quarter, which means that we had a minus 54 in net cash flow for this period. Looking on the financial leverage, we have a target of maximum 2.5. Given the stability of our business and the stable cash flows, I think it's quite prudent to be at this level. And it's in line with our financial target. I think we should definitely be between 2 and 3 in leverage. And again, like we said, this is something we can to some extent, to a large extent, impact. And of course, our cash flow will mean that we will de-leverage naturally over time. But then we like to use that money to grow by acquisitions, which has the opposite effect, of course. Our loan maturity profile is the same. They are maturing end of 2026. It's bank loans from three different banks. And we have one covenant being net debt to Evitea Performa, which leaves us plenty of headroom to continue to grow. And my last slide is the financial targets. We have a growth target of 10%. As you know, we are now at 14%, looking at the last 12 months. Our margin is .7% ahead of our margin target. Leverage 2.4 versus 2.5. That's in order. And we have a proposal from the board is to make a no dividend regarding 2023. And that means back to you, Jakob. Yeah, thank you, Carl-Fedrik.

And just summing it all up, we believe we delivered solid Q1. Net sales increased by 11%, mainly driven by organic growth, even though you should keep in mind a portion of it is variable revenue from snow. Our acquisition contributed with 4%. Evitea increased by 5% and amounted to SEK 90 million. And Evitea margin of 6.5%, financial gearing in line with our targets. And last but not least, we made two acquisitions in Germany following our plan for the DAH expansion. So by that, we came to the end of the presentation. So I believe it's time to open up for questions and then we'll try to answer them the best way we can.

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 Carl Bockvist from ABG Sundal Kalia. Please go ahead.

Thank you. Good morning, Johan and Carl-Fedrik. My first one is on just if possible, can you say anything about the start of April and how we should think about the potential, you know, lack of weather effects or how we think about, you know, did snow have a positive impact also now in Q2 potentially or just colder conditions overall just to get that dynamic right first?

Yeah, good morning, Jakob here. Well, basically the second quarter, that's less definitely less seasonality compared to Q1 regarding weather. So we do not like believe that weather will like impact our financial performance in Q2. Well, not at all compared to Q1. So the answer is no.

Understood. Yeah. Sorry. Sorry for that, Jakob. So and then on the in Norway, I'm just a bit curious about the I mean, previously you talked a bit about the sort of normalization in profitability here. And would you say that this is now more or less complete in a way?

Well, it's a little bit harder to answer that one. I mean, we had a really good quarter this one. Our maintenance companies did really well. And I believe our landscaping companies during the circumstances, during the circumstances, while Q1 is a tough, tough quarter for the landscaping segment, they also did well. So I believe it could fluctuate a bit. But again, I think we had rough last couple of quarters in Norway. And hopefully this is a little bit of normalization.

But wait and see. I mean, what we can see is to some extent a little bit more positive tone or more activity from the customers. And we ourselves are, you know, we're super, super happy, of course, with our companies and proud of our Norwegian colleagues. But we think we should do better than 10 percent. We could

do better.

Yeah. OK, understood. And then the Swedish business overall, and just to understand the impact of this one or one project in particular, you have already taken provisions for it. So should we expect that, you know, we will not likely not at least see any further kind of margin pressure from that one?

I agree with that. So like for like, it should be an improvement versus last year.

Understood. And my final one before getting back in the queue is just on M&A here. Of course, you've clearly ramped up the efforts in the Dutch region. But M&A opportunities overall, what is your view on the markets in the Nordics and in, well, for example, Lithuania, where you've previously found good acquisitions as well?

I think, well, in some way, the M&A market is coming back. So we see a bigger inflow of opportunities from all our channels, all over our, in all our geographies. So there are a lot of opportunities out there. And of course, we've got this DAF focus. And I believe that that is, well, maybe our number one market &A-wise at the moment. But still, we will do add-ons in on all our other markets as well. And we've got some good dialogues, not only in the DAF region. So it looks good. We just have to be careful welcoming only the best companies into our group.

Understood. That's all from my side. Thank you. Thank you.

The next question comes from Dan Johansen from SEB. Please go ahead.

Good morning. Thanks for taking my questions. I think three additional questions here. Maybe starting with the question on Snowfall here. You mentioned there was a bit more than Q1 last year in Norway, some part of Sweden. Is it possible to quantify that impact? Is it, are we talking -5% contribution or is it even more than that? If you have any ballpark figure on that, it would be great. Thank you.

This is a tough one. I mean, to give you some kind of perspective here and going back in time. So there was days a couple of years ago where we were highly dependent on weather and on snowfall. We didn't really like that situation. So we worked really hard for the last couple of years to hedge that dependency. And I believe we've done fairly well. And it's not like all our maintenance companies just cherish the snow profitability-wise. So it's a mix even between the, or among the maintenance companies. But overall, I would say our dependency margin-wise is much, much smaller today. We might not be out of it regarding sales yet, but it's hard to say. But we're not super dependent anymore.

But yeah, and also even though it does contribute to our growth definitely in the quarter, especially in Norway, some other companies are being hit by it, negatively. So that means that we can do less of other types of landscaping work.

So

it's a nice balance.

It's hard even for us to quantify down to like, with really

like, with precision. But the majority of the organic growth is most likely due to the winter. Yeah,

correct.

Andersson, thank you so much for the clarification. And maybe touching a bit on the competitive environment. You saw some increased competition during last year in Sweden, for example, perhaps lower construction market where some companies moved into your space. How do you view the competition and the competitive environment so far in the beginning of 2024? Is it a bit back to normal? Or is it still a high competition in certain areas of your business?

I think we moved sideways regarding that. So we still see a lot of competition from like players that normally are not our competitors. So still a lot of competition out there. But again, we are really close to our customers. I said in the beginning our entrepreneurs are super skilled maneuvering their companies in bad times and in good times. So we're not super affected of it. Of course we are affected, but not in a dramatic way. So the same answer will be when the tide is shifting. We won't be super affected when times are better and when competition is less than now. But I would say an overall answer to your question is that basically nothing has changed compared to like Q4.

Sounds good. Thank you. And maybe a final question from my side, a bit on the Dash opportunity there. If we take the two acquisitions you made here on a combined basis, is it fair to assume that they are above the group average in terms of profitability? And also question on multiples in Germany. Now you've done a few deals, maybe have a bit better data now perhaps on the multiple levels. Are they on similar levels in the Nordics or higher, lower? I guess it depends on what types of company you buy and what type of size, but just in general terms. Thank you.

Yeah. So regarding margins, we're not disclosing that one actually, but super good companies. And we really believe that they can contribute in a really good way for the long term for the group. Regarding multiples, I mean, there's no dramatic differences between our markets. That would be my

answer. Meaning we're still between sort of five to six times around there.

Yeah. Okay. Sounds good. I think that was all from my side from now. So thank you so much and congrats for the good numbers here. Thank you. Thank you.

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

Okay. So thank you for listening into our Q1 presentation. Again, we are really happy with the strong start of this year. Yeah. And that concludes our presentation and Q&A. Thank you very much. Thank you all.