Indutrade AB (publ)

Welcome and good morning on our behalf as well. We will directly go into some of the overall highlights as usual. We gave this quarterly report the headline stable demand in a challenging quarter and with challenging we refer to that Q1 in 2023 was a very strong quarter and is now a difficult reference. We have some easter effects and also some headwind in certain segments and all of this I will obviously elaborate more on. But back to the highlights and the comments. So there was a stable order intake growth of plus minus zero percent in total where of minus three percent organically and to comment some of the Sectors and segments we saw good demand in the medtech area, pharmaceutical area and also in terms of energy and the process industry. In terms of sales we were down four percent and organically minus six percent and again this was mainly due to strong references and fewer working days. This led to an EBITDA margin of 13.3%. Not a level where we want to be but again I will talk a bit more about this later on here. The inventory level was quite stable from Q4 2023 so sequentially flat and a very good acquisition pace. five acquisitions completed in quarter one and seven so far in the year here. And I would say that the inflow of interesting companies to acquire is strong. But I'm sure many of you are keen to understand more about the market perspective. And on this slide here, you see both order intake and sales next to each other and the bars refer to the absolute numbers and the yellow line is the growth line organically and you can see now in terms of the bars there that we have had a growing order intake and a fairly good order intake in Q4 last year and Q1 now this year in relation to sales which has been a little bit weaker there and hence we have built some order book but I would say continued aggregated stable high demand and order intake as I said in line with previous year and Q4 23 and just to gives some context to 23. Order intake at that point in quarter one was in total up 14% and organically plus 3%. And as usual for Indutrade, we have seen variation between companies, segments and countries. And we have had a positive book to build now two quarters in a row where orders now were 4% higher than sales. So you have to take the numbers, plus minus zero in total, minus 3% organically, plus 3% from acquisitions, minus one from divestments, and plus one related to currency. And talking a bit about sectors and segments, as I said, companies with customers in the pharmaceutical production had the strongest order intake. But demand was also good within the process industry and the energy segment. As many of you know, we have a cluster of companies linked to the Novo Nordisk capacity increases. And that's still obviously ongoing to a very large extent, but the projects are large and complex and there are some delays being experienced there. I would say that we weren't able really to invoice and ship to the extent which we planned some months ago. In general, I've said this many times before, in general the green transformation is still driving a lot of investments and also business activity in general which is positive for a large part of our companies. not least the process energy and water business area. The organic order intake in infrastructure and construction was still weak and has been weak now for some quarters predominantly in the construction area. This quarter we have also experienced a bit weaker demand from the engineering segment. If we then turn into sales, again, strong references, and it was even stronger on the sales side than the order intake side. Q1 2023 sales increased 26% in total and plus 13% organically. So it is really difficult comparisons here. And we came in this quarter minus 4% in total and minus 6% organically, plus 3% from acquisitions, minus 1% from divestments, and the impact from currency was basically flat. And this time, only one of our five business areas were able to grow organically, and that was process, energy, and water. And again, based on to a large extent, I would say the green transformation and predominantly the Nordic region. Life science had very strong references, a lot of all time highs in our companies in terms of sales last year. And again, as I said, a bit of delays linked to the Northern Nordic potential invoicing shipping. and also lower activity in terms of single use in the pharma production. We had a great business linked to that a year ago and now it's dramatically lower and part of that can be explained by less with orientation. And again, a continued challenging market situation for the infrastructure and construction area. If we look at sales more in a market perspective, what markets countries we sell into, you see that we have divided this in a Nordic cluster. something we call rest of Europe and then rest of the world. We are since several quarters back stronger or we are experiencing a stronger market situation in the Nordics versus the more central European countries. And within the Nordics it's actually this quarter been Norway which has been the best market And in Norway, I would say that the energy segment stands out positively. And otherwise it's a rather okay situation overall. Otherwise, Sweden, Denmark, Finland was more flattish. Obviously, differences between sectors in these countries. In Sweden, we have had a good life science situation, but a weak construction situation. sector. The rest has been more flattish. In Denmark it's been quite okay in terms of process, energy and water. Some of our companies there have built new business in Iceland where we really haven't been strongly present before which has been positive. As I said, Denmark would probably have been a little bit stronger with an arrow up if there had been more invoicing linked to this Novo Nordisk cluster. In Finland we also see a weaker construction area, also slightly weaker engineering segment. Obviously there's been a strike as you all know in Finland this quarter and that has also had some impact there. If we turn to the rest of Europe it is somewhat weaker. In the Benelux area in Germany we see weaker single-use invoicing and that sort of driving the arrows down otherwise fairly flattish situations. In the UK Energy defense are positive, construction weaker. And in Switzerland and to some extent Austria, we have also seen a weaker situation in the construction segment. Also life science and process energy in water. And we are not really present in the other sectors in Switzerland, Austria. We are fairly relatively small in North America and Asia, so large individual orders can have some impact, but in general, the business climate is stronger in North America, and that's why the arrow is up there, and Asia, prominently China, a bit of a weaker business situation. If we then turn to our financial performance in terms of EBITDA. Obviously, the organic sales development is the main driver for the EBITDA decline. Again, the strong references and the Easter effects had impact there. In absolute terms, our EBITDA came in at 1.1 billion SEK, a decrease of 16% and 19% organically and plus 3% from acquisitions, 0% from divestments and 0% linked to currency. It was actually comforting to see that our gross margin was improving in this quarter. It's actually been our best gross margin level since Q4 2021. So good work in terms of that. However, we also experienced higher expense levels and Here we are not equally proud and I could just say that cost management will be important going forward. I think we were a little bit too much on our heels versus on our toes in this quarter linked to the cost side. All of you basically know that from the beginning of the year we introduced a new group structure. We went from eight business areas to five international business areas. The intention with this is basically to fuel growth, medium term, long term. Not any expected short-term impact. The organization is obviously launched and implemented and the structure is based on being more outside in market driven in terms of these new sectors and all the sectors are then divided into approximately 30 segments. We have definitely still kept the individual company at the core of Indutrade. So we are more building, you can say, a support and development structure around the companies. And the companies are now grouped into more relevant segments where they can learn from each other and gain knowledge from each other in a better way. We also think that this can and should drive positive acquisition activity. We can more clearly see now where we potentially have what we call white spot areas in these 30 segments and build acquisition plans in a structured way linked to that. I also think this structure provides more clarity about the Indutrade in an external perspective. It's intuitively more easy, I would say, to understand what we are all about and in what sectors where we are present. So if we then turn into the performance in the five different business areas, I would say that all of them are obviously impacted by fewer working days and strong references, but in particular the life science area. They had an extremely strong quarter one last year and not least then linked to this single use area. Infrastructure and construction continues to have a challenging market situation and in this business area total sales were also affected negatively by the divestment of the Dutch company Cubic which we made late last year and that had an impact of minus eight percent This is not new that there has been headwind in the construction sector for some quarters now. I would also say that the winter this quarter or the first quarter of this year in the Nordics have been quite challenging in terms of construction work. The weaker general engineering and also construction markets had impact in industrial and engineering and also technology and system solutions more broadly and I would say more evidently this quarter than in 2023. But process energy and water managed to grow organically and driven mainly by the process industry and the energy segments in the Nordic area. If we look at EBITDA in a business area perspective, all areas were impacted by the weak organic sales development. EBITDA margin declined for all business areas, but only very marginally for process energy and water. Life science, as discussed before, had the most challenging references. And the lower organic sales for companies selling to the pharma production single use had a really stronger impact on the margin here. Good pricing work and impacting the gross margin positively. And again, it came in at 35% versus 34.6 a year ago. So a strong level here. But the margin, the EBITDA margin was reduced or dampened by our increased expense level. And we have obviously experienced cost inflation in general, and this needs to be managed. And I'm not completely satisfied with our performance here this quarter. If we then leave the financials and the business areas and turn to acquisitions, a more happy phase, happy situation, I would say a really good start in 2024. And we have now been able to acquire seven well-managed, successful companies. And if we add their total sales annually, it adds up to 775 million SEK. four out of five business areas have been engaged in acquisitions. And we have a number of projects right now in different phases ongoing, which is positive for coming quarters. And as we have said before, we have generally strengthened our acquisition resources since some quarters now, and we have built also some some professional resource in the Northern Italy and hope to see positive effects of that going forward. Also the general pipeline remains strong and the inflow of new companies is positive. So all in all I'm quite optimistic that 2024 will be a good acquisition year. On this slide here you can see our performance in terms of number of companies acquired and also the quarterly financial effects from acquisitions. Basically how much EBITDA we have added in a single quarter here. In the slide towards the right there you see that we have added around 30 million SEC in quarter one. That's in relation to the previous years here, a fairly low level. We have been more around 60, 70 or even above that some quarters. So we didn't have effects from previous quarters into this first quarter to a very large extent now. And the acquisitions we have made this quarter haven't really added in enough yet. So in this perspective, quarter two will will have a better effect, more effect. But you know that our goal is to really acquire around 20 companies per year and I would say that we are at that pace this year now. In general it's wise to basically follow up our acquisition progress over a longer period of time since it can shift between quarters quite significantly. By that I will leave the word over to Patrick to elaborate a little bit more about the financial performance.

Yes, thank you, Bo. And summarizing a little bit of the financial performance then, and maybe repeating a little bit the important key points. Total growth for orders and sales were zero and minus four respectively in the quarter. And as Bo already talked about on the organic side, strong references and they affect fewer working days had a negative impact on the development. And also on the acquisition side, the addition from acquisitions were relatively low compared to previous quarters as the new acquisitions have not really started to give effect. So slightly lower than we're used to, but it will increase during the coming quarters. Positive is that book-to-bill was above one in all business areas and also then aggregated, of course, for percent higher orders than sales in the quarter. Continued good pricing work gave this higher gross margin, as Bo also mentioned, and 35 versus 34.6 last year. Beta was down 16% in the quarter, driven by the lower organic sales, I would say, and slightly higher expenses. Beta margin 13.3 versus 15.2 last year. And Q1 has historically been a seasonally low margin quarter. So the 15.2 last year really stands out. I must say that. And looking in detail in the result a little bit more, we had some positive earn out revelations in the quarter as we sometimes have, but then They were basically offset them by some other negative one-offs, for instance, connected to the divestment boom mentioned. So net, there are no sort of one-off effects in the result, I would say. Finance net up 17 versus last year because of the higher interest rates. Tax costs decreased with 23%, so basically in line with the results. The underlying tax rate is also then basically in line with last year. EPS decrease with 22% in the quarter and I will elaborate on the next slide a little bit more on that. Return on capital employed declined but is still on a good level of 20% in line with our target. Cash flow, operational cash, seasonally weaker in Q1 and amounted to 487 which is lower than last year also that affected mainly by the lower earnings. Net debt EBITDA was stable on a relatively low level 1.5 versus 1.8 last year. So moving on and looking at the cash flow and as I said then it is also clear from this chart Q1 is a seasonally low quarter, but it was also down versus previous years and amounted to 487. The decrease is driven totally by the lower result. Working capital movements were actually more favorable this quarter than last year. Inventories more specifically, they were sequentially stable from end of last year. Of course, a bit of headwind when the organic sales has a sort of a slow development. But our companies are working hard to get the inventories further down. And then maybe also important to note that Q1 is normally a quarter where working capital is increasing slightly. And that's part of the reason why cash flow is normally seasonally a bit low in Q1. So moving on to look at the earnings per share development in a trend perspective. EPS amounted to 1.61 in this quarter then compared to 2.06 SEK per share Q1 last year. And this was mainly driven by the lower operational results. But also then, of course, the increased finance costs also impacted this in a negative way as well. Looking at the more longer-term perspective, the three-year and the five-year growth is 16 and 14 percent respectively. Ending then with the debt situation. To summarize, we still have a strong financial position. The interest bearing net debt decreased versus last year and was around 8.5 billion versus 9.4 last year and the reduction there comes mainly from the very strong cash flow we had last year then the lower the seasonally lower q1 cash flow then in combination with the increased acquisition pace made the debt move up sequentially slightly But the net debt ratios, they are still stable and low from a historical perspective. Net debt equity, 55 versus 69. And net debt debt, as I mentioned before, 1.5 versus 1.8 last year. And if you exclude the earnouts, it's 1.4 versus 1.6 last year. So again, in conclusion, despite increasing our acquisition pace, the financial position is strong. So then I leave back over to you, Bo, to summarize.

Thank you, Patrik. So the key takeaways from this presentation here should be that there has been stable demand in a challenging quarter. and a positive book to build two quarters in a row now we have a portfolio of companies in different situations and companies experiencing better market situations they obviously continue to pursue growth initiatives while companies with more declining order intake are actively working on on defending their margins There is still some uncertainty in terms of the macroeconomic situation. However, it seems like we are coming closer and closer to reduced interest rates. But there is also geopolitical risks which provide uncertainty. And we also face strong references, particularly now in quarter two. In quarter three and four, they will be more reasonable. However, the slightly improved order backlog and the good acquisition pace contribute to some optimism about the earnings trend in the coming quarters. Seven acquisitions in 2024 with combined annual sales of 775 million SEK. And we have established and implemented a new group structure for future growth. I would say towards the end here that we are not happy with the Q1 profitability and we will work towards improving this level going forward. By that we end the presentation, the formal presentation and leave the word back to the facilitator.