Instalco AB (publ)

Welcome everyone to this presentation of Instalco's report for the first quarter of 2025. My name is Robin Bormann and I'm the CEO at Instalco and with me today I have our CFO Kristina Kasperi. Let's kick off as usual with a short summary of the company today. Instalco is one of the leading installation companies in Sweden, Norway and Finland and since quite recently we also have a presence in Germany. Our decentralized model is a key strength, gives our local companies the freedom to act, but also backed with a strong governments and shared tools. Across the group, we have more than 6,000 employees contributing daily to enable the green transformation. Demand for our services continue to be underpinned by powerful long-term market trends. First, a quick glance at our last 12 months figures. Net sales amounted to 13.7 billion and we ended also the quarter with an order backlog of 9 billion which represents a steady book to bill of 66%. When adjusting for one-off costs taken in Q4 and Q1 our EBITDA amounted to 900 million which contributes to a margin of 6.6% compared to 7.6% at the same time last year. We are not satisfied with this obviously and we will continue to take action to improve but in this challenging market when many small and mid-sized companies are going out of business it is a testament to our resilience that we can continue to deliver this type of margin. Part of that resilience can be explained by our quick adaption by our subsidiaries to service, which has covered some of the shortfalls that we have on the project side during the past years. In Q1, service remained at the high level of 36% of our revenues. I'm very pleased to see that our cash flow from operations has held up, coming in at almost the same number as this time last year, even despite the decrease in earnings, showcasing our strong focus on improving working capital. If we look at a quick summary of the first quarter, Those of you who have listened in for the past years and even slightly beyond that know that the market has been very challenging for installers. It remains that also in Q1, but we have started to see some positive signs. Despite the headwinds, we deliver an organic growth in the quarter for the first time since Q2 23. And according to external forecasters, the construction sector has passed its weakest point. At the same time, our operational environment is currently characterized by global uncertainty. As a local player, we are not directly affected by the increase in world trade tariffs, but we noticed that the economy is somewhat hesitant and willingness to invest is made up due to some uncertainty, both when it comes to interest rate and geopolitical tendencies. Our margin this quarter was also impacted by several factors including one of costs as well as a continued tough pricing environment in some areas. But we're actively working to mitigate these effects as always. We also completed one acquisition during the quarter and finalized our first phase of our investment into Germany. An important strategy and milestone for Instalco going forward. And with that, I will hand over to you, Kristina, to go through the financials in somewhat more detail.

Thank you Robin. Okay, let's start off with looking at how our net sales and order backlog has developed during Q1. Net sales was up by 0.3% to 3.3 billion with an organic growth of 0.2%. This is the first time in over a year we report organic growth, although small. This was driven by Segment Sweden. The first quarter of the year tends to be seasonally weakest and as usual we saw a slow start of 2025 before activity picked up in March. Our order backlog shows growth of 1.1% in the quarter with an organic growth of 2.1% in constant currency, again driven by segment Sweden. In addition to the backlog, we have our service business, which remains an important stabilizing factor. In our service business, we saw growth of 14% in absolute numbers in the quarter. This resulted in service making up 36% of sales. Then on to looking at our earnings, EBITDA in both millions and margin. The seasonally weak Q1 also impacted on earnings. We are seeing the effects of the price pressure on the market throughout last year for the projects we are now delivering on. We have continued to stick to our strategy of favoring profitability over volume, but in a weaker market environment, the choice of projects becomes more limited. This is still reflected in our margin, which we are far from satisfied with. At the same time, a number of major projects were recently finalized that have not yet been fully replaced with new ones due to timing in the order book. This has led to a number of subsidiaries having temporarily lower capacity utilization during the quarter. This had a direct impact on the group's earnings, especially in other Nordic segments. In December, we communicated that Instalco's remaining exposure to Northvolt amounted to approximately 60 million. Following Northvolt's bankruptcy, we now take the exact cost of 64 million as a one-off expense, which impacted EBITDA in the first quarter. Adjusting for this, EBITDA amounted to 187 million, corresponding to a margin of 5.7%. The action program we also communicated in December is on track. The savings that have been realized so far corresponds to about 5 million in the quarter and we are taking further measures for subsidiaries that need them. To break it down into more detail, over to a slide that summarizes segment Sweden in Q1. Overall, net sales were up to 2.4 billion with an organic growth of 5.7%. The entire one-off cost of 64 million for Northvolt relates to segment Sweden. Adjusting for this, the EBITDA margin amounted to 6.8% compared to 7.9% last year. Without adjustments, the margin came in at 4.1%. The order backlog grew organically by 2.4% to 6.5 million. The Swedish installation market is still characterized by major regional differences. For example, in northern Sweden, the level of activity has fallen compared to last year, although volumes are still good. In Stockholm, as well as in the southern parts of the country, there is some recovery from low levels. In mid-eastern Sweden, demand remains weak. The development and demand in the industrial sector is generally positive. Okay, now for a summary of the rest of Nordic's segment. Overall, net sales were down to 900 million with an organic decrease 11.6%. Acquisitions contributed with a growth of around 1%. The EBITDA margin amounted to 2.7% compared to 5.3% last year. Last year, the market in Finland remained on a low but stable level. However, during Q1, the market showed sign of deterioration. Both sales and earnings were negatively affected by temporarily lower utilization of staff in several subsidiaries, primarily in Norway. This was due to the fact that larger recently completed projects have not yet been fully replaced by new ones. The Norwegian market had a tough start to the year. The timing of the backlog and project pipeline is expected to improve somewhat going forward, but uncertainty remains. The order backlog for the segment decreased organically by 1.3% to 2.4 billion. This still represents a sequential growth from the 2.18 billion at the end of Q4. Then on to the cash generation in the quarter. In Q1, cash flow from operations amounted to 223 million, an increase of 12% compared to last year despite the lower earnings. The positive development is mainly due to improved working capital, which has been a focus area for us for a long time and remains so. The work is never done. Looking at the cash flow from investment activities, here the main thing is that one acquisition has been finalized in the quarter and the minority investment in Fabri Germany was closed. with the majority of the purchase price paid in newly issued Instalco shares. In operational performance, it is reassuring to see that despite the challenging market, we are reporting a very strong cash conversion at 96%. Finally, we look at our performance on a rolling 12 months basis in relation to our financial targets. Our targets are set over a business cycle and given the market situation, there is no surprising that we are currently not meeting the growth target of 10%. This is a result of our prudent order taking over the past year. But I'm happy to say that we are reporting growth numbers that are back in black. Our adjusted EBITDA margin came in at 6.6%. We are not satisfied and continue to take actions for subsidiaries where this is needed. Cash conversion came in at a very high 96% due to strong focus on working capital. The leverage target we have set for ourselves is 2.5 times net debt to EBITDA. In the current environment, with earnings still impacted by market conditions, we remain above the target. This said, we still have significant headroom in relation to our loan covenants, and our dialogue with the banks remains strong. All this to say we have a stable financial position that allows for continued selective growth and we expect leverage to go down quickly when the market turns. This through our focus on profitability and working capital as well as prudence in capital allocation. In a week from now, we will hold our AGM where shareholders will vote on the board's proposed dividend of 0.68 sec, maintaining the level of last year. This is above the 30% policy due to the strong cash flow and forward-looking optimism. And we also remain committed to our climate targets announced in December. More information about this and our progress so far can be found in the recently published annual report. So, Robin, by that over to you again.

Thank you, Kristina. In March, we finalized our first acquisition of the year, which I would like to highlight very quickly here. Alf Näslunds eltjänst is a well-established electrical installation company based in Örnsköldsvik, founded in 1995 and led by Anders Näslund since 2010. The company brings a team of around 30 skilled employees and generates a net sale of around 55 million SEK. This is a strategic step aligned with our local cluster model and well-timed with the upcoming investments in the region. We already have an operation there through Inlandsluft, Kivent and Melins Plåtslageri. and adding Alf Näslunds eltjänst strengthens our multidisciplinary capabilities in the region. We have previously collaborated with Alf Näslunds eltjänst and found a shared commitment to quality and customer focus. We welcome them into the team and to the Instalko family and a natural progression and we are looking forward to a successful partnership together. The theme for the quarter, a typical Instalco project. I know that the typical Instalco company that we showcase in Q3 was quite well received. So we thought about digging a bit deeper and taking a step further and showcasing a typical Instalco project. Our bread and butter is small projects. The projects that are maybe not so prestigious or large that they deserve or weren't a press release, but they are the ones that make up the majority of our offerings in any given year. And it is definitely an area where we can excel. So here is basically one of the pages that I wrote as one of the first ones when we started in Stockholm and it's basically stayed the same. So we focus on the mid-size projects, we focus on the public buildings, residential, commercial building, industrial buildings, housing, corporations and we do that due to that key success factors is quality, lead time, local presence and relationship. And that's also to minimize risk, which is lower in the midsize segments. We can also do some partnering projects here. We have also stayed in the range, as you see here, of 1 to 75 million, where we only have a few larger fixed price projects above 30 million. So this is a size and a business environment where our local companies thrive. This is an illustration that gives you a glance of an order backlog of two of our companies. These companies have a turnover of roughly 60 to 70 million each year. This is a moment in time printout from our POC database and it includes all the projects that these two companies currently have in their order backlog. And of course this varies a lot between different Instalco companies based on discipline, customer base, local market and so forth. And again, this might not be the most prestigious, flashiest projects out there, but it is where we can do our best work. So it's a difference here in company A and company B. You see some difference here. There's some fire stations, some retail, some electrical upgrades, some municipality projects for company B. There are some few residentials, also some commercial, there's some fire, there's school... So there is a wide variety of smaller projects and some projects also somewhat larger here, especially for company B, but also a fire station there for company A, for instance. So actually over 80% of our projects are generated within the range of 1 to 75 million. And you can see the different contract types that we use. So fixed price projects 44%, partnering projects 30% and other types of commercial contracts 26%. And others typically some kind of a mix of the two above. In addition, after growing our service offers, we have a very well balanced sales mix when it comes to projects types where new builds now only make up a third of our revenue. We always get a lot of questions about new production, which of course is a relevant topic. But most of these questions centre around residential and commercial properties. And here it is more important to remember that this also includes a lot of industrial properties. If you look on the right side of your screen there. So renovation, new production and service. So in addition to focusing on an attractive niche when it comes to project size, we have also worked actively in the recent years to broaden our customer base and diversify our end market. Today, our sales are spread across the well-balanced mix of segments. Industrial properties lead at 24%, followed by schools and hospitals at 16%, and commercial properties at 14%. This diversity helps us to reduce exposure to individual sectors and give us a resilience throughout change in the market conditions compared to more focused competitors. Our customer base is as a wide variety of ranges across construction, property, industrial and public sector. Construction companies are our largest group. But no single client is, so to say, dominant in this field. We serve around 2000 customers and our top five customers combined makes up only 11% of our sales in 2024. And our largest contributes to less than 4% of our turnover. It is this diversification across both customers and market that gives us a long-term stability and strength. And here are two examples of typical Instalco projects. The first is a ventilation project during a renovation of a surgery room. Medical context requires special knowledge and advanced skills in a very sterile environment. The other one is a small but quite exciting one. It is a One of our subsidiaries did a heating and plumbing in a very specialized residential new build where the new house of 20 apartments were built on an existing inner yard in a very old style of building surrounding it. These examples showcase the range of our expertise from technical complex environment to innovative urban infill solutions. Now back to the summary and Q1. As we mentioned, Previously, the market remains challenging, but we are starting to see some positive signs. Notably, this quarter marks the first time since Q3 2023 that we are reporting organic growth, even if it's on very small levels. Our order backlog has also seen a slight little increase. Both are important early indicators of a momentum of maybe returns but we're not there yet further our technical consultants at intake continues to deliver margins above the group and they are much earlier in the cycle than our installation companies also our automation branch within matic is showcasing good progress as they get closer to celebrating their fifth year of existence With that said, the environment is still tough and on top of weak market conditions, our margins this quarter were impacted by temporary overcapacity in parts of our business, as well as one of write downs, as Kristina mentioned earlier. These are short term effects and we are taking actions and steps to addressing them. and we are not on a satisfactory level of where we aim to be as a company. Global market remains somewhat unstable and uncertain while our local operation is shielded from these kind of effects and increases of tariffs. But of course we are affected by the investment environment. and we're more influenced by interest rates and development in geopolitical instability. Looking beyond the quarter, our financial situation, as Kristin has gone through, remains stable, which gives us the flexibility to be selective and strategic when it comes to acquisitions. which is an important part of our long-term value creation. I'm also pleased to report that we have completed the first phase of our expansion into Germany. It is a significant step in broadening our platform and diversifying our growth opportunities even further. Internally, our team is working intensively, focusing on what we can influence, how we can improve our efficiency, how we can sharpen our offerings and build the foundation of what is to come out when the market turns. We remain confident that our strategy on our ability to create value, both in short term and long term. And with that, I would like to hand over to you for any further questions.