Instalco AB (publ)

Welcome everyone to this presentation of Instalco's report for the second quarter of 2025. My name is Robert Bohman, the CEO of Instalco. With me today, I have our CFO, Kristina Kasberg, and Per Sjöström, current chairman and soon to be interim CEO. As usual, let's start with a brief overview of Instalco today. Instalco is one of the leading installation groups in Sweden, Norway and Finland, and also with a presence in Germany. Our decentralized model is a core strength, empowering our more than 150 local companies to act independently while benefiting from strong governance and shared tools. With more than 6,000 employees across the group, we support the green transformation every day. And the demand for our services continue to be underpinned by powerful long-term market trends. First, a quick glance at our last 12 months' numbers. Net sales amounted to 13.6 billion, and we ended the quarter with an order backlog of 9.3 billion, which represents a steady book to build of close to 70%. When adjusting for one-off costs taken in the past three quarters, our EBITDA amounted to 871 million, corresponding to a margin of 6.4%. We're not satisfied with the margin, even if it's an improvement sequentially, We continue to take firm actions and strengthen it. In a market where many small and mid-sized companies and competitors are going out of business, our stability is a clear sign of our resilience. A key part of this resilience is how quickly our subsidiaries have shifted focus towards service. This has helped offset weaker demands in projects over the past years. In Q2, service remained strong and accounted for 36% of our net sales. We also had a very strong cash flow in Q2, which brought our last 12 months cash flow from operations to above a billion SEK, even despite our decrease in earnings, showcasing our strong focus on improving our working capital. so summarizing a bit of the quarter and showing some some of the highlights we're seeing sequential improvements in our business however it is on an overall market remains weaker cash flow was strong again in the quarter supported by our financial stability and ability to invest where it counts we also signed a new bank facility which gives us additional flexibility going forward Another interesting topic is our technical consultants Intech continue to deliver margins above the group and as you heard me say many times before they are earlier in the cycle than our installation company which is a positive sign looking ahead. And on that note I've always said that we will deliver this investment in a solid way and looking at what we have built in Intec over the past five years through our proven startup concept, the return on investment is very clear. If you compare our cumulative losses before breakeven to today's rolling 12 months earnings, the implied multiple of this investment is 0.5 times. So a significant and a sign of how quickly we turned the business profitable. You could also calculate instead of all our shareholder contributions in relation to EBITDA, then the multiple will be around 1.5. Still well below the multiple around five to six, we typically pay for an installation company. Or the double digit multiples recently seen in the transaction involving technical consultancy firms. So it showcases that our long-term investment in structure, recruiting, and quality has paid off, built a profitable consultancy business with 500 employees, now standing firmly on its own. And as you all know, a year ago, we started an automation business built on the same foundation. But I would like to hand over to Kristina, who will now take you through our financial development in more detail.

Thanks, Robin. Let's start off with looking at how our net sales and order backlog has developed during the quarter. Net sales was down by 3.9% to 3.5 billion with an organic decline of 2.8%, whereas acquisitions contributed positively with 0.3%. Organic growth was down in both reporting segments, but more in the rest of Nordics. Currency had a negative impact of 1.4%, primarily due to the weakening of the Norwegian krona and the euro. On the other hand, our order backlog grew by 4.6% organically, with the biggest contribution coming from the rest of Nordics segment. We have maintained our cautious approach to order taking, prioritizing the right project for the right customers. While the market is slowly recovering from low levels, we see even greater local variations in demand than usual. Metropolitan areas are starting to regain momentum. Price pressure remains, but there are more and more projects on the market which enables better selection in the tendering process. In addition to the backlog, we have our service business, which remains an important stabilizing factor. In our service business, we saw growth of 6% in absolute numbers in the quarter. This resulted in service making up 36% of sales. Then on to our earnings, EBITDA in both millions and margin. Q2 tends to be seasonally better than Q1, so also this year. In total, EBITDA excluding items affecting comparability amounted to 236 million, corresponding to a margin of 6.7%. The lower earnings are primarily due to the performance in the other Nordics segment and certain subsidiaries in Northern Sweden, which have seen a decline in both revenue and earnings, although they are showing strong development in the order backlog. These are the same companies that experienced temporarily lower capacity utilization in Q1, which continued during the quarter. The action program we announced in December is progressing, though implementation takes time. We continue to follow up closely and are taking additional steps where needed, particularly in subsidiaries facing tougher conditions, also for companies other than the eight communicated in December. To break it down in more detail, over to a slide that summarizes segment Sweden in Q2. Overall, net sales were essentially flat at 2.5 billion with an organic development of minus 0.8%. The order backlog grew organically by 0.4% to 6.6 billion. The EBITDA margin amounted to 6.7% compared to 7.1% last year. The Swedish market shows early signs of cautious recovery, particularly in the largest cities where several major projects have started or are being prepared for tender. However, conditions remain weak in parts of central and northern Sweden, with signs of overcapacity and continued price pressure. Regional differences involved are larger than normal. And also a summary of the rest of Nordics segment. Overall, net sales were down to 980 million with an organic decrease of 7.3%. Acquisitions contributed with a growth of 0.6%. EBITDA margin amounted to 6.6% compared to the very strong 7.7% last year. Finland was flat on sales despite the challenging market environment. The Norwegian business decreased year over year but showed positive development compared to the first quarter. The business is to some extent continues to be affected by temporarily lower staff utilization in certain subsidiaries. This is still linked to the timing gap between completed projects and new ones starting up. Both countries report lower earnings compared to a year ago but significant sequential improvement from the first quarter. The order backlog for the segment increased organically by 15.9% to 2.7 billion and also represent the sequential growth from 2.4 billion in Q1. Then on to the cash generation in the quarter. In Q2, cash flow from operations amounted to 202 million, an increase of 28% compared to last year, despite the lower earnings. Almost all components of working capital improved in Q2 compared to the same quarter last year, primarily driven by accounts receivables and contract assets. Further down in the cash flow analysis, we find the expected outflows during the quarter. 182 million in dividends as approved by the AGM in May and 38 million in earnouts paid to acquired companies. In the coming quarter Q3, we expect to make some payments related to earnouts and the buyback of minority shares in a few subsidiaries in line with previously agreed option structures. The strong cash flow in the quarter once again highlights the underlying discipline in our operations, a key strength, as we navigate a demanding market environment. During the quarter we have entered into a new 3.4 billion credit facility with our existing banking consortium. The facility is a two-year term and an option to extend by another two years. This strengthens our long-term liquidity and provides greater operational flexibility through continued collaboration with our established banking partners. Finally, I will look at our performance on a rolling 12-month basis in relation to our financial targets. Our targets are set over a business cycle and in the current market we continue to prioritize protecting our margins and thereby selective order taking over volume. The adjusted EBITDA margin came in at 6.4%. While still not at a satisfactory level, it is improving. And we continue to take targeted actions in subsidiaries where needed. Cash flow was very strong in the quarter with a cash conversion of 107% driven by continued focus on working cap. Our leverage remains above our own long-term target of 2.5 times net depth to EBITDA as expected following the payments in the quarter. We have strengthened our financial flexibility through a new bank agreement signed during the quarter. And we also remain committed to delivering on our climate targets. So by that, over to you again, Robin.

Thank you very much, Kristina. And I will continue to talk about our German investment in Fabri. So Germany continues to grow market for a growing market for us. And our platform Fabri is progressing well. Since our initial investment in November, the group has since then grown from 12 companies to 17 companies. as you can see on the map here, spread around Germany. Fabri is acquiring the same type of high-performing, entrepreneur-led installation companies as we have done in the Nordics. Simply put, we allocate capital where it delivers the best result, and right now that is in Germany. And on the right-hand side here, you can also see the different steps in the acquisition. We initially invested, so we became shareholder of 24% in Fabri in Q4 24. Next step, step two, will be an initial investment of buying 27%. of the shares in Fabri that will most likely, if prognosis keeps going the way it has done for Fabri, be somewhere in the mid 26. And then you have step three and four you can read yourself. If we look into the kind of acquisitions they have done recently. So you can see here on the slide, so they've done three recent additional contributions of three companies. contributing to 14 million euros in annual sales and further strengthening Fabri's technical scope and also geographical reach. These are acquisitions that closed actually after the end of Q2, so they're not included in the numbers yet. All companies remain local, managed and fully aligned with both Instalco and Fabri's decentralized model. This continued momentum confirms our strength in our platform approach and the significant opportunities that we see in Germany and in the German installation market. Then I would like to move on to the quarters theme. It will be a shared segment here between myself and Per as a sort of a handoff, since this will be the last quarterly report for me at Instalco. So quite fittingly, the theme for this quarter is called The Road Forward. maybe let's start a bit with how it all started. I've had the privilege of being part of this journey essentially since day one back in 2014 when Instalco was founded and the initial five companies sort of say started Instalco and from there on we have grown the market and also grown our company by consolidating the installation market, also looking into adjacent markets such as the industry, technical consultants, and also we IPO the company in 2017. So it's been a fantastic journey so far. Of course, these last years have been somewhat tougher for the installation business with COVID, material shortage, inflation, increased interest rates, and an overall downturn in the construction industry. But with that said, we know what we are capable of. Despite the headwinds, we have achieved incredible things together. We have built a well-functioning service business that started from around 17% of sales that are in this quarter up to 36%. We have a strong offer for the industry. Today that stands for about 25% of our sales with a new customer base. We built a profitable growing technical consultancy business that today stands for around 500 employees and we started that from scratch. We launched an automation business on the same platform as our technical consultants and today they roughly have 80 employees. And as I just mentioned, we also in 2024 entered into a new market together with Fabri in Germany. So I'm very proud of what we together have achieved during these last years, despite the market situation. And I feel confident that Instalco has a solid base to continue from. Per and I have discussed, of course, about what is the next step for Instalco. But I would like to hand that part of the presentation over to you, Per. to maybe explain a little bit on the future for Instalco.