Instalco AB (publ)

Welcome to the Instalco Q3 presentation 2025. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing pound key 5 on their telephone keypad. Now I will hand the conference over to the speakers. Please go ahead.

Hi everyone, and welcome to this presentation of Instalco's report for the third quarter of 2025. My name is Per Sjöström, CEO at Instalco, and with me today is also our CFO, Kristina Kasberg. And in fact, this is my first time fully presenting a quarterly report since 2021, and I'm glad to be back. As usually, let's start with a brief overview over Instalco today. Instalco is one of the leading installation groups in Sweden, Norway and Finland, and also with the 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. And with more than 6,000 employees across the group, we support the green transition every day. The demand for our services continues to be underpinned by powerful long-term market trends. And then we can switch slide. First, for a quick glance at our LTM numbers. Net sales amounted to 13.4 billion, and we ended the quarter with a backlog of 9 billion, which represents a steady book-to-bill of close to 70%. And that's exactly where I want to be. Our order backlog, as I mentioned, is about 70% of our revenue, and I think that's very good. The reason why I think so is that you should not be, so to speak, fully booked when there are early signs of a market return. When adjusting for one of costs taken in the past three quarters, our EBITDA amount to 863 million, corresponding to a margin of 6.4%. As you might know, we are aiming for 8% margin and we are driving the business in that direction. In Q3, service remained strong and accounted for 37% of our net sales. And the strong cash flow in Q3 kept our LTM cash flow from operations about 1 billion, even despite the decrease in earnings, showcasing our strong focus on improving working capital. So, next slide, please. Then let's move on to a quick summary from the third quarter. In summary, we are reporting numbers below last year's. On the positive side, we report strong operational cash flow and order intake is stable despite our cautious approach. But to speak frankly, it's not good enough. Internally, I have been very clear that I have three priorities right now, and that is margin, margin, and margin. Margin is, as you know, the base. This is for high cash flow, low net debt debita, but it's also a good sign of high quality, efficiency, stability, and last but not least, it gives pride among our team members. Margin improvement is our highest priority, as I said, in the short term, as well as in the long term. In the quarter, we also introduced a new country-based organization, and we are working on an update operational model. I will come back to that. By which we are creating a clear management structure, governance and follow-up. And as I said, this I will come back to later in the presentation. But for now, I will hand over to Kristina, who will take you through our financial development in more deep detail.

Thank you Per. Let's start off with looking at how our net sales and order backlog has developed during Q3. Net sales was down by 3.7% to 3 billion, with an organic decline of 3.3%. Organic growth was down in both reporting segments, but more in Sweden. Currency had a negative impact of 1%, primarily due to the weakening of the Norwegian krona and the euro. On the other hand, our order backlog grew by 6.4% organically with the biggest contribution coming from the rest of Nordics segment. And they're primarily in Norway with several for us larger projects coming in. Several of these are planned to run for years. The market is fragmented and still characterized by clear regional differences. Activity increased somewhat during the quarter, particularly in metropolitan areas. This is important as these regions tend to be the engines for demand in the other areas of the countries. Price pressure remains in several segments, but the increased supply of projects provides better opportunities for selection and a focus on profitability. In addition to the backlog, we have our service business, which remains an important stabilizing factor. In our service business, we saw growth of 2% in absolute numbers in the quarter. This resulted in service making up 37% of sales. Then on to our earnings, EBITDA in both millions and margin. Q3 tends to be seasonally weak due to the summer holiday period. And this was the case also this year. We saw a weak July and August, but a stronger September. In total, EBITDA amounted to 180 million, corresponding to a flat margin of 6%. No one-offs were taken in the quarter. The earnings were up in segment rest of Nordics, but down in Sweden. In the former, we saw increasing sales and result in Finland, primarily due to the projects for industrial clients. Norway, however, reported somewhat lower sales, but a strengthening margin. In Sweden, we saw improvements from low levels in areas such as, for example, West, South and Stockholm, but a decrease in the middle of Sweden and the industrial discipline. As Per has made very clear, we are not satisfied with this margin level and getting our margin back up is a key priority for the entire Instalco group at the moment. To break it down into more detail, over to a slide that summarizes segment Sweden in Q3. Overall, net sales were down somewhat to 2.1 billion with an organic development of minus 5.7%. The order backlog was down by 2% to 6.3 billion. The EBITDA margin amounted to 5.1% compared to 5.5% last year. The Swedish market shows early signs of recovery, especially in major cities with several large projects starting up. Technical consulting is strengthening with more automation and digitalization projects emerging. Conditions remain weak in parts of central and northern Sweden with low pricing and some overcapacity. Industrial activity is mixed. Power and defense projects are stable, with the larger investments remain delayed. And now for a summary of the rest of Nordics segment. Overall, net sales were down slightly to 968 million with an organic decrease of 2.2%. Acquisitions contributed with a growth of 0.1%. The EBITDA margin amounted to 7.7% compared to 6.9% last year. The segment showed very strong development of the order backlog, which increased by 29.9%. As I mentioned a few slides ago, this was primarily driven by Norway. We saw some, for us, larger orders come in. In Norway, the market has stabilized with early signs of recovery, especially in Oslo and the south. Public investments continue to drive demand, while housing shows cautious improvement ahead of next year. In Finland, activity remains weak, but is stabilizing slightly in Helsinki, with energy and defense projects expected to support demand over the medium term. As announced end of August, this segment will be split up in our external reporting starting from January 1st, 2026. Then on to the cash generation in the quarter. In Q3, cash flow from operations increased by 12% and amounted to 133 million despite the lower earnings. Almost all components of working capital improved in Q3 compared to the same quarter last year, primarily driven by accounts receivables and contract assets. Further down the cash flow analysis, we find the major expected outflows during the quarter. 160 million in payments related to buyback of minority shares in a few subsidiaries in line with previously agreed option structures. And 67 million in payment related to Fabri, which is a performance-related payment fulfilled for... fulfilled for step one, where we acquired 24%. Sorry for that. Once again, we are showing that disciplined execution pays off. The strong operational cash flow in the quarter reflects our continued focus on efficiency and working capital management. Then let's go over to our performance on a rolling 12-month basis in relation to our financial targets. Our targets are defined over a business cycle and in the current market we continue to prioritize profitability and discipline project selection over pure volume growth. The adjusted EBITDA margin came in at 6.4%. It remains below our long-term ambition. We are not satisfied and are taking actions. Operational cash flow was again strong with a conversion rate of 112% supported by ongoing improvements in working capital efficiency. Our leverage remains above our own long-term target of 2.5 times net debt to EBITDA, as expected following the payments in the quarter and typical seasonality fluctuations. The new credit facility agreed last quarter demonstrates continued confidence from our banking partners and secures long-term financial flexibility. And of course, we remain firmly focused on delivering on our climate commitments as part of our long-term targets. By that, I'll hand over to you, Per, again.