Karnell Group AB ser. B

good morning everyone and welcome to canada's q1 2024's earning presentation we're really excited to have you all joining us today at our first presentation as a public company and throughout this session we'll be providing you comprehensive overview our performance during the quarter highlight our key financial achievements operational updates and strategic initiatives that we are driving our business forward Let me quickly introduce our presenters. It's myself, Petter Molenius, CEO here at Kanell. And with me, I have Lars Nereth, who is our CFO. And at this first quarterly report, we thought that we should spend a few minutes, first of all, to introduce Kanell as a group. Then we'll reserve some time at the end, after the presentation, for a Q&A session, where you will have the opportunity to ask questions. So who is Kanell? We are an active long-term owner of industrial niche companies and we have a clear thematic approach seeking small to medium-sized companies that holds a strong position in their respective niche markets. We have divided the group into two business units based on their respective business models. We have first of all the product owning companies and these are companies that possesses their own intellectual property, their own IP often a form of a patent or technical height, and focusing on developing clever products that add significant value to our customers while maintaining a competitive edge. The second business unit is our niche manufacturing companies, and they focus on specializing in specific subsets within manufacturing, allowing them to add substantial value to their customers and our criteria for success in this unit is the ability to achieve some 20% EBIT margin consistently. Chanel has a strong track record of acquiring about two platform companies per year, and we maintain a highly selective approach, targeting industrial leaders within their respective niches, and rather pass on an opportunity than to buy a mediocre company. Currently, Chanel comprises of 12 companies, located in Finland, Sweden, and the UK, and collectively employing about 600 employees. Our financial overview, as you can see in the chart, is for 2023, pro forma view, so adding up the 12 companies in the group, a net sales of 1.3 billion SEK with an accompanied EBITDA of 183 million. We strive to be as transparent as we can possibly be, and that means sharing detailed numbers that sometimes may sting in the short term. However, we firmly believe that our commitment to transparency will benefit us as a group and our shareholders in the long run. By providing a clear insight into our financial and operations, we aim to foster trust and confidence in our decision-making processes and our strategic direction. And on that note, it is important to highlight that we have chosen not to adjust our financial figures for the IPO costs or external advisory fees in the quarter. At Kanell, we believe in presenting the numbers as they are without resorting to adjusted figures that may obscure the true financial picture. And with that said, we'll share the detailed numbers that actually reflects our operations and financial health. And by doing so, we aim to build trust among our stakeholders and demonstrate our commitment to long-term value creation. So without further ado, let's delve into the details of our Q1 performance. It has been undoubtedly a very transformative quarter for Carnell with a very successful completion of our IPO along the acquisition of both a platform company and an add-on acquisition. We navigated through significant milestones, Despite the prevailing headwinds in the market, I'm pleased to report that we have achieved a modest organic growth during the quarter. Cash flow from our operating activities amounted to 12 million SEK, which is an improvement from earlier Q1s, where we typically have a bit bigger buildup in inventory to meet demand that comes in Q2. To give you an even better understanding then of the reported 20 million SEK, we have high costs during the quarter, mainly driven by the IPO. So our reported EBIT aid from our subsidiaries amounted to 36 million SEK for the quarter, reflecting the operational performance across our business units. Group costs excluding IPO and acquisition related expenses totaled 6 million. These costs encompasses various administrative and operational expenses incurred at group level. During the quarter, we incurred expenses totaling $7 million attributed to the IPO process. Additionally, there were acquisition costs accounting for $3 million related to our strategic acquisitions. Excluding IPO and transactional costs, our EBIT A amounted to $30 million, and that would translate into an EBIT margin of 10.6% during the quarter. And with that, I'll let Lars go through the financial details.

Thank you, Petter. So first, an overview of the development of Net Sales and EBITDA. And here we have added some more historical quarters for you to get a feel for the historical growth in Q1. So looking at Net Sales, we have had a CAGR of 54% from Q1 2021 to Q1 2024. And the increase from last year was 15%, and we ended up at 286 million. For EBITDA, if we exclude ICO and transaction costs that I mentioned during this quarter, then the CAGR from 2021 was over 100%. And the increase from last year was 6%, and we ended up at 30 million. If we look at the breakdown of net sales on the left here, we had organic growth of 5 million SEC or 2%, which we are very happy with in these market conditions. Acquisitions were 13% and we had a small currency effect as well, 1%. EBITDA was affected a lot by the IPO and transaction costs again. in the quarter of a little more than a 10 million SEK. So if we exclude these costs, we had an organic growth of 1.5%. But including these costs, we had a decline of 36% of 10 million. Acquisitions represented 7% and a small currency effect, again, of 1%. And now looking at our business segments and starting with our product-owning companies, we had a very good quarter with an increase in revenue of 27% to 117 million SEK. And most of that came from acquisitions, but we also had a nice organic growth of 8%. EBITDA increased by 73% to 11 million SEK, and most of that, More than all of that was from organic growth, 87%. And we actually had a negative acquired growth in the quarter, and that is due to the latest acquisition of Sekiyokunen. And Sekiyokunen has some seasonality in its earnings, and the Q1 is the weakest quarter. This is according to plan, and we expect Sekiyokunen to contribute to Evita in the coming quarters. The beta margin improved from 7.1% last year to 9.7% this year. And in general, Q1 had seen some recovery from a weaker Q1 last year from the product companies. And several of our companies performed much better with higher sales and much higher margins. In this segment, we have some companies that operate in the construction sector in Finland, and that is still very cautious or even weak. For our niche manufacturers, revenue increased by 9% to 168 million SEK. Most of that came from acquisitions, and we had a small negative organic growth of 2%. EBITDA decreased by 8% to 25 million SEK and here we had an organic decline of 19%. The EBITDA margin decreased from 17.5% last year to 14.9% this year. Our niche manufacturers had a very strong quarter last year where some of our companies showed record sales and margins This year shows a little lower activity in general, and we have especially seen a little lower activity from some of our larger industrial customers. And this has led to slightly lower sales and some pressure on the margins and the segments. Moving on to cash flow from operating activities, and we have had a very strong cash flow for the quarter as well as for the last 12 months. And this is due to both increased operating profit as well as positive networking capital development. And we have some variations in cash flow as we have in revenue and earnings, which is why we usually view cash flow on a 12-month rolling basis. So Q1 is usually the weaker quarter, but we have a positive cash flow in the quarter as well. Then on to our capital structure net debt. And we think we have a very strong capital structure. It was strong even before the IPO, but obviously even stronger now after the IPO and the issues that were made. At the end of Q1, we had a net debt of 77 million and a leverage of 0.5x. And that is excluding IFRS 16 leasing. And this was further improved in the beginning of the Q2, where we received the remaining of the cash from the IPO, the over allotment option or the green shoe. So we added 37 million. And in our definition, we also exclude earnouts and put call options, the liability for put call options. But we have included them here on the chart on the right if you want to make your own calculations. Back to you, Petter.

Yes, thank you. So during April, so after the quarter, we released our sustainability report for 2023, which underscores our commitment to our responsible and long-term ownership. Our sustainability report serves as an important component of our corporate governance framework, highlighting our efforts to integrate sustainability into our business operations. It is noteworthy to also see that we have used scope three emissions in our calculation this year. This is the first year we do that. And that expansion represents a significant step forward in our sustainability journey, enable us to capture and address indirect emissions across our value chain. And by incorporating the scope three emission, we aim also to enhance our understanding of our environmental footprint and identify opportunities for improvement. We have also done a CSRD gap analysis across the whole group during the year to prepare ourselves for the upcoming regulations. And for those of you who want to read this more in detail, please go to our homepage and have a look at the full report. Now to acquisitions, the platform acquisition that we did during the quarter. It's a company called Säker Jokkuna. It's a second generation family business who was identified through our proactive search. And the initial discussions were held already in March 23. And that's typically how it looks in our proactive processes. They take quite some time. And we bought this from the Jokkanen family. It's five siblings, all of them active in the company. Säkiökkinen specializes in outdoor lightning products in Finland and is perhaps most known for their pole bases and their collusion safe lightning poles called Kappu. And they also have standardized poles. Säkiökkinen exemplifies quite well what we're looking for for companies. It's an established, it's a family owned slash entrepreneurial business with growth potential and succession consideration. So a family who who are then looking for a long-term home for their business. As you can see from the chart, it's a solid financial track record with a favorable market dynamics. And we believe that we can continue on that journey and support in increasing the company's business in Finland and not the least in exports to Sweden and other markets. We are really happy about this transaction and the faith placed in us by the family Jokkinen to continue on with their legacy. So to sum up, we're very pleased with our results on Q1. Despite the challenging conditions in the IPO market, we successfully navigated that process, which serves as a quality stamp for our group and our visions going forward. The IPO has provided Canada with a long-term home, aligning our commitments to providing stable ownership to the companies that we acquire. The milestone has also equipped us with the resources needed to further pursue successful acquisitions of small to medium-sized industrial technology companies and niche market leaders within their respective niche. Additionally, our recent acquisition and modest organic growth in net sales and EBITDA, excluding IPO and acquisition costs, further underscore our positive trajectory. Together with our new and existing shareholders, we eagerly anticipate the continuation of growth and reinforcement of Cornell's position as a leading industrial technology group. And with that, we open up for questions.