Karnell Group AB ser. B

Welcome to Canell's Q4 2024 earnings presentation. My name is Petter Malenius and with me today I have our CFO Lars Neret. We will be walking you through our financial performance for the quarter and discuss our strategic initiatives and providing insights into our recent acquisition. So we thought that we'll give you a brief introduction to our Q4 and full year 2024. Lars will then give you a more detailed view of our business units and their performance. And I'll then give you a short introduction to the acquisition we did here in the end of January, Manchester. And we'll also, as usual, reserve some time for Q&A at the end of the session. This is now our fourth presentation as a public company, and we have decided to slim it down as the audience of this call knows us really well, many of you at least. And we are also happy to schedule an introductory call with institutional investors that don't know us that well. Just reach out to us at ir.canel.se. But as a short and quick reminder, Kanell is an active long-term owner of industrial technology companies, focusing on acquiring small to medium-sized companies with strong position in their respective niches. We have a very disciplined acquisition strategy, prioritizing quality and leadership within industrial niches. As of now, Kanell comprises of 16 companies across Finland, Sweden, and the UK. And all in all, we approximately employ 700 people. And we strive for transparency, even if it means sharing numbers that in the short run might sting us, but we believe that benefits Kanell and our shareholders in the long run. And with that, let's turn to Q4 report. In short, as you can see, we had a net sales of 403 million SEK. That's an increase of 32%, which was organically driven on 6.1%. EBITDA, 50 million, up by 42%. And that's then an equivalent of an EBITDA margin of 12.5%, with a cash flow of 86 million for the quarter. with low leverage of 0.9X. To give you some more context and flavor, we started off Q4 really strong, October, November performing well. December was a bit softer than we had expected. partly or to a large part to the extended holiday period this year, or 24, which then had a pronounced effect on some of our businesses. Overall, we are very content with a solid Q4 as a group, though there were notable shifts within our business units. Our product companies continue to perform well, benefiting from a more stabilizing construction environment. And that has improved the visibility for some of our businesses. And we still see some positive signs at the end of the tunnel, even though we believe it is quite some time before we see full growth recovery in some of these sectors. Encouraging early positive trends are emerging with larger requests and higher levels of engagement with our customers. In contrast, our niche manufacturing companies experience a softer market impacted by reduced demand and a bit more cautious market sentiment. And this has put some pressure on our margins. And that goes particularly for the customers with capital intensive products who are then tied to the later stages of the construction and investment cycles as a whole. Turning then to the full year, Summarizing that, it has been a very transformative year for Can-El and was marked by our successful IPO and the completion of four acquisitions that we did during the year. And as you saw on the last slide, we are close to year on a solid note, resulting in a full year net sales increase of 27% to 1.4 billion SEK. And this growth was driven by a combination of organic development and our strategic acquisitions. Having a bit more detailed look on our EBITDA performance, we increased 21% compared to the same period last year, reaching 166 million. This improvement was primarily driven by acquisitions and strong operational execution within our product owning companies. However, our niche manufacturing segment faced challenges during the softer market conditions. The EBITDA margin declined from 12.4 to 11.8. due to the IPO related costs during Q1, as well as the ongoing expenses being associated with being a public listed company. I would like to emphasize the positive organic top line growth, even though we experienced margin compression. This outcome stems from deliberate choices that we've made based on the belief that our employees are our most valuable assets. In some of our companies, we have consciously prioritized gaining market share by remaining personnel, despite the increased price pressure and lower margins. We believe that positioned us very well to capture growth and high margin customers when the market eventually recovers. Turning to cash flow, furthermore, I would say that following the IPO, actually we had, or our then existing shareholders was diluted, and the outstanding shares increased to close to 53 million from 42. despite a delusion operating cash flow per share rose by 3.7% to 3.27 SEK even before the full impact of the acquisitions done during 2024 was realized. We remain focused on executing our growth plan, identifying opportunities in niche markets and delivering on the promises we've made to our shareholders. Despite the broader market challenges, our disciplined approach towards acquisitions and our emphasis on sustainable long-term growth continue to propel Canal forward. And I would like to also emphasize that we maintain the low leverage and unhealthy M&A pipeline. With that, I'll hand it over to Lars who will walk you through the financials more in detail.

Thank you Petter. If we look a little further into Q4 then and start with the breakdown of net sales on the left hand side here. As Petter mentioned, the total increase was 32%, of which organic growth was 6%, which we continue to be very happy with considering the current market. Acquisitions were 25% of the increase and a small positive currency effect. The beta increased by 42%. Most of that came from acquisitions at 8%, but we also had an organic growth of 3%. Just a small currency effect. The beta margin increased from 11.6% to 12.5%. If we look a bit further on EBITA, we had reported EBITA from our operating companies throughout our two business segments of 58 million for the quarter. And then we had central costs of 8 million and no transaction costs or other special costs in the quarter. Over to our business segments then, and starting with our product owning companies, we had again a strong quarter with an increase in sales of 53% to 211 million. Most of that came from acquisitions, but we also had an organic growth of 16%. EBITDA increased by 72% to 32 million. Most of that also came from acquisition, but at the same time, we had a strong organic growth of 32%. The beta margin improved from 13.5% last year to 15.1% this year. And this quarter again continued the recovery from a weaker year last year, and almost all companies within the segment performed better with higher sales and higher margins. We also see continued stability for our companies within the construction sector in Finland, and hopefully the recovery will continue within the sector. For our niche manufacturers, sales increased by 15% to 192 million. And here the full increase came from acquisitions and we had a slightly negative organic growth of minus 2%. EBITDA decreased by 9% to 26 million. And here we had an organic decline of 33%. The EBITDA margin decreased from 17.1% last year to 13.6% this year. So again, our niche manufacturers had a very strong quarter last year, and this year still shows some lower activities, especially from our larger industrial customers and especially in the Finnish markets. Sales is holding up pretty well, as Petter mentioned, but we see continued margin pressure in several of our businesses. If we combine our two business segments, EBITDA declined organically by 7%. Moving on to cash flow and cash flow from operating activities increased by 31% from last year. And for the quarter, it increased by 2% compared to a very strong Q4 last year. And the increase is due both to high profits and to reduced working capital and especially inventory and accounts receivable. And here Q4 is usually our strongest cash flow quarter and so also this year. And then our capital structure and net debt. So we didn't make any acquisitions during the quarter and we had a strong cash flow which caused our net debt to decrease substantially as well as our leverage. As of December, we had a net debt of 174 million excluding IFRS leasing and leverage of 0.9x. And then we still don't have the full P&L effect of our latest acquisitions. And as usual, we also exclude earnouts and liabilities for put call options in our calculations. You can see these numbers here on the table on the right. And if we would include all of these, our leverage in Q4 was then 2.1x instead. Back to you, Petter. Thank you.

Yes, we are happy to announce the acquisition of Manister. And that was then, as Lars mentioned, not in the quarter, but actually the last day of January. Manister is a manufacturing that specializes in pipe support systems for the marine industry and has proprietary products for HVAC and insulation applications. Mannister was founded in 1955 and it's based in Rauma, Finland. It's a family owned business with annual sales, as you can see here, approximately a little bit more than 6 million euros with strong profitability. The acquisition is expected to have a positive impact on Kanell's earning per share on an annual basis. I think Manister represents very well the exact type of company we are looking for when executing our acquisition strategy. It's a family owned business with strong niche offering, a market leader within its field, and it has a proven track record of delivering high quality specialized products. The former owners, Teppo and Minna, they have retained 9.6% stake in the company, ensuring that their continued involvement and commitments to the company's success. Teppo will continue as a CEO and provide continuity and leadership as the company embarks on this new chapter with Kanell. And as all our acquisitions, our goal is to support Manister's growth while preserving the core values and expertise. This exemplifies our strategy of acquiring and developing family owned niche industrial companies with strong market positions with healthy profits. Moving on to wrap up. Solid performance in Q4, supported by organic growth and resilience, even though it was challenging market conditions. Despite the dynamic market environment, Canal closed 24 with a strong growth and strengthened portfolio through four platform acquisitions. While some of the industrial segments remain uncertain in the short run, the market outlook remains stable for our group companies with low inflations and gradually decreasing interest rates, boosting investment confidence, especially in the interest sensitive sectors like constructions. We have a strengthened M&A team to further accelerate our acquisitions and support our 16 portfolio companies. We have extended the team with two investment directors, one based in Finland, in Helsinki, and one here in Stockholm at the headquarters to reinforce our local presence and execution capabilities. With low debt levels, robust cashflow, and a solid M&A pipeline, we are well positioned to advance our growth strategy and leveraging our proven acquisition and ownership model to identify and acquiring promising industrial technology companies. We are excited about the path that lies ahead. We eagerly anticipate continuing our growth journey and further solidifying Canal's position as a leading industrial technology group. And with that, we open the floor to any questions that you may have.