Lagercrantz Group AB (publ)

Welcome to Lagercrantz Group Q3 Report 2023-2024. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answer session, participants are able to ask questions by dialing pound key 5 on their telephone keypad. Now I will hand the conference over to CEO Jorgen Y and CFO Peter Thyssel. Please go ahead.

Thank you and very welcome everyone to our Q3 report conference call. We released our figures this morning and together with me here is Peter Tissel, our CFO as well. We will usually go over the numbers and our report here this morning for another approximately 40 to 50 minutes or so. with also the Q&A at the end of the session. As you know, we have a year ending end of March. So we today, this morning released our Q3 figures. And we normally go over this in a short presentation, a short introduction to the group. And after that, we'll jump right into the reporting. And then we try to highlight a few things that we feel are important for us going forward as well at the end. And then we open up for Q&A at the end of the session. So let's get going. Well, to give you all of those that are new to the group, a little bit of an introduction, just briefly. I mean, we are an industrial tech group with leading position in expansive niches. You have around 70, 75 companies within the group, and they're organized in these, as you can see here, the five divisions. It's an industrial group. We are looking at companies that have a good performance for many years when we acquire them and we try to build and develop them along the way. Usually looking for companies that are very strong in terms of cash flows and performance. And through that, we generate our own cash to acquire more companies and build the group. Over to the right, you can see where we have our needles and where we're present. It's in Northern Europe mainly, but you can see all the way to the right also that we are more and more working with exports and we have some footholds also in other big markets around the world, in China, India, and especially the US, as you can see there over to the right. We have some revenues of approximately 8 billion and are some 2,700 employees We are very keen and driving our companies with a high proportion of autonomy in a very decent structure where each company are working under their own name with their own markets and their own customers. And we follow up and work with them in business development and board work in order to develop all the companies along the way. challenging them and also helping them in growing the businesses, both in domestically, but also more and more over exports. Acquisitions is of course a very central. We view ourselves as a serial acquirer without an exit horizon. And M&A is very important to us where we try to acquire some eight to 12 companies per year as we grow the business over the years. I think we posted and along the way, as we now see that we work in both with M&A and organic, I think that currently the organic side is a little bit weaker, but we compensate that with strong cash flows from the organic side and generating even more acquisitions along the way, which I think is a is good for us at the moment where we are growing the business quite significantly on a total level, but along the way also now currently more through M&A maybe than through organically. We've been listed on the stock exchange in 2001. We were one of the companies that came out of the old Bergman and Beaming Group and have been doing what we've been doing as a separate company since 2001, but the heritage goes back all the way since 1906. And we've been on the stock exchange in one form or the other since 1976. So we've been very established. I mean, working the way we're working for quite some years now. Looking a little bit into the interim report, I think it's great to see that we had another solid quarter, I would say. We posted some record earnings and record profits. and we closed some four M&A deals in the quarter, which I think is very good to see. You can see here the trajectory we've had over many years, and you can see that we posted another strong quarter with both sort of top line growth and also profit growth along the way. For those of you that have been with us, you know that we raised the bar some years, three years back, raising the bar to doubling from 500 million in terms of profits to 1 billion. But now here lately, we surpassed that in here already this summer. And now here in during the fall, we launched a new program then raising the bar to the 2 billion, which I will talk about a little bit later here during the presentation. But I think that the numbers were strong and solid along the way here. So that is highlighted here on this slide. Yeah, so we move in, looking a little bit in how we commented the business conditions. I think all in all, we felt that the market situation remained stable for most of our businesses. I think that we had some 1% negative organic growth in the previous quarter, now it was 2%. No drama there really, no dramatic changes. I think the order intake for comparable units has been in line with net revenues for the last couple of quarters, and that continued during this quarter as well. So it's been holding up very well for us, better than most, I would say. So I think we're... We're okay and not wrong. We see that we are, in many instances, very well positioned with the security and safety in the segments we're in, with the security and safety, the electrification, the infrastructure segments that we are working with. And we also saw that those main segments continue to do very well for us. We saw that the bigger companies of the group with the EL Press, with the Tormek, with the PCP in Denmark, they all performed very well during the quarter and continued to have good market conditions. Why we see some smaller units more related to construction and a couple of companies also within the electrified more addressing the wind power turbine manufacturers and those segments that they were affected by some boss and structural changes in those markets, but also to weaker business cycle. No dramatic things there either. It's been something that we've been talking about for the last couple of two, three quarters now. We feel that we have a very strong broad based sort of set of companies within the group with many different end customer segments and geographies. And I think that the focus that we have within electrification where we have our main companies, the infrastructure, the security and safety and other specialized niches that we are providing some good resilience and continued good growth opportunities within as we are developing the group along the way. Down to the bottom there, we are usually comment also on the sort of content of what we're having. And the propriety progress, you can see that is at 76. It's been growing there. And that's been the key thing for us along the way. And we can also see that we are gradually, slowly but gradually becoming more international with more sales outside the Nordics. As you can see, there are revenues by geographic market over to the right there. So it's a couple of things that no dramatic things, no dramatic changes, but still gradually sort of moving in that direction along the way. Yeah. Looking at the numbers, Peter, maybe you should comment on the figures here.

Yes. Thank you, Jörgen. I believe our Q3 can be summarized by increased earnings, improved margins, strong cash flows and several very exciting acquisitions. First, the net revenues increased by 6% and acquisitions contributed with 7 percentage units and organic growth was slightly negative, 2%. and currency contributed with 1%. The EBITDA increased by 9% and the EBITDA margin improved from 16.6% to 17.2%. The cash flow was, I believe, quite strong. It was 367 million compared to the 439 last year, which was exceptionally strong last year. Our profits after financial items increased by some 13% in the quarter. And as mentioned, we signed agreements for four acquisitions that add about 595 million in annual net sales. Jørgen will come back and describe these acquisitions a little bit in more detail later. And out of these four acquisitions, the last one, the Nordic Road Safety, is by far the biggest and we have not gained access to that acquisition yet. So if we summarize the financial year so far. The first nine months, the net revenues have increased by 15% and acquisitions have contributed with 11% units and organic growth has been slightly positive. a bit more than close to 0.5%, and currency has contributed with 3% units. EBITDA has increased by some 21%, and the cash flow is probably one of the stronger points here, has increased by 46% to 951 million. our profits after financial items have increased by 17% to 818 million. And our earnings per share increased to four crowns and 0.13 compared to the 370 that we had in the last financial year. Our return on equity was 28%. and our equity ratio was 38%. And our profit over working capital has improved to 77% compared to 73% last year. And we have so far this financial year completed or we have made eight acquisitions that contribute with some 900 million. If we look into the divisions, it's, as Jörgen mentioned, quite broad-based improvements. And I think what's most important in this slide is to notice that all our divisions are now above 17% EBITDA margin in the quarter. That's quite broad-based and quite good, we feel. If I should mention one, it's the international division, which has for a long time lagged behind the other divisions, but is now catching up. And we find this very, very satisfactory. And for the group total, As I mentioned earlier, it has improved from 16.6% to 17.2%. And maybe, Jörgen, you should comment a little bit about the business in each division.