Lagercrantz Group AB (publ)

Welcome to Lagerkrantz Group year-end 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 Jörgen Wieg and CFO Peter Theisel. Please go ahead.

Thank you and very welcome everyone to our year-end report presentation. We released our numbers and as you all know we have a year ending end of March so we're releasing our full year numbers this morning and it's me Jörgen Wig speaking and together with me I have Peter Tissell here our CFO will go over the numbers with us. We have had a presentation is on here right but it's also available online on our website so you can watch it there and take notes if you'd like. But otherwise, we'll just go over the different slides here. So very welcome. I think we summarized in our report here a very strong end to the year and a very strong year, really. We feel very confident and very confident around our business idea and how we run things. And we have been doing this for many years now, building on our strategy and working with our decentralized model and making acquisitions along the way and then we posted another good year with their earnings per share then at the new all-time high for the 14th consecutive year which i think i feel very proud around and we are really painting something strong here and and have been doing that for many years and will continue to do so going forward we normally start these presentations with a little introduction to the group And then we will move right on to the numbers. The introduction is for those of you that are new to the group. So we will look at the overview here. I mean, Logikrans is one of those serial acquirers without an exit horizon. And we view ourselves as a tech group, and we are really strongly believing in building with proprietary product type companies. building leading and having leading positions in expansive niches. So we have a group with all types of dependencies when it comes to products, customers and geographies. We organize all these companies into the five divisions that we have. All are doing B2B tech. So it's B2B industrials and tech companies that we have within our group. And that is sort of the boundaries that we put on ourselves. But we have organized them into these five divisions, Electrify, Control, TechSec, Niche Products and International divisions. And you can see the number of companies or the number of profit units that we have in each of the divisions. They're of similar size, Control being a little bit smaller than the others, but building as well. The other ones are of fairly the same size. So and all in all in the group, we have a revenue of some 8.1 billion and we have some 2,800 employees working in all these companies that work under their own name, under their own label, addressing their customers, their markets with their products in each market. And we can be a good, hopefully a very good owner of these companies. Usually they have been owned by entrepreneurs or owned by smaller type companies that we've been able to acquire over the years. We are currently some 70 or even 75 profit centers within the group and organized into these five divisions. M&A is a very central part of our DNA and our business model and we are making some 8 to 12 acquisitions per year. We have been on the stock exchange in one form or the other since 1976 and under our own names in 2001. We were previously part of the Bergman & Beving Group that made some spin-offs over the years and are currently on our own since 2001. You can also see that we have where we are operating and it's mostly in the Nordics and in Northern Europe. But we also have some footholds in other parts of the world as we are doing quite a lot of exports in our companies. So we are addressing the US, for instance, with a number of our companies. We are also addressing China and India and other parts of the world. So you can see all the way over to the right here where we have our footholds in different parts of the world. So that's a small introduction to the group. as said we we think we posted another strong quarter and a very strong year you can see our trajectory here when it comes to revenues and profits and as you also also can notice is that we have the the the scales here on these axes proportional and that meaning that we can also see how margins are developing along the way here and you can see that the margins have picked from being very very low we think back in 2005 and since then we've gradually grown profits and also growing margins along the way and we set a couple of years back we set the target of going from 500 million in terms of profits to the 1 billion and we surpassed that here during this last fiscal year going by the 1 billion and have during the fall here communicated that we are now moving towards the 2 billion as you can see here. And we have come some way already on that here in our first half year or so building on that new goal setting. That also comes with some activities. We are broadening the scope of where we're operating. We are also addressing a couple of new markets and things like that as we go towards the 2 billion. Also building some capabilities on a divisional level meaning that we can also make more acquisitions along the way. We feel that we need to acquire some 10% of ourselves every year. Coming back to the Q4, then, on the next slide. I mean, Q4, we have, as most companies have seen, we have seen a slowdown in the market during the year. We see that especially within the construction, within the infrastructure and those type of markets. While we see in many other markets where we're addressing within the niche products, within our safety products, within a number of others that we see things holding up very well and growing in some instances as well. So we think all in all that we, from a group perspective, we think that the market situation remains stable during the year. As you all know, we've seen interest rates coming down and we see that inflation rates are coming down or expected to come down. And we see that the opportunities for investments among our customers are to some extent picking up. We see some more requests than previously. But we also see customers holding back, not really making the decisions to go forward just yet. So it probably will make the case a couple of more quarters or so before we see that the market might be coming back in more broadly. And that's what we see. We also saw here in the quarter that we had some really tough comparables towards last year. And we also had an Easter effect where we, as you know, we're doing March through April. So April through March every year. That means that we actually had two Easters in our fiscal year last year. So that was in March this year as opposed to April last year, which is affecting the end of the quarter here to some extent. which we have also communicated here. We saw that demand, generally speaking, was stable, a little bit less. We had an organic growth of 6% reported. But due to the calendar effects, we have calculated that it's roughly 3% underlying negative organic growth. But we are compensating that with strong cash flows and also some more M&A activities in those periods. And that we've seen also with some two good acquisitions during the quarter here. which I'll come back to in a short while. We saw demand holding up very well in some parts of the businesses, which was especially within the niche products division, but it was slightly weaker in the tech sec, where we have some construction-related type companies, and also in the electrified division, where we both have some infrastructure and construction-related type businesses, but also some project-based sales that happened last year, but that was not repeated this year. has also affected the numbers of the electrified division. You can see down here to the right that we are gradually becoming more and more international as well. We see that we are picking up especially when it comes to sales in the UK. We probably will report that separately going forward but you can see other Europe is growing there and that is the acquisitions and what we're doing in the UK where we see things happening along the way. So we're gradually becoming more and more international as we are building with more proprietary products. We also see that those proprietary products are usually viable for also some export sales. So our export share of sales will probably gradually increase as we move forward as well. We also see down to the left that we are also building with the proprietary products and we are currently at the 76%. We are gradually seeing that improving or picking up even further. We are strong believers that that will add to our margins, to our profitability and also to our opportunities for organic growth as we move along. And therefore we set a clear target that we would like the proprietary products to grow. We had previously the goal of 75%, but we also in connection with the 2 billion program, we have raised the bar there to 85%. So that we will see happening as we make more acquisitions going forward. Looking a little bit at the Q4 numbers, I will hand over to Peter, and you can go over some numbers here.

Yes. Thank you, Jo, again. So our last quarter to the fiscal year, was quite solid, although we could see a slight slowdown. In terms of net revenues, they increased by some 6%, where 11% growth came from acquisitions, and we had negative organic growth of some 6%, where about half of that were three percentage units. was due to the Easter, and then last we had 1% growth from currency effects. Then we saw that our EBITDA increased by 14%, where the EBITDA margin was at another record high level of 18.1% compared to 16.8%. in the last year. The cash flow continued to be quite strong, a little bit lower than last year's really strong cash flow. And the profit after financial items increased by some 10% in the quarter to 298 million. We completed two acquisitions in the quarter, a little bit larger. in size, the PREDO, and then the Nordic Road Safety. And I'm sure Jørgen will talk a little bit more about these two acquisitions later on in the presentation. If we move to the full fiscal year, we note that the net revenues increased by 12%, where most of it came from acquisitions. 11% growth. The organic growth was marginally negative by 1% and then we had 2% growth from currency effects. The EBITDA increased by a good 19% to 1 billion 431 million and the EBITDA margin increased by 1% to 17.6%. The cash flow from operations increased by 24% to 1,327,000,000, corresponding to a cash conversion of about 78%. And the profit of the financial items increased by 15%, which is the group's goal over a cycle. So this was right on target. The profit of the tax increased by 16%, where the earnings per share increased by 15% to four crowns, 25 per share. And the return on equity was 27%, a little bit over our targeted level of 25%, and the equity ratio was 35%. Our internal return measure profit over working capital was about the same level as last year, which is a good level at 77%. Entire financial year, we completed nine acquisitions that add about 1.2 billion in annual net sales. And finally, the board proposes an increased dividend of 1.9 crowns per share, which corresponds to about 45% payout If we look into the outcome per division, we can notice that the electrified division had slightly lower margins this quarter at 14.7. And the control division ended a strong season where they, for example, have the Radenova rate of measurement season is over. And they concluded at a very good level of 20.2%. The tech sec division also had a little bit lower margin in in this quarter um probably attributed to to the civil londberg business where they had no season um it was more that this year is more typical i would say than last year where where civil londberg for example issued new devices for solar panels that helped them last year The really strong division in this quarter was the niche products that reached a record high level of 22.5%. And last, the international division also continued their very positive development and achieved 17.6% in the quarter. And as already mentioned, the group reached a new all-time high of 18.1% EBITDA margin in the quarter. Thank you.

Yeah, we'll look a little bit more on the divisions.

I think that those are important to comment on as well. We have some comments here on the coming slides. But I think it's important to highlight that we have a very strong EBITDA margin for the full group of 18.1 and record high. And also the niche products has done extremely well here during the quarter. While we see some slowdown, especially in the Electrify and TechSec. The TechSec is more construction related. While Electrify is more due to some projects that we had last year and also a season where we see some differences. They usually have a stronger Q1 here next quarter and also coming further on. We see some also investments that were held back here in the infrastructure related type of businesses during the quarter which affected the Electrify division. have some comments on the coming pages here so let's let's look them through quickly the beta fell by 15 in electrify and and that is usually more than we've seen before but but still we we feel very confident that electrify will pick up further on um as we move along we saw some weaker market conditions uh and and challenges with also some Easter effects and stuff like that affecting the numbers here. But we see some of the key players or some of the key companies within the division is still holding up very well. The yield press is holding up very well, doing it very well on the building networks or contributing to building networks with their components really in their business. both in the Nordics but also in exports in the US and also picking up somewhat in China where they're also present. We also see in the cabling businesses that they're picking up due to that we see some increased demand from the wind turbine manufacturers along the way. Within the infrastructure, that's where we saw most of the slowdown really and we also saw some without the major project deliveries, which last year was around 20 million. So that is also affecting the Electrify division. During the quarter, Electrify also made the Nordic Road Safety acquisition and that is coming in, but they also have a weak season during this part of the year. So we are confident that that will pick up along the year here as we are doing most of the road works in the summertime here in the Nordics and in Sweden. Looking a little bit further on the comments on the control division, I mean, that was a very stable quarter, as you can see from the numbers. It picked up some 3%, where we saw some of the really good companies doing very well for us, continue to do it very well. That was the RADENOVA director, Nick Lieting, and also Node Indicator, which has really moved up, doing it much better than before along the way. And that is good to see. A fairly small company, but still worth noticing, we think. On the other hand, we still see Presimeter, which is one of the key players as well. They are impacted still by the European aluminium industry, Reducing the production, which means that they're reducing their investments, which is Presumeter's type customers due to high energy prices here in Europe, especially. They also have some sales in the US and that's holding up very well. So Presumeter are doing it very well, but the market is somewhat sour for them along the way. In the tech sector vision, we see higher dependency up on the upon the construction related businesses. We see that within CW Lundberg and Arcon. Arcon is doing it better along the way, but still behind last year still. The CW Lundberg is more, as Peter already said, is more affected by the general downturn and also in the construction sector. Some companies doing it really well for us within several businesses. The ISG Nordic did it very well. The PCP, our biggest turnover-wise company in Denmark, are doing it very well. Dora & Jorja in the UK are doing it very well. Aras and IDESCO reported also very good performances. And the new acquisitions also came in very nicely there. We have a few comments also on the remaining. The niche products that stood out as really they grew revenues by 14% and doing quite a lot of acquisitions during the year. Organically down only 1% then during the quarter. And the EBITDA then picked up 25% during the quarter. And the EBITDA margin of a record high of 22.5% as already pointed out. A very strong Q4 for niche products. with a positive development in many of the markets they're present in. That is more scattered around. If you need to understand that better, you should look at the different companies and see what they're up to and where they are, which they are communicating on their websites. But it's scattered around quite a lot within the niche products division, but holding it up very well on the broad front, really, with Evaproacept and the brush companies, Sibensias are doing it very well, and also Thermod and Vendi had posted a good quarter here. Tormek, which is one of the key players in the biggest company within the niche products division, also recorded a very good quarter and overall delivered its best annual results to date, becoming the second most important profit unit within the whole group of logic rounds. And also some good acquisitions coming in with the MH modules, but also with the pre-DOS at a really good start within the group, doing it very well for us from the start. Really, it sounds like we believe that that's a very strong company for us going forward. Last but not least is the international division. We've also posted a very strong improvement. The revenues grew by 20%. Organic was down 4%, but acquisitions contributed quite well. Doing quite a lot of acquisitions in the UK and other places. And also, as opposed to an EBITDA improvement of 43%. to 70 million. We see, looking further back, we could see that the international held structurally lower margins than the other divisions, but I think now they've picked up and are proven through their acquisitions that we are structurally on a new level within the international. We have the marine sector, which has been really strong for us, and a couple of other acquisitions is also contributing quite well. So the international due to that they're also moving into more proprietary products or posting better and better results. And most of that I think is structural as well. So that I think we could expect going forward as well. We could see that acquisitions came in very nicely. The Glow Rail in Denmark and the SupplyPlus and DPCs in the UK contributed very well during the year and also the end of the year. the end of the year as well, the last quarter. A lot of comments there. I hope you caught them all. But that's how we work and operate, by working with each businesses separately, adding up to some good numbers for the group. A couple of build-downs we'd like to present as well. I think we are very happy with the portfolio of companies we have. I think the portfolio has never been as strong as it is currently. And a couple of things to look at is how we see the profit over working capital distributed by division. We release these numbers every year, really. And I don't think that we can see some decline here, a couple of percentage points, but they're well above the 45, which is the target. So I think we're continuously doing it very well when it comes to profit over working capital. along the way. And we can see that we have a broad portfolio of companies doing it very well. So it's not really related to just one division or one business. It's very broad based in our group, which I think is proving some resilience to the business and some really good profitability coming out and providing some good cash flows for us along the way. So those numbers were released this morning as well. The net sales per market segment. Well, here is also another drill down where we see the top line growing from 7.2 billion to 8.1, you can see. But the content of the business is fairly stable along the way. We are dependent on a lot of sectors and have a very broad base set up in the group, which is also, I think, proving to the resilience and the stability to the business. So a couple of drill downs there. I think another drill down that many of you would like to see. Yeah, as we move forward here. So what we will do along the way is that we will continue to build the group. We feel that we feel very confident in how the group is set up and how we are working with our vision and financial goals. This is unchanged and we will have now put up the bar for ourselves at the 2 billion, which is our next sort of level to reach. And we will do that by growing early before tax by 15% per year and having a high profitability in terms of return on equity of at least 25%, which is corresponding to at least 45% or above when it comes to the profit over working capital along the way. We will in this program continue building the five divisions. And we have intentionally changed those sort of scopes and where we are looking for company, our hunting grounds, as we call them internally, when it comes to where we would like to be with our separate divisions. We would like to be in sectors where we see sustainable structural growth with sustainability connected to it. And that I think we have within our five divisions now where we are growing along the way. Yeah, I was referring to this slide going previously. So coming back to the portfolio companies we have, we try to illustrate that also where we have our companies when it comes to where we see the profitability. As you know, we're doing quite a lot of benchmarking, measuring, comparing and challenging our different companies. to perform even better. And it's good to see that we see some good performance and see that it's also very broad based. So here we internally have the rank from the best to the worst in terms of return on sales or net margin, EBT margin, and you can see how the different units are distributed here over to the right. And you can see about 20% in terms of return on sales. We have some 24 units as opposed to 19 last year. We can see between 15, 20, 8, some of them moved up to about 20%. And we also have an increase in the ones about 10%. So if you add those up, it's 55 companies that we have above 10%, as opposed to, I think it's 47, right? That adds up to last year. So it's gradually, I think we have a very strong portfolio. We also have some companies in the end, of course, that we are working with. It's good to see that there are only four. There were four last year as well, but we had a couple that left that field, but a couple of others that were into that field. So that's a constant struggle we're working with within the group to really fix the ones that are not performing. So the four units are the same amount, but there are other units, or at least in two cases, there are other units this year as opposed to last year. A couple of final drill downs is also then the aim for 85% proprietary products. We are currently here at the end of the year at 76%. We see that all the acquisitions are coming in along the way, so we basically have If we adjust it for what we already acquired, I think it will pick up a couple of percentage points or so. But we're aiming here in the next three to five years to get to the 85, which we feel that the companies having proprietary products usually have higher margins, have better cash flows and better opportunities for growth. And we can also sell the products all over the world, which means that there are better opportunities for exports when it comes to those companies. therefore we are very keen on trying to drive this even further as we go forward and with the corresponding number then is the continued focused on value add you can see how that's evolved over time and you can see that we need to reach a new record high here for last year with a 39.3 percent and this is of course very very important when it comes to us being profitable and generating the cash we need in order to acquire more business So this is of huge importance to us, and we would like to see how that's evolving over time. And it's good to see the pickup here in the last year as well. You can see that it's quite good here in the last year, which is adding to the future. Last but not least, I'd like to talk a little bit about the acquisitions. Along the way, we are acquiring and actively acquiring some leading B2B tech companies in expansive niches. And in connection with the 2 billion program, we raised the bar for ourselves. It used to be 6 to 10 companies. Now we raise the bar to 8 to 12 companies per year. Our ambition is to acquire some 10% of ourselves every year. And that we have been doing for a couple of years now. And we intend to do so going forward as well. And that means that as we are growing ourselves, that means that we need to increase both the number of acquisitions, but also sometimes slightly the size of acquisitions. We will still stay with sort of our price tags and that type of thing. We will stay very disciplined doing this, but along the way, we will look at some bigger acquisitions as well. We will also go gradually outside the Nordics and do more things out in Northern Europe especially and we are very confident in the UK where we have put feet on the ground here in the last couple of years and it's working very well for us with more opportunities to look at and also of better quality. So during the year here we posted some nine acquisitions and it's then 1.2 billion which corresponds to roughly 16% of of last year's sales. So it's well above the 10% I talked about. So we've had a good year in terms of acquisitions. You can see how they're listed down to the right there. And we have been talking about them in different settings and in our quarterly meetings, but I'd like to present the two newcomers, which is the PREDO and the Nordic Road Safety coming up here now then. The PREDO we feel very happy about that I brought them to the group. a very well-run company in the west coast of Sweden, or on the west side of Sweden, in Tråvard, in Västergötland is the location. It's not off the west coast, but it's on the west side. And they have about a third of the market in Sweden when it comes to the folding doors. And some five to 10% in Norway. So some good growth opportunities in nearby markets. You can see down to the right, we usually make these type of fact sheets when we communicate around our new acquisitions. And you see it's a very well-run company with some really good numbers down to the right there. which will add to the niche products performance going forward. A very good company that is now part of the niche products division as of March 2024. So they've been with us only one month. The Nordic Road Safety is the next one I'd like to present this morning. And that is a leading supplier of permanent road safety and noise barrier systems. All these products need to be certified. So it's a barrier to entry for others that haven't certified their products. Which means that this company is really big in their market. Some expected revenues of 350 million. and a good EBITDA level of 50 million as well and a good profit over working capital in 2023. We have communicated that. So an EV EBITDA of 6.5 times is what we acquired at that. Yeah, we are acquiring some 85% of that company. This will be part of the electrify going forward and that started here from March, yeah. Right.

Okay. Good.

We will round off before we let in for questions. To just sum up the year, the financial overview here is where we could see how we developed over many years now. You can see how the net sales are growing year by year. The EBITDA is growing. The EBITDA percentage is growing. So we are very happy with where we are. And we can see the EBT growth as well. It should be 15% per year, right? You can see how that's developed year by year. And another 15% for last year then. Return on equity then was at 27%. And you can see the target there is the 25. So that's also been on a very good level. And the earnings per share growth then is at 15% for last year. But we're also then proposing a dividend per share of 190, which is a 19% growth here corresponding to last year versus last year. So a good performance over many years, and we are confident about the future as well.

I think that was all for us this morning, but we will have some Q&A coming as the next thing here then.

If you wish to ask a question, please dial pound key 5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key 6 on your telephone keypad. The next question comes from Zeno Engdalen Ritchie from Handelsbanken. Please go ahead.

Hello, Jörgen and Peter, and thanks for the presentation. I'd like to start off on the margin side, which of course were very impressive. Could you elaborate some more on it and if you see it as a sustainable level going forward? Of course, there's a lot of variations between the segments here.

Yeah, I think that we've had and do have a very strong portfolio of companies. And as you saw from one of the slides, right, the number of companies are about the 20% or so. Of course, we need to increase that share along the way in order to drive margins even further. I've been a bit reluctant to promise that we will stay in the 18 or 17% going forward, and I probably should be a bit careful around that. But as we're moving forward, we see quarter by quarter that it's holding up very well. So we're getting there, and then we also drive the margins in the companies that we have. So I'm sort of, I feel that this is where a level we should be able to deliver, not in all times and every quarter, but along the way we should be at the level well above the 15.

Very good, thank you. And in the electrify segments, of course you mentioned large deliveries there that you had last year but but not in this quarter do you see it as unique to this quarter or that it's a push effect that they are pushed to the next or that we will see them a bit less until the interest rates decline well it will be

We have a couple of companies that are a bit lumpy within the electrify. We've had the QD business as those of you that know that. They had some orders and some delivery sourcing last year's Q1. So that will probably be something to reach this coming quarter as well. But on the other hand, this quarter, the comment we're making here was not really related to QD. It was related more to Eel Capsule, which is another company that had a huge order delivery last year to the UK. And that wasn't repeated this year. So that was another reason, really. So we have a couple of lumpy businesses, which will bring the numbers a little bit up and down. But we also see some good projects being ahead of us. So we will see also quarters where we see some lumpiness coming back or positive effects of the lumpiness.

Okay. And just to be clear on the Easter effect, you particularly mentioned in the report Electrify and TechSec. Were those the segments that stood out the most when it came to the Easter effect?

Yeah, I think it's more general than that, really. I think the comments were made there, but I think it's more general to the whole business. We have some businesses that have more of a day-to-day sales, while others have other types of businesses where the Easter effect or the calendar effect are less. But some companies have more of a day-to-day sales, and then three, four days, sort of Easter effect will have an effect on those companies in that specific way.

Very good. And lastly from me, you're close this quarter to a relatively large acquisition of NRI and Predo. Do you anticipate that this will have an effect on the M&A pace that you want to wait for some cash flows in the near term or how do you think about that?

I think that we still have a very strong balance sheet and we are able to do more acquisitions and we're looking at a few already that we feel we might not do the really big ones, but I think that we will have a flow of acquisitions going forward as well. Our net debt to EBITDA is currently at some 1.4 or so. And that, I think, leaves plenty of room for more acquisitions.

Thanks for the answers. That's all for me.

Thank you.

The next question comes from Gustav Berneblad from Nordea. Please go ahead.

Gustav here from Nordea. Just to start off here I mean if we look at the P&L I mean in terms of other operating income there looks to be a positive effect of 28 million. What is the main driver behind this? Or what are these primarily relate to?

Is that referring to the quarter or?

Yeah this specific quarter because it sticks out on the positive there so it's just wondering what this relates to.

Well part of it it's not four million as we as you can see is related to revaluation of the earnouts and the remaining of course it's Towards the end of the quarter, we generally review and make the assessment on all sorts of things. So it's a lot of assessments like that. But I would probably have to come back with a more detailed description.

Yeah, that would be great. Just to sort of get more clarity into what the driver is and what we should extrapolate and so forth. Then sort of my next question. I mean, you have driven a sort of very strong margin journey, partly through margin accuracy of acquisition and so forth. What is your interpretation more longer term or are you still seeing a lot of opportunities instead of finding attractive companies with attractive margins sort of at group level or above group level still sort of trading at four to seven times EBITDA or are you seeing sort of a risk in the model where acquisitions are likely to be maybe more dilutive going forward or have to pay a higher multiple for it or if you can sort of expand a little bit about this.

Yeah it's I mean as we are getting a better and better EBITDA margin in the group of course the scope or the space of finding more margin and creating more businesses to acquire of course that is becoming limited limitation along the way. I think we are confident that we are going to be buying very well-run companies at, say, EBITDA about 15%, but doing a profitable working capital, meaning that an investment is really a good thing for us. So we will continue to build along the way. But I also feel that there are a number of companies, we are looking at companies that have well above 20 or above in terms of margins. And we also have, I think the benchmarking and how we work with the companies is also sort of driving the margin improvements once we have acquired the companies. We have seen that in a couple of the UK companies that we've acquired lately, that we see good margin improvements after we've acquired the companies. So margin will always be a key driver for us. It's been a key thing for us all over the year, all throughout the years, that the margins are driving the cash flows. And therefore, we are very keen on driving the margins. But we are even more keen on driving earnings per share, right? We need to also, so I mean, there is somewhere, there is, of course, a limit on how much you can drive the margins and still grow. But I think that we see companies in our near space here that are at the 20 or even a little bit above. So I think we have done a tremendous good journey coming from where we were, but we still have some good opportunities to drive that even further. Well, it won't be at the pace maybe. We have been driving at one percentage point per year or so, looking in the rear window, but I don't think that will be possible for a long period of time. But along the way, I think we'll keep or try to drive the margins going forward as well. A bit of elaboration. I don't know whether to add something.

No, no, it was good. That was all for me. Thank you very much. Thank you.

The next question comes from Niklas Sovres from Red Eye. Please go ahead.

Hi, Jörgen and Peter. Hello. I want to start with a question on electrify and wonder if you could give some more color on the seasonality there and if it has changed due to the acquisition of Nordic Road Safety.

Yeah. we'll do that i i am looking looking at you when you build electricity grids which is one key driver of that whole division really that that has always had a seasonality effect so that we also see we see some pickup during the summer and the sort of the summer period or the or at least q1 q r q1 and q2 right and that we see within the air press that we see within the air capsules that we see like in qd as well we see some of that So there has always been a seasonality effect to some extent, but maybe less than you might think. But it's still something there. Then when we're coming to NRS, that is also building then safety barriers for roads, right? And the road construction work is also done mostly in the summer. So they run big projects and they will probably have a build-up of project related type businesses during the spring and then will deliver most of it during the fall. So that will probably add to the numbers and especially the cash flows will probably be a bit late in the season or coming in October, November in that company. So that will add to the decisionality. You're correct there.

Okay, thanks. And also, I want to follow up on the question from the previous analyst on continuing to do, I mean, continue on the acquisition phase you have had. I mean, financially, you're looking in great shape to continue to acquire companies. I just wonder, organizationally, I mean, if you have any barriers in terms of like educating the new businesses on your operating model and and so on if you have any limitations in the near term driven by that.

It's definitely something we work with and it's not a challenge but it's a work that we think is important to do to drive also the culture work and how we do things. That I think is where we stand out and are maybe a bit different from many others and we are really driving the culture work when it comes to also What we're looking for, how we run businesses, how we do and drive M&A. So we are running trainings and things like that. We have an MD conference coming up and this will be a key thing in that MD conference with all the MDs. We're also then looking quite a lot at building M&A capabilities to a larger extent on the divisional level. And that we've been doing for some years now. You really see the fruits of that when we see that we are posting more acquisitions and having a better quality in acquisitions. We're looking at doing it more broadly within the group, getting more people involved in the subsidiaries and on a divisional level.

And my last question is on the business area size and how you think about I mean, each product has performed really, really strongly and you added the acquisition of PIDO there latest. I mean, what kind of size per business area do you think is like an okay level and where, I mean, at what size would you think about maybe splitting one business area into two?

I think we are to some extent doing that already. We are building some capabilities on a divisional level. And then we have some clusters or putting things together that have some synergies or not really synergies, but they can work together and have benefits from that. And we call it clusters. And that is already happening within the group. That will eventually maybe result in an aggregated P&L on that level. But I'm not sure that you as externals will see that. That is something we will work with internally. We are very keen on measuring and driving things in a decentralized way and measuring things and having people feel responsible for the P&L that comes from our profit unit or profit center organization. And that will continue as we grow on more levels.

Okay, great. That was all coming. Thank you so much, and have a great weekend, both. Yeah, thank you. You too.

The next question comes from Max Baco from SEB. Please go ahead.

Good morning. Thank you for taking the questions. I missed the first part of the presentation, so we might have talked about this. But anyways, and I think the first question is touching a bit upon a previous question here with operating income and expenses that was unusually positive in the quarter. And then the same time, the central costs of minus 5 million here in the quarter was unusually low. Do you have any more insights to why the central costs were so low in the quarter? Perhaps the same explanations to why the operating income was so positive.

Do you have something to add there, Piotr? Should we look into it?

We should look into it. As I said earlier, we make assessments towards the end of the financial year. And that's probably related to this, but I'd rather look into it in more detail.

Yeah. And the second one, I noticed that Juergen managed to take the time to do an interview here during the morning with the local press where he elaborated a bit on the comments in the report where he said that positive trends with interest rates and inflation coming down. uh could could lead to the market recovering but it could take a couple of quarters uh before that trend results in more orders and and i believe you said that because you you then got the question to specify when that is and you said q3 and q4 uh 20 24 25 for you uh i mean i know that you don't want to give any guidance and you also said in the interview that it's too far ahead to say anything of certain but As you say it right now, is that when you expect to return to organic growth, basically?

It's really hard to tell. I mean, all our companies are struggling and working the best they can in order to drive their businesses and grow their businesses. And whether that will happen in Q2 or Q3 or Q1, it's really hard to tell. It depends on how fast the market will pick up. My comment was more of a general sort of kind in the sense that I feel that now interest rates are coming back. People are feeling more confident and starting to look into new projects, new sort of construction projects, new infrastructure projects, other types of things that will result in investments going forward. But before that ends up in our order books, then it's a lot of approval processes and project work that needs to be done before it ends up in our order books. And we are, to some extent, late cyclical. And therefore, I think it will take some time before it starts picking up for us again. And whether that is now or somewhat later, but I think What we will do along the way is that we will look at the companies. We have a lot of companies that are more in a better part of the market than the NSE growth. And we also see that we are compensating some of the slower growth in more acquisitions. So I'm confident that we are entering better times along the way here.

Understood. And the last very brief question, also quite similar to a previous one, but here in the quarter isolated, very nice margin improvement, which seems to be driven by the gross margin. Would you say that that is on an organic basis, or is it that acquisitions included here in the quarter has been margin supported? Perhaps a bit difficult to quantify.

yeah it is a bit difficult to quantify but it's not not it's not like it's very driven by the new acquisitions the last ones that those are more of an average level of the group so that is not driving the the the total i think it's it's more of good work being done in many of the other business units so it's more organic

That was all for me. Very well done. Thank you. Thank you.

The next question comes from Carl Bockwist from ABG Sundal Collier. Please go ahead.

Thank you. Good morning. Most of my questions have been answered, so I just have one really, and it ties to... topic we discussed recently and just when you look at the order books now how would you assess the visibility into the second half and the follow-up would be you know you usually do provide a bit of flavor at least on the order intake and what can you say about that in this quarter?

I think what we said earlier on is that we've seen a slowdown in the market, but we also see that it's marginal. We are talking about the one, two, three percentage points that we've been discussing all along here. But it is stable there on a group level, but it varies between the different businesses and especially the ones related to the construction sector. So we see some weaknesses there. while others in niche products division where we have a lot of dependencies and more also international business that we see is holding up and building quite nicely. So it's really a very mixed picture. Generally speaking, we have an order book which is three to four months long on average, but it varies quite a lot between the companies. Some are more hand-to-mouth while others have long projects and have delivery times of nine to 12 months. So it varies quite a lot. I think it is very hard to tell for anyone really what's going to happen during the fall. But as we see interest rates coming down, inflation rates coming down, I think that the willingness to invest will come back. And we also see that from requests from our customers We see the level of requests are more picking up and also some more qualitative than before. And that is why I'm giving the comments like I am.

Understood. That's all for me. Thank you.

Good. I think there were no deleted questions right no written questions so i think i'll thank thank everyone for for taking time and and peter and i am always available if you have additional questions individually and we will we will look at those but but we'll keep in touch and thank you for listening and have a good day