Lagercrantz Group AB (publ)

Welcome to Lagerkrantz Group Q3 Report 2024-25. 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 on their telephone keypad. Now, I will hand the conference over to CEO, Juergen Wigg, and CFO, Peter Theisel. Please go ahead.

JURGEN WIGG, Good morning, everyone. I hope you're all hearing this now. Welcome to Lagerkron's interim report, our nine-month report. As you know, we're starting our fiscal year on the 1st of April, so we just concluded our nine-month report ending then in December here. Together with me here this morning is Peter Tissel as well, our CFO, and we will try to run you over some numbers and have some Q&A at the end. We usually spend around 45 minutes or so doing these sessions every quarter. So welcome, everyone. We will have a a setup where we will have a short introduction to the group for those that are new to us. And then we will go over and discuss the numbers and then have a little bit of discussions on where we are more strategically and in the long term perspective at the end. So just to give you a short introduction, Lager Krause is a tech group with really working through M&A and building with all these autonomous companies that we have within the group. Currently, we have some around 80 companies within the group. all aiming at getting a leading position in an expansive niche where we see some growth and good opportunities to be a very strong player in these niches in the companies. Every company work under their own name in their own market and we try to be a very good owner of these companies, encourage them then and challenging them and supporting them in their growth and improving their growth and profitability in each of the companies. You can see here that we have organized ourselves into these five divisions, the electrified control tech sec niche products and international, you can see how many sort of profit centers or companies that we have within each of the divisions. This setup is new as of some three years ago. And we see some some good things coming out of it now that we have a more of a focused approach in each of the in each of the divisions. trying to get them into growth areas and building where we see there's some underlying structural growth. We have reached revenues of around 9 billion Swedish and we are currently some 3000 employees in the group. You can see all over to the right where we have our companies with the needles there. We have been focusing on Northern Europe for quite some years. And since many of our companies are also working with exports, you can see also all the way over to the right that we also have some footholds in other parts of the world in Asia and also in North America. M&A is a very simple part of our business model. So we're acquiring some companies along the way, some eight to 12 companies per year, adding approximately 10% of the group is our ambition every year. We were part of the Bergman & Biening Group up until 2001. But since then, we've been on our own since 2001, listed on the Nasdaq Stockholm. And we started out as a small cap company, went through mid cap and are currently since some three years on the large cap segment. So that's an introduction to us as a group. We released our numbers here this morning. And it was good to see that we had a very strong quarter, we think, with some improvement in terms of growth rates compared to where we have been in earlier quarters. We came back to positive organic growth already last quarter, but now it was improved a little bit. So we posted some 3% organic growth. But on top of that, we've been also then very inquisitive here for some time. and acquiring more than the 10% I talked about ourselves along the way. And here in the quarter, it was around 16% that came in organically in terms of sales growth. Sorry, not organically, non-organically through M&A. So we have been having a good trajectory for quite some years now. And that continued here or even strengthened a little bit here in this last quarter, which was very good to see. We have, since we were at some 500 million or so, we set the bar that we should double. Since we're growing with some 15% per year, meaning that we're doubling every five years or so, we set the bar there that we should go towards the 1 billion, which was a goal for ourselves along the way. And we actually achieved that as of last year. And now we put the bar at 2 billion. And we have now some quarters that where we see that trajectory is really continuing over the year or along the way here. So, yeah, thank you. Next. In our report this morning, we communicated that we feel that the sort of overall market conditions have been stable and continue to be stable for most of our businesses. We see some variations between the segments. We see some segments that are actually showing some good and better growth along the way. We see the electrification taking a growth path along the way. And we also see some of the parts within the niche products also doing it very well. We also see that in other parts of the businesses along the way. But we also see that the construction sector, which has been sluggish for some time now, continue to be sluggish. I think most of us expected that that would pick up here during last year, but that has been delayed. And then therefore we see that this construction sector is still sluggish for affecting some of the companies that we especially have within the control division and also some in the tech sector division. Looking from a geographical perspective, we feel that most of our main markets, Sweden, Denmark, Norway, and the UK are showing some good recovery. while we still see that especially in Germany we don't have that much in Germany as you can see already six percent or so so it's not that much in Germany but that is of course also affecting some of the Nordic companies as Germany is a very important export market for for all of the Nordics, really, not only us, but many other companies as well. And we also see that Finland is also a bit sluggish. So we see a pattern there. But our largest markets, the ones that are put up there, have developed and show some recovery also along the way, allowing us to have a stronger earnings trend here in the last quarter. We also stated here in the report that our order intake were in line with or actually slightly a little bit above invoiced sales in the quarter. That varies over time and it's hard to really make a huge conclusion of that, but still it was a little bit better and a book to build that was a little bit above warm here then. here in the quarter, which was good to see and is also sort of supporting the thinking that it actually, it is a little bit of improvement along the way here. What was also good to see is that we continue, you know, that we have the great ambition of our proprietary products and that went to the 78% here now. I have a slide later on covering that as well. So that was our sort of general comment on the business trends or the business conditions. And Peter, maybe you should go over the actual numbers then as we presented them.

Yes. So overall, as Jörgen mentioned, we're quite happy with our Q3 report. The net revenues increased by some 20% where acquisitions contributed with 16% and the organic growth was 3%. And as you may remember this time last year, we had a couple of quarters with negative organic growth. So this is a gradual improvement. Last quarter, the organic growth was 1%. So we see a small improvement there on the EBITDA increased by 21%. And the margin was quite stable and slightly improving from 17.2% to 17.4% in the third quarter. Our most important earnings is the after financial items and this increased by 18% in Q3 and profit after tax increased by 19%. The cash flow was quite strong in the quarter. This is partly driven by some of our entities like the Nordic Road Safety, which has quite strong cash flow during the late fall, but improved by some 32% in the quarter. And then in addition to the Well, in November, we made the acquisition of mask system that only was included in December in the numbers, but that added some 175 million in annual revenues and that totals to some 1,320,000,000 acquired since October in 2023. So this is roughly the 15-16% acquired growth that you could see above. And in December, we also signed agreements for the acquisition of Van Leeuwen Test Group in the Netherlands and TASL in the UK. And they are both subject to regulatory approval and will most likely be added to the group in the beginning of 2025. If we sum up the financial year so far, we noticed that the acquired growth was 15% and the organic growth was slightly positive, but zero. And the currency didn't affect the net sales. And a beta increased by 15%. And the beta margin was very stable at 17.4. And the profit after or before before tax increased by 14%. So as you may know, this is slightly below our target of 15%. But we're quite positive to achieve that in the full year. And cash flow improved to 980 million. Return on equity was the same as last year, 28%, and the equity ratio was at 35%. Profit over working capital was at 82%, so an improvement from last year, 77%. And the earnings per share improved to 4.61 Swedish kronor. So if we then turn to the outcome per division. We noticed that all divisions improved their EBITDA in the third quarter, except TECSEC. So we're quite happy with that. And you noticed that the A beta margin for the group improved from 17.2% to 17.4%. But there are some variations across the divisions. And the most strong performance is from the niche products divisions, which has had a couple of quarters now with above 22% beta margin. So that's very, very strong. A comment on the electrified division is that this is affected by Nordic road safety, for example, which has a rather weak season in the Q3. And yeah, those are probably the most important comments. So then maybe, Jörgen, you can comment