Lagercrantz Group AB (publ)

Thank you and welcome everyone to Lagerkrant's year-end report for 2024-2025. We released our numbers this morning and we will conduct an ordinary that we have done session here for 45 minutes to an hour or so and taking questions at the end. We usually start with a short introduction, go over to the numbers what we released this morning And then talk a little bit of how we see the future and a couple of pointers that we would like for you to have as well along the way. And together with me here is Peter as well, our CFO, right next to me. And we'll do this together along the way here. For those that are new to the group, we usually start with this oversight of the group where we could see that we are viewing ourselves as a tech group with leading position in expansive niches. That's what we're trying to build. We are one of those serial acquirers that are on the stock market and we work without an exit horizon. So we continuously build our group. We have the Nordic Northern Europe as our marketplace where we have most of our companies. But along the way, we've acquired quite a lot of companies with proprietary products that are also along the way doing some exports. And you can see all over to the right here on the slide where we have our hubs all over the world. Our scope is that we are working within B2B tech. mostly hardware, where we find different type of companies that we can add to the group, usually very niche-oriented with working in expansion niches, building leading positionings and expanding niches, what we're trying to do with our different companies. We have grown over the years, and so we always need to update these numbers. We have now exceeded 9 billion in terms of revenues. And we are 3,100 employees as of the end of March. So we're continuously growing the group, both organically and through acquisitions. We are firm believers in decentralization, working with management by objectives on all of our 80 profit centers in these five divisions that you can see here on the top. We also can see our profit centers or our companies as we view them here. uh the number that we have in the different divisions and where we are also present with each of the divisions you can see up there the number of countries we're in with each of them uh yeah m a is a very central part of our business model we work continuously with making some 8 to 12 acquisitions per year so that's a really important part and and two-thirds of our growth to come through acquisitions along the way is the ambition that we have And we have been a part of the Bergman & Bibbing Group up until 2001, but since then we've been separately listed on the Stockholm Stock Exchange, currently on the large cap. So that's a brief introduction. I think we were very happy with the last quarter and the year end here, satisfied with reaching a higher growth rate than we had earlier in the year. And we had posted another good quarter then. And you can see here that we have this trajectory and the graph over where we have been doing all the way since 2005 and 2006. And we have continuously been growing since then and have had a higher growth pace here in the last couple of years, two to three years. And we continued that with also yet another strong year, another strong quarter. It's actually the 15th consecutive year of improved earnings per share that we posted here. And that is, of course, very satisfying to be able to say that. So we've been working hard also this year. We have along the way put the ambition that we will grow the business. When we surpassed the 500 million, we said we would go for a billion. And since then we surpassed the 1 billion in terms of profits. And now our ambition is towards the 2 billion. Growing with some 15% per year, meaning that we will double our profits every five years is sort of the overarching ambition that we have. And what we've been doing also for many years. So in words of business conditions, we felt that the market situation continued to be stable and somewhat better during the fourth quarter compared to the same period the previous year and along the way here. We still saw that demand continued to vary across companies and segments, but we saw especially in Electrify and niche products that had a stronger growth and remaining some weaker customer or order intake primarily from the construction sector. that we have in the, especially in the tech sector division, but also to some extent in the others, and especially in the control division also has some of that. We saw that order intake for comparative union was in line with or slightly above invoiced sales. So we've seen a gradual improvement in the order intake and also in the market conditions along the way, even though it's not moving very fast, it's still in the right direction. Of course, the recent increased geopolitical uncertainty with the trade barriers being introduced, uh is is uh is of course bringing some uncertainty but so far we have not seen any significant impact on our demand on our how we run business uh we we have some five percent of our group sales is directly into the us and of course that's a that's a limited number uh even though there is much of sort of indirect effects that might happen if that is becoming more of a reality. But so far it looks like it's sobering up a little bit and things are moving along there as well. So hopefully that will continue in a good direction. You can see down to the below here, we also have a stronger proprietary products of 78% that is gradually been growing. That is a strategic ambition for us and that we also continue to do here in the last year or so. And we also can see the net revenues by your graphic mark We have an ambition to become more international along the way, and you can see that we are bringing new countries and volumes outside the Nordics. It's gradually growing, and that is, of course, a good sign for the long term for us as well. And then we will move into the numbers, and I will hand over to you, Peter, then.

Thank you, Jörgen. It's my pleasure to go through the numbers and we had overall a strong end to another successful year for Lagerkrantz. In Q4, we saw the net revenues increase by 16%. And we saw most 11% from acquisitions, but an improved organic growth of 5% in the quarter and insignificant currency effects. The EBITDA increased by 24%. That is continuing improvement throughout the year, quarter by quarter. The EBITDA margin remained at a good level of 17.8%. The 18.1% we had last year was a very high level. So that was a tough comparable. The cash flow from operations was 342 million and also there we had a very very high or tough comparable affected by some unrealized currency effects and unrealized revaluation of earnouts in Both periods, that is very positive numbers in Q4 last year and some negative numbers, non-cash numbers, that is, in Q4 this year. Continuing, the profit after financial items increased by 23%. to some 368 million, and that we had some help towards the end from some positive currency translation effects in Q4. The profit after tax increased by 28% to 307 million. During the quarter, we completed four acquisitions, adding some 370 million in annual net sales. So the acquisition or the market for acquisitions is still positive. If we sum up the year, it was another successful year for Lagerkrantz, where we increased net revenues by 16%. And in the full year, we had a little bit higher contributions from acquisitions, 14%. But as you can see here, the organic growth was 2%. If you remember, in the beginning of the year, we had some 2 or 3% negative in the first quarter, but it has gradually improved throughout the year. The EBITDA increased by 16%, and the EBITDA margin is still on a very, very high or good level, the 17.5%. compared to 17.6 last year, which was a very good improvement from the year before. Cash flow from operations is still on a good level, similar to last year. And the profit after financial items and after tax increased by 16%. and earnings per share improved to 4.93 sec per share. The return on equity was 28% and the equity ratio, similar level as last year, 34%. Profit over working capital improved by 2% units to 79%. And in the full financial year, we completed seven acquisitions that corresponds to roughly 10% of the net sales for the group in the previous year. And the board proposes an increased dividend by 16% to 2.2 sec per share. If we look in the outcome by division, in the fourth quarter, the electrified division stands out with very good both acquired and organic growth and the EBITDA growing by some 52%. Also, the niche products control and international division had good performance in a bit of while the tech sec division, was still struggling with a weaker construction market. And I think you plan to go through that development, Jörgen.

Yeah, some comments by division. Looking at some highlights by division then. Electrify is running very well and smoothly at the moment. They're doing it very well with both organically and through acquisitions. And revenues increased by 31% here in the last quarter. And a good EBITDA margin of 17% up a bit here from last year, as you can see here in the top. I think for electrifying most of those businesses, both the electrification market and also the infrastructure, remained favorable and did very well. And we saw that also in some of the companies doing an all-time high in terms of profits, which was Eel Press, Gecoflex and Nordic Road Safety. So those performed very well. And also Eel Capsuling, Swedwire, EFC, Encom Active, and also newly acquired Mast System noted some good demand and positive earnings development during the quarter. That was, so it was sort of on a broad base, a good quarter for the electrified division. The control division also grew some 16% in the quarter. but are still struggling organically with some of the sort of more construction related businesses still having a tough market. The EBITDA margin was up 17 to 17.9%, which is a good number. And we also have some seasonality, as you know, in the control division, especially rather nobody, it's just a strong quarter for them. But on a good level, also compared to a strong quarter last year, But and we can also see that some of the companies did it very well in terms of presimeter and CP cases in the UK did it very well. And we also see that. But but again, some of the more construction related companies, especially the smaller one, are dealing with tougher and tougher market conditions. And here in the quarter we also closed the Heman was acquired in the UK. We'll add some numbers and some volumes to the control division as we move forward. They were not with us for the full year. They came in during the quarter. The division that is maybe struggling the most is probably the TechSec division. Their revenues were up with only 6% then, still on the positive side and good, but not living up to expectations when it comes to some of the companies more in the construction related companies. But we saw a favorable market situation on other sides. So it actually was a decent fourth quarter. And especially Aras, IDESCO, Firecon, Fricktape and PCP also are the biggest company within that division had a good quarter. So doing it very well on the broad base, but still some companies around construction is more struggling. With the ARCOM, the CW Lundberg, Doran Joinery and ISG Nordic continue to be affected by the weak business situation in the market. So it's a bit struggling in the tech sector vision. The niche products division, on the other hand, had a very strong quarter. The revenues were up 26% and the EBITDA margin at 22.1%, which is at a very good level and above the 20, which we've become accustomed to when it comes to the niche products division. The earnings improvement was noticed on the broad front. and especially a couple of companies with the ACEPT building their business in the US, doing it very well there. But also the SIP and SIAS in Finland and Sweden are doing it very well for us. And we also noted that Tormek, which is a very important company for the niche products division, also posted a strong result in line with previous year, which was a record year last year. Also waterproof noted a stronger market. Here we also would like to highlight that the Credo, which was acquired in the spring of 2024, posted a record year for the full year. Very strong sort of new company within the niche products division along the way. And gladly, we also closed the VLT business acquisition in the Netherlands, coming in here now as of, yeah, January, right? Was it? February. February. Adding another Euro 20 million into a strong group in especially the Netherlands and also in the UK. So that will also add to the numbers going forward within the niche products division. The international division, last but not least, they posted revenues actually declining. The only one that had declining revenues in the quarter, but only 1% then. And EBITDA was a little bit, basically on the same level as last year, with an EBITDA margin of 17.6%. Here we are, yeah, trying to grow the business both organically, but also looking at some interesting M&A opportunities going forward. And what has been good here with the international division is really what we built in terms of the marine cluster, and especially the Libra company in Norway had an excellent year for us. And also DPCs in the UK and NSD in Denmark also posted a very... So a lot of things going in the right direction in the international division. but expecting more in terms of M&A going forward. And last but not least, some international has some exposure to the German market. And as you all know, Germany are struggling a bit, and therefore we also see, and we've seen that in some of the companies that we have in Germany, most of them are within the international division, also the fact that those numbers. So that was sort of where we are with all the divisions. And on an annual base, we also provide you with some return on working capital, which is our key metrics in terms of profitability internally. And we would like to highlight some of the things in the different divisions. So once a year, we provide you with these numbers. And you can see how that's evolved over time. A very stable and good development. You can see that and we are all struggling to get above the 45% in our businesses and you can see that we have a very strong portfolio and very profitable businesses providing both good margins and good profitability and that is of course also then resulting in good cash flows coming out of the business that is fueling our M&A growth going forward. But the 79% is a really good number. And you can see here that we've been on that level for a number of years now. So we have some calendar effects when you look at especially the tech sec division. So we have a couple of skewed numbers here when it comes to M&A coming in during the year and that affect these numbers a little bit so here we have some calendar effects and M&A effects but overall on a very good level I think with the 79% something that we feel proud about we also provide you with yeah and going forward then I mean We feel strongly that we have a very strong business concept. I write about that in my CEO words in the report. I think we have a very strong concept, a very strong business idea for Lagerkranz. And we posted, as I say, there's the 15th consecutive year with improved earnings per share. And I think we have a very strong concept going forward as well. Building this very strong portfolio of companies along the way, and trying to establish companies that have market leading positions in their niches and having a group of those type of companies. And our overarching ambition is then to grow EBT or profits by 15% per year. And as we've said, at least one third of that should come organically and the rest through eight to 12 acquisitions per year, two thirds out of acquisitions. And here in the last year, when we've seen a slower growth in the market, we have compensated the slower growth in the market with more M&A and then resulting in the 16% for the year in terms of EBT growth. The return on equity should exceed 25%. So we should do this in a very profitable way, taking cash flows out of the sort of existing business and using that for M&A and through that getting a good return on capital employed and also in return on equity that exceeds well exceeds 28 25 and as you saw from the numbers initially it was 28 here for the full year so we are surpassed that also in the year that we just posted uh And we're building then the five divisions. We set up this structure some four years ago with the new five divisions, and we will continue building that and get the larger grants towards the two billion. We feel that we are, we have positioned our divisions in the direction of where we see underlying structural growth. with sustainability themes, the green transition, safety and security type products, water treatment within the niche products division, as an example, and other areas where we see investments and and demand for uh sustainability and and those type of products that we try to work with in our companies and building them positioning segments with sustainable structural growth is our ambition over there over time and and here we also think one key thing to know about us is our strategic ambition to grow with proprietary products and as you can see how we have gradually this is the sort of brown area here you can see over some number of years that we have continuously grow the share of proprietary products within the group and we started out with having almost none and then we made the ear press acquisition in 2006 and since then we have gradually been growing and set that as a clear target for us to grow with proprietary products we see proprietary products as companies that have their own products, of course, but also have some stronger margins and also greater opportunities for exports and also through that some better opportunities for organic growth as we go forward. And we are currently at the 78%, you can see there, but the aim in our 2 billion program is to get to the 85%. And we should do that in the coming three to four years or something like that. I think it's reasonable to see that we will get there. Another highlight that we do along the way is usually that we continue our focus on value add. We are very keen on getting companies that are strong and have a pricing power in the market. And therefore, we also measure the focus on value add and the gross margins along the way. And you can see that we posted yet another year at a very high level. It's not growing this year, but it's basically on the same level as it was the year before. There are some mixed effects, of course, in this when we acquire companies that also skew these numbers a little bit. But along the way, we would like to see it go up. And of course, a percentage point here is very important when it comes to making money and having great margins and getting the cash flow out of the businesses. So that's also a highlight for you guys. Last but not least we will just go over the acquisitions. I think we have along the way built our resources and built our capabilities in terms of doing M&A in a very professional way. I think we have been doing this for many many years but still along the way we have gradually refined how we do this. and here since a couple of years back we have raised the bar for ourselves to do it trying to make eight to twelve acquisitions per year that is a reference to really make the ten percent uh sort of or two-thirds of the growth should come from from m a and that we we are we have been at that level or above that level uh here in the last year or so so we'll continue doing acquisitions I think we have a very established acquisition process and gross list for integration. I mean an M&A sort of database where we fill it up with opportunities and we are working with this all throughout the whole group from all the companies but also on a divisional level and more so over time. So we were occupied with making good acquisitions along the way. And of course, it's also a highlight that I think we are financing our M&A operations through cash flows from the existing business. And here during the fiscal year 24-25, we made some seven acquisitions and 825 million. So we are basically at the 10%. We made some acquisitions just at the end of last year. Looking a little bit further back was actually a bit higher than this, but still on a good level. You can see over to the right acquisitions. We tried to make a data sheet for all the acquisitions that we're making so you can follow what we're doing and see what type of companies we're getting into the group. And I just like to highlight a couple of the bigger ones that we posted here during this fiscal year. And we will start with the CP cases, which is on the next slide, please. Yeah, the CP cases is a company in the UK with also operations in Delaware, in Frankfurt. in Delaware in the US. And so especially two sites making these type of cases, protective cases and racks used for mission critical equipment. It might be for commercial use or for healthcare use, or it might be for, but most of it is for military applications. So it's a very strong company, and you can see all down to the right here that it's been growing, and it's also been doing well in terms of EBITDA and EBITDA margin, and those are the companies that we like to bring to our group. Niche-oriented, very specialized in what they're doing, and performing well over time. And this company we acquired here last summer, and it's been doing well for us along the way. So it's a very good company that we brought to the group. Another one that we also concluded here is another UK company is the principal door sets company. It's an innovative manufacturer of bespoke fire doors in the UK, especially fire doors with some sales of 9 million pounds with good profitability. And it's located on the West coast or Southwest in Devon. in the UK. And you can see all the way to the right there again of the size and also the beta margin. We're very keen on finding these companies that are very niche oriented and also have a proven track record of sustainability or profitability over some time before we acquire them that we feel that they can be stable and good companies that we can get to grow a bit, but keeping them at a very profitable level after we've acquired them. And they are part of the TechSec division as of July 2024. So that's a company we acquired during the year. We'll go to the next one. Another one, this is slightly bigger in terms of profits and also in EBITDA margin. It's very good here at the company of Mastsystem. It's a Finnish company that we acquired and have a sales of some 15 million euros. uh and doing it very well and have a good great start to the to the camp to the to the group as well located in you and so on the east uh east side of finland um um and part of the electrified division as of december 2024 so it's been with us for four months basically since year end here We take the next one which is the newly acquired and Van Leeuwen test group making service robust equipment and testing for testing heavy vehicles including brake testers and integrated software. company located in the Netherlands, but also have 50% or so their business in the UK. Also some with some 20 million euros in profit, sorry in sales and then a beta over for around 4 million euros. So it's a It's a highly profitable company with an EBITDA margin of close to 20%. So these are exactly the type of companies we're looking for. It had a very good start for the group with some really good order intake here lately, which looks promising going forward with that company as well. We'll take the next one. Yeah, that was the ones I'd like to highlight here today. So thank you all for listening in. We usually round off with a financial overview. where you could see that we posted yet another good year. Now sales above 9 million. You could see the EBITDA at 1.5 almost, or 17.5% EBITDA margin. And you can see the EBT, we would like to grow that by 15%. And we have been doing that for the last four years, at least. But over a long period of time, it's been in that neighborhood or above that threshold of the 15% growth per year. return on equity the bench there or the target there is the 25 and you can see where we've been over the many years that we have here in this directory and the earnings per share and earnings per share growth is is also sort of hand in hand then with the with the yeah the growth of the ebt of course and the dividend then we the the suggestion here was the 220 and the dividend growth of 16 here that we could fill in there. But you can see how the trajectory there has been as well. So a good trajectory for many years and another good year for us. And with that, I think we'll round up and open up for Q&A. So please, I don't know how we do that, but...