Lagercrantz Group AB (publ)

segments and we saw especially within the electrification and also within the infrastructure segments within electrify there we had some strongest growth but also some parts of the niche products division with the with the specialization companies there that had posted some good growth along the way. But we also see demand more hesitant and the construction related businesses still struggling where the market remains sluggish during the quarter. All in all, we still think it's quite positive in terms of that order intake for comparable units was in line with or slightly above invoiced sales. The book to build was slightly positive, which was good. But of course, we are also very occupied with looking at the market and see how geopolitical uncertainty develops. And that, I think, is bringing some hesitation to the market, which we've seen from others that are importing as well. So I think we are well in line with what's happening in the market. And our exposure then to the U.S. is limited. We also commented on here to U.S. with amounted to less than 4% of group sales. So it's small, but still, of course, sort of affecting different parts of the market as well. but but from from from from still on an improvement track but but slowly this slow improvement is what we see in the market with the exception of the construction sector where we see some that the market is remain sluggish we have you can see down here that we also have some some sort of key metrics we follow the proprietary products were at 78 percent now for the moving 12 months. It was 79, I think, in the quarter. But still, that is a key sort of strategic ambition for us. And we also see that we are growing the business, sort of becoming more and more international. And you can see the net revenue by geographic market down there to the right. And you can see that the Nordics And business outside the Nordics is gradually sort of growing faster than the group average. So that's also something that we are keen on seeing happening along the way. Peter, could you maybe take us through some of the numbers, please?

Sure. I'd like to start by summarizing the quarter. It's a solid start to the financial year where we have positive organic growth and also positive contributions from acquisitions. We can see that net revenues increased by some 10% and acquisitions contributed with 10% and the organic growth The EBITDA increased 12% and the EBITDA margin improved to 17.5%. The cash flow was relatively strong, up 23% from the previous year. And the earnings before tax increased by some 14%, a little bit below our target. of 15%, but still stronger than the previous year. And the profit after tax increased a little bit more, 18%, but that was mainly due to higher taxes last year. The earnings per share increased to 5.14 Swedish crowns. And as you know, the board has proposed a dividend of 2.2 sec per share. We have completed some 11 acquisitions in the past year, or more exactly from the 1st of July 2024 until today. And this corresponds to some 15% of the net revenues for last year. And this is the pace we have kept for almost three years now. And I think you will see that since some of these acquisitions came in rather late in the quarter and also on the 1st of July after the quarter end. If we take a look by division, you can note that the strongest divisions are this quarter electrify and the control divisions where we have noted very good earnings improvements also followed by the niche products but with some weaker performance particularly in the tech sec division but also to some extent in international But if you look at the bottom for the EBITDA margin, we are quite happy to see that almost all divisions contribute to the margin improvement. So maybe, Jörgen, you will comment a little bit more details by division.

Yeah, a little bit on the divisions. And Electrify was then the first division and was the strongest performer here. We saw revenues grow by 20% and organically 13%, so very good on organics. And that we sort of see coming from the electrification and infrastructure investments being done. And those companies with that type of addressing that segment had generally a good quarter. So we saw some good performance coming in from Nordic Road Safety, El Capsuling, Swedwire, Elpress, Elfac and EFC and all those companies have that in common. A very strong sort of performance from the electrified division and it is strong in the beta margin as well of 18.3% which is up from 16% last year. So a very strong and good performance from the electrified division. Within the control division, which was also very good, revenues grew by 21%. But organically, it was somewhat weak with the minus 2% and also some FX effects of minus 4%. But EBITDA grew them by 46%, driven mostly by M&A. And also the beta margin picked up to 16%, also driven by M&A within the division. Generally, they saw a stable market situation combined with successful acquisitions contributed to a good improvement in earnings and margins during the quarter. And some companies stood out. The CP cases acquisitions we made last summer has had a positive development. While others, sort of more of our legacy businesses with the Lieting, MH Modules is fairly new, but also Presymeter is more of a, been with us for many years, showed Gording's earnings improvements in the quarter. While we are struggling with some of the smaller businesses within the division. within the division. And here also, the He-Man, the company we acquired here earlier this spring, had a promising start within Lagercrowns. And also good to see is that they posted another acquisition of the O-Rex here just here during the summer. I'll come back to that one. So control a strong performance. The one lagging behind a little bit and not performing, living up to expectations is the tech sec divisions. TechSec division, here we saw revenues decline by some 2%, and organically was minus 5%. A couple of companies here addressing more of the construction sector, and here we see that sort of coming through. But EBITDA amounted to 84%, and still a good EBITDA margin, generally speaking, of 16%, even though it was down a little bit from last year of 18.2%. But the more constructor-related businesses with the Archon, Doran Joinery, it started out very strong within the group, had a fairly good performance, but still not living up to last year. And Principal Dorsey and CW Lundberg remained affected by the weak market situation within the construction sector. and also the division's largest business the PCP in Denmark and Northern Europe. Notably stable demand but reported a slightly weaker start to the year. So Texic is the one a little bit struggling. Niche products division there we saw revenues pick up by 15% and organically it was my plus one so Okay, but still a little bit on the low side. Beta then picked up 14%, so that was good, and a beta margin of 20%. This has been our high performance in terms of a beta margin, and they continue to be so here during the quarter as well. um a stable quarter um and i also see some some companies stand out a bit uh the predo uh with the with the folding doors had a very strong performance and also the new newly acquired van loven in in the netherlands the vlt company came in with a very good start within the logic runs but also other more legacy type businesses the sias the prof safe and vending also deliver clear earnings improvements While also some of the bigger ones that Tormek, Asept and Vapro perform in line with previous years. So good, strong performance within the niche products division. And they also posted a smaller acquisition, an add-on company for the Vapro business here. I'll come back to that later on as well. Also sort of building the division for the future. The last division then, last but not least, is Day International. They posted a decline a little bit in revenues of minus 2%, but organically was up 3%, but were more affected by the FX of minus 5%. So EBITDA picked up with only 1%, but still the EBITDA margin up to half a percentage point to 18%. So still a good performance. they as for those of you they've been with us for a long period of time internationally was the one struggling a bit with the beta margin but they have since now in a couple of years two three four years they've been been well in line with the rest of the group so they've improved their performance and show that that's been structurally and sustainable in in terms of living up to that expectation Especially the marine business in Libra and the DPCs in the UK continue to develop strongly and other companies also did it very well. And here it's also good to point out that International now have posted two sort of slightly bigger acquisitions with the poke in denmark and also figure workers in sweden and those are now being sort of consolidated within uh within the group from first of july so they're not really within the num in the numbers just yet in terms of p l numbers um so that that's that's also ahead of us so to speak uh so that was the comments by division and that will sort of we move then into the next session section i mean we are then continuing building our group and we are aiming then for the logger crowns towards the two billion and i think we have the trajectory and this was just another quarter where we see that we are well in line with that ambition in terms of timing and and the sort of route to get there I mean, what we're trying to build within Lagerkrans is this strong portfolio of companies and really having companies that are working in building market leading position in niches. And our financial goals is then to grow the EBT by 15%, where at least one third should come organically and the rest through eight to 12 acquisitions per year. And we have now for a couple of two, three, four years really been living up to this. As the base grows, of course, we need to increase the number of acquisitions. And the current pace of 8 to 12 or some 10% of ourselves every year is something that we're living up to. And you noted maybe that Peter reported that it was 15% here last 12 months coming from acquisitions. And that's good to see, well ahead of the sort of 10% that we have as a general benchmark. So the annual profit growth of 15% is where we aim to be. And IE doubling the group every five years and reaching then the 2 billion along the way. Well, on time or ahead of time. Return on equity, then we should do this in a very profitable way by having a return on equity of at least 25%. And we were currently at the 28th, as you saw maybe from the report. So we have also been delivering on that financial goal for us. and so we continue building the group with with the five divisions we have in the last few years been putting increased emphasis on the on the divisional level building some resources and really get going with with making investments and finding acquisitions for us and we could see that the pipeline of acquisitions are strong is strong and and we have a Basically, more people working with this along the way, a little bit. We are some 20 people or so, 23 or whatever we are in the overhead here now. And that includes the people working on the divisional level. So still sort of mean and lean, but very dedicated to building these divisions along the way. And we also see that we have since now four years, I think it is, been addressing different segments in each of these divisions. And that has also been very key for our sort of last few years good performance when we see that we are addressing specific segments and markets with our different divisions. You could see there the focus area on the different divisions here. And you could see that we have a number of units, a number of profit centers within the different divisions. But this is where we put the emphasis to building this and building capabilities and resources and get going with building these divisions. Building positions in sustainable segments with underlying structural growth is the sort of key theme here when we're building the different divisions. And we continue doing so over time. Another key strategic ambition for us is to build the proprietary products. You can see that this is where we're coming from. You can see how it's been developing. That is the brown part of the slide here. And you could see that we have been growing that and we had ambition of getting to the 75% for quite some time. But then lately we have now put up the ambition for 85% in this sort of time, sort of moving to the 2 billion goal. And we are currently at 78 or in the last quarter, as you can see, 79% from the report. Here it's a moving 12 months figure of 78%. So that is also working in the right direction for us. We see within proprietary products, we see higher margins and we also see greater sort of opportunities for exports, meaning that also the organic growth sort of ambition is easier to deliver on when we see a broader market for our companies. And that is also been a key thing for us when we looked at finding more proprietary products to bring to the group. So that's been good for us as well. last but not least i will talk a little bit about the acquisitions well to to grow a serial acquirer by by 15 per year over a long period of time we also need to then both produce some organic growth but also do quite a lot of M&A. And that is, of course, a key thing for us. And in the last sort of set of goals, we have ambition of growing some 10% of ourselves, i.e. some 8 to 12 companies per year is how we translated that. and i think we're well underway here with 11 acquisitions that we posted here since july 2024 adding some 1382 in annual business volume ie 15 roughly 15 or or percent of ourselves really in in that period and you could see that we have some posted some 85 acquisitions since 2006 and here we had a yet another good sort of time period of more acquisitions And just to highlight what we're acquiring, we're both acquiring smaller companies that are bolt-ons to companies that we already have. And within the niche products division, we are building a water cluster of companies. And here we found another company adding to that cluster, the WAPRO cluster within. It's not very big, this company, but still a good add-on for and important for the WAPRO business. And you can see down to the right here that it's been performing well and will be a good add-on to that company, to the WAPRO sort of area. The next acquisition I'd like to highlight is then more of a standalone acquisition. This is a very strong player and a leading player in Sweden in terms of products handling and maintenance for funeral and cemetery sectors. So a lot of things that goes into sort of cemetery and that market. Also a very good, well-run company with some 50 million in terms of turnover and some EBIT of around 9 million, as you can see there. And you can also see the EBIT margin down at 17 to 20 percent or so. A good add-on and a company that could sort of develop very well within the Lagerkrantz framework, a Swedish company, part of the control division. Then I would like to highlight a couple of bigger acquisitions here in Denmark. We acquired here in June the Epoch company, which is a leading manufacturer of equipment for winter road maintenance and road safety, especially for spreading sand and salt. uh and and you can see this is slightly bigger this is danish millions as well uh so it's uh it's going to be a good and important add-on for for the international division um just newly acquired based in veyen in in in in jottland in in denmark But also have some subsidiary in Germany and with the production facility in Denmark. So a very good and important add-on on a new company within the international division. And related to somewhat to that is also then the Swedish company Frigga Åker, which is also making the sand and salt spreaders under the Swedish name that many of you might recognize, which is the Falkköping brand, well-known in Sweden, very well-run Swedish company with some 100, 120, 130 million in terms of sales in Sweden and in EBITDA of some, yeah, EBITDA margin of 20, 25%, as you can see down there. This company we acquired here the 1st of July, so this will be sort of consolidated here from the 1st of July as well. So that was not in the numbers here that we reported. And an important company also for the international division and similar or related to also the poker business. So to round off I think we posted a good solid quarter and you can see here that our good trajectory in terms of the financial figures continued in the quarter. We had a good net sales improvement and a good in beta improvement and the EBT and the EBT growth is currently now at the 17% on the sort of rolling 12 months sort of basis as opposed to the to be compared with the with the with the target then of the 15 and the return on equity there the financial goal is 25 and we're currently running at 28 that is also very good and the earnings per share growth was 19 compared to them to the goal of 15 and so a good strong quarter and continued continue sort of on our on our trajectory here so that was good to see And with that, I think we will open up for some questions. Move into the questions, Q&A session.

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 Max Baco from SEB. Please go ahead.

Thank you and good morning, Jörgen and Peter. Well done in the quarter, a solid one indeed. Yes, one question from my side. We have heard from one of your bigger peers there during the reporting season that they have postponed some M&A transactions due to the geopolitical unrest and low visibility. you you seem to do the opposite take advantage of the slightly slower market and I guess also lower competition for quality companies so basically the question is then what are your thoughts on doing acquisitions in the current market environment with which is perhaps characterized by by uncertainty any thoughts on that would be interesting um

Well, I think we have more or less been doing what we've always been doing. We are looking at good companies. And since we don't have an exit horizon, we are very, very long term. I don't think that we should sort of stop or sort of adjust very much for a geopolitical situation that might be sort of in some parts of the world or so. Of course, we are uh sort of observant to what's going on in a specific acquisition so looking at the acquisition you just i just presented most of them are very addressing markets and customers in europe or in even in sweden in some instances so i don't think they will be very affected by the political situation in sort of north america or so of course if there is an bigger things happening with the sort of, yeah, whatever that might be. But if that's happening, but we're looking at it case by case. And if we feel that they're sort of, they're addressing a market in Northern Europe or so, I think we are still very sort of, yeah, keen on continuing our M&A sort of, yeah, our M&A activities. We have not stopped or adjusted very much, no. That's true.

No, that's fair. That's fair. That was all from me. Well done, and thank you very much.

Thank you.

The next question comes from Christian Binder from Red Eye. Please go ahead.

Hi, and thanks so much for taking my questions. First one regarding organic growth. If I remember correctly, in Q4 2023-24, you noted that the timing of Easter kind of had a negative effect of three percentage points on organic growth in that quarter. Can we assume there was like a similar effect in this Q1 when comparing it to last year's Q1?

Yeah, I think there was a slight sort of, yeah, the organic growth was slightly stronger in the previous quarter with some 5%, I think we posted in the last quarter. And this quarter we posted 3%. And some of that effect was really sort of coming from the calendar effect. That's true. But I don't think we should make that a key point here. I think that we are in our companies, we see quite a sort of a different sort of landscape in terms of organic growth that you could see when we went through it from the division side. So I'm not sure that that's sort of to be expected here going forward. The market is improving, but slowly, as pointed out earlier.

Okay, perfect. Got it. And then one question regarding Epoch. Looking at the last 10 years of consolidated financials for a company, it seems like sales haven't changed too much, but EBIT margin has improved a lot. Can you just give a little bit more color on what kind of has changed in the business?

Yeah, I think they've been going through some improvement programs and some cut out of costs as well within the business. But I also know that they have been addressing more of the aftermarket and been much better at addressing the aftermarket than they used to be. And all those things have added up to some better improvements, better performance in that company in more recent years. And that we see as sustainable going forward.

Perfect. That was all from my side. Thank you so much. Thank you.

The next question comes from Patrick Schwartz from Pareto Securities. Please go ahead.

Hi, Jörgen and Peter. Congrats on another solid quarter. I have a couple of questions here. First on Electrify. Obviously, we've had some really strong organic growth here the last couple of quarters, although admittedly I guess perhaps some easier comparatives looking forward. I think it's getting a bit more difficult now. What is the feeling here on organic growth? Should we expect it to obviously, I mean, 10%, 11% is perhaps not too sustainable, but what do we think going forward?

Yeah, well, that's a very difficult question. I think the key engine, the engine within the electrification has been our eel press. And our eel press has been performing very well for many, many years. And they have had a growth pace of maybe 8 to 10% for some years. But now in the last couple of years, it's been a little bit above 10%, so 10, 12, 12, 15%, somewhere there. But they are also meeting a better market. We see that investments in electrical infrastructure and cable logs and electrical grid is improving and picking up along the way. And I probably see that continue for a number of years going forward. But whether we should translate that to a strong organic growth for Elpress and the other companies, well, I think it will be fairly strong. But whether it will be this strong, it's really hard to tell. Yeah, we will come back to that. We'll see what happens. But in the neighborhood or slightly in the neighborhood, we should probably be, yes.

Okay, thank you. And then since you mentioned Eagle Press here, obviously we have had some announced tariffs here on copper prices. I know that the US exposure here is quite limited, but Eagle Press is 60-70% copper products. Do you see any impact here on demand and then on profitability?

Not really. I think that most of what Elpress is doing is quite sort of competitive. I think they've been doing very well and the US is a very small market to them. I think from my knowledge as well, some of the products were also accepted from the tariffs early on. I don't know whether that has changed here or whether that is about to change, but it's nothing that we have seen so far.

Yeah, yeah, okay, good. And then here, a final question here on Epoch. How should we think about seasonality going forward? Is it strong Q3, sorry, strong Q4, strong Q1, and then soft Q2, Q3, or...

yeah yeah that's that's good spotted there is a seasonality to both the poke and figure workers that is that is related to the to the after summer and and winter sort of that's those are the strong strong strong seasons and and slower in the in the beginning of the year or or yeah it's spring time spring to something kind of the opposite of nordic road safety right yes yeah okay thank you i'll get back in line

As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. There are no more phone questions at this time, so I hand the conference back to the speakers for written questions or any closing comments.

Thank you and from what I can see we have no written comments so I think we'll round off there. Thank you for listening in and posting yet another good quarter and it feels very satisfying to be doing that here just ahead of summer. So and Peter and I are available here if you would like to contact us individually. But otherwise, have a good summer, everyone, and speak to you soon as we get back from vacation. Thank you very much.