Lagercrantz Group AB (publ)

Good morning, everyone. Welcome to Lagerkrantz year end report call. We, as you know, have our ending of our financial year end of March every year. So we have just concluded our numbers and released them here this morning. So welcome, everyone. Together with me here, I have Karin with us as well. our CFO and we will try to do this together. We usually end up having a 45 minute call or so and we open up for questions at the end if you don't have any along the way. So with that, I think we can get started. Yes, I will start with a short introduction and then we'll get right into the numbers and then we'll look a little bit on where we are with the group and how we build the group for the future. and some future priorities as we move forward. And then we open up for questions. So let's start with a little bit of an overview. I think this slide and this perspective you've seen many times. It's an overview of the group where we have our five divisions and how we rephrase ourselves. We are a tech group with a leading position in exams in niches. We have currently some 85 companies growing with some 10 to 12 new companies every year. uh we have during the fiscal years uh surpassed uh 10 billion in in terms of sales or are now approaching 11 here um with 10.6 or so and then moving 12 months i think we have and we are currently some 3 600 employees within the group You can see over to the right where we have our needles, where we are located. And it's a lot in the Nordics and Northern Europe, but we also have foot tolls in the rest part of the world, as you can see all the way to the right there with both in North America and also in Asia. So we are a Nordic based group, but moving and expanding in other markets. And we have definitely put our feet on the ground in the UK in the last few years. but are also now looking more into countries like the Netherlands and Germany and other sort of mid-Europe markets, or still Northern, but still. Acquisitions is a central part of our business model. And as I said, we are closing some 8 to 12 deals per year. We have been on the Stockholm Stock Exchange since 2001. And before that, we were part of the Bergman & Beving Group. I was listed already in 1976, so we've been on the stock exchange now for 50 years and then our own name in 25 years. So that's a bit of an overview. We posted another very strong and solid quarter. So we have the next one. Yeah, there we are. with really some good developments during the quarter, even though we've seen quite a volatile market and a lot of uncertainty going on in the world with EU political situations. and what is happening in different parts of the world. And that is, of course, in the long run affecting us as well. But we have seen very limited effects during this quarter. And hopefully we don't see any big things going forward either. But we see some volatility in the markets when we talk about raw material prices and things like that. We posted a very solid quarter. and continued our trajectory towards the 2 billion in terms of profits as you can see over to the right there. So another strong solid quarter. We commented in our report on the business conditions. So we move to the next one. We see some volatility and some uncertainty in different markets, but all in all, we still feel that we have a very diversified and strong portfolio of companies working in our niches. So on an overall level, we felt that the market situation continued to be stable also in the fourth quarter. We see a strong development and strong growth in electrification, infrastructure, security and defense related businesses, while we see a slower demand still in the construction sector. Everyone has been expecting a an uptick on an improvement in that sector and we've seen a little bit of that but very very limited so far so we think that the construction sector remains weak uh even though we see some some improvements in some areas uh the order intake all in all was then slightly higher than than the invoice sales during the quarter and increased organically by some five percent adjusted for exchange rate fluctuations with negatively affected the order intake by by 3%. And you can see down here that we have continued our development over the years, we see that we are becoming in the right one, you see that we are becoming more and more international. The Swedish part is growing, but still as a percentage of the total is going down a little bit. And we see that other markets are picking up, especially the UK. Then you can see that it's now the third biggest market within Logitrans with 9%, similar to the Norwegian one, which is also 9%. We also saw during our key strategic focus has also been that we should increase the proprietary product share of our sales. And now that reached 80%. I'll come back to that strategic aim of ours later on. So stable market and good market conditions along the way, as we've seen. And here, Cori, maybe you can comment on the actual numbers here.

Yes, absolutely. And as you already mentioned, Jörgen, we are delivering another very strong quarter. The revenues increased by 13% and acquisitions was contributing with 12%, while the currency had a negative impact of 4%. And on the other hand, our organic growth improved and reached 6% in the quarter. EBITDA increased by 20% and improved steadily over the course of the year quarter by quarter and the EBITDA margin expanded to 19% compared with 17.8 last year. Cash flow from operations was 20% higher than last year and ended up at 410 million Swedish kronor compared to 342 last year. The profits of the financial items and profit of the tax both increased with 19% to 438 and 368 million Swedish kronor. And when we conclude for the full year, we can see that we completed another very successful performance with the net revenue increasing by 13%. And we are now ending the full year with 10.6 billion Swedish kronor. Acquisitions contributed with 13% and currency had a negative impact of three and the organic growth amounted to 3% for the full year. EBITDA improved with 17% and the EBITDA margin is still on a very high and a good level at 18.1% compared to 17.5 last year. Cash flow from operations remained strong for the full year, increasing by 14% compared with the prior year and ending up over 1.5 billions. Profits of the financial items increased with 17% to 1.5 billions and profits of the tax increased with 18% to 1.2. Earnings per share share increased by 18% and ended up with 5.81 SEK per share, while the return on equity amounted to 29% and equity ratio at 35%. Profit over working capital improved by 2% and units and ended up at 81%. And for the full financial year, we completed eight acquisitions that corresponds to roughly 11% of the net sales for the group for the previous years. And also during and we will come back to that one. And during April this year, we completed four more acquisitions with a total approximately revenue of 300 millions. And then also the board proposes an increase of the dividend with 14% to 2.5 Swedish kronor per share compared to 2020 last year. And then on a very, very high level, just, and we will come back to this one, Jorgen will in short, by the division. In the fourth quarter, four out of five divisions reported solid growth and with a particularly strong performance in the international division both organically and through acquisitions and then from an operating profit perspective three divisions electrified control and international delivered strong EBITDA growth as well as margin improvements but we would also like to highlight niche product that this still remains on a very high level on 22.5 percentage and then before I I think that we should highlight the Electrify division that really increased their EBITDA over close to 40% in the quarter compared to last year and has actually, the last three quarters, they have had an EBITDA margin over 21%.

Yes, and as you can see here, all in all, we have five very strong divisions with really good margins and good performance over the years. We are very happy with the four divisions. TechSec is lagging behind a little bit, but improving a lot here in the quarter as well. So we're very happy with where we are with our five divisions at the moment. So, and just to have a few comments by division then, I mean, electrify posted some 8% revenue growth and organically it was 9%. So really strong organic growth in electrified division driven by the increased demand that we see within the electrification area, but also within the infrastructure, which is also an important part of the division. The EBITDA increased by 38%, so really strong, and the EBITDA margin was now at 21.8%. So they have established themselves about 20% now, some three consecutive quarters or so within this division. with good growth and improved margins. And we saw that especially within the companies like EL Capsule and posted really good year MOS system, which we acquired a little bit more than a year ago, also posted a really strong quarter and also Nordic Road Safety or NRS ELFAC and ELPRESS. Big good companies, all of them, and they're performing really well at the moment. So that was a couple of comments on the electrify. We move on to the control division where revenues were up 9% and of which acquisitions stood for 10% organically 3% and then they have some headwinds from the currency developments of minus 4%. All in all, 9%. EBITDA grew by 15% to 68 million. And the EBITDA margin was at 18.9, so an upper percentage point from last year. Here we see some strong developments within the companies that are related to the defense sector, and especially the MCP cases. But also Letang in Norway had a really strong performance during the year and also in the quarter. Stegbergs and Radenova also showed good improvements in earnings during the period. So a really strong quarter there as well. But we also have some smaller business units, especially in Norway and Denmark, that are still struggling, which we have commented on earlier. And they're still struggling with the construction sector, not really coming back as we had expected. So we are taking even more measures in these companies as we move along now. Within the tech sec divisions, revenues were up 21% and 16% came from acquisitions and organically up 10%, which is a really good number for tech sec. FX was against a little bit, so minus five from FX. EBITDA amounted to 96 million as opposed to 83 last year. So a good growth there as well. And the EBITDA margin was up, was at 14.4%, a little bit down from 15.1 last year. The division's largest company, PCP, in Denmark and Northern Europe, and the more construction-related businesses, Lauréa, Dore and Joynery, Principal Dorsets and CW Lundberg, continue to be affected by the challenging market that is the construction-related markets. But the company iHolland that we acquired, that is a new area for us with a medtech business that we acquired in November had a good start in the division. So that was also a strong factor within TechSec, the development within the TechSec division. So within niche products, the revenues grow by 1% and also 10% actually was positive coming from acquisitions, but organically was down 4% and FX was minus five. So the EBITDA was up only 3% to 146 million and EBITDA margin still at a very good level of 22.5. So strong EBITDA margin development, but some headwinds when it comes to the market development. And especially that is related to what we have seen with currencies, with raw material prices, and also with the exposure that some of these businesses have toward the US, where we've seen the trade tariffs and stuff now coming into play a little bit along the way. So ASEP, Tormek and Westmatic had a weak development connected to what's happening in the world and geopolitical uncertainty going on. But the recently acquired Swedish company, Siprite and Enskede Hydral had a good start in the group or within the division as well. And last but not least is the international division then had a good development with revenues growing 31%, where 25% came through acquisitions and 12% organically. And FX was minus 6% within this division. So EBITDA was up 45%, really strong development and EBITDA margin on 19.4, a really strong development within the international divisions. We felt that the market here was overall on a stable level despite the negative currency effects. So a strong quarter with good growth and improved margins. Especially the marine businesses within Libra in Norway and also the DPCs in the UK continue to show strong performance. And here we also commented on that we felt that the seasonality that we have seen within the acquisitions we made starting from 1st of July last year with the poke and frequent workers with the road and winter winter treatment yeah with salt spreaders and things like that they have a low season here now in the in the in the coming quarters so that that and we didn't have we didn't have that last year so that would probably affect the numbers going forward a little bit so that is the comment that we have down here below um so we have a usually a weaker spring and an early summer period uh that we didn't have an impact of last year that we will have this year so that will probably affect the quarter going forward here So a bit of a heads up there. And with that said, I think we've gone on with most of the numbers. Once a year, we also release the numbers in terms of return on working capital or profitable working capital per division. It's good to see. And we release these numbers not on the quarterly base, but on an annual base. And you can see how that development have been over the years here. good development in most divisions so and at the very good levels that we're having the whole group down at above 80 which is really good to see and we see also that that the divisions are are performing very well all in all here so uh that is that is a very satisfactory to have it like that so and we move on we also have uh Once a year we also disclose the net sales per segment. This doesn't make sense to have every quarter, we think, to add all these numbers up, but we do it once a year. And here you can see the developments over the years, not the huge changes really. We see that we have a very broad portfolio of companies in a wide set of sectors. make the whole portfolio very diversified. A couple of things then is still that we see that the power and electricity distribution and the infrastructure is growing as a percentage due to organic growth but also some acquisitions there. The mass system acquisitions came in and also the Tico Flex acquisition came in within the infrastructure and that is adding to that exposure which we think is very positive for us. you can also see that we are now highlighting the meditech medtech business that is currently some three percent we acquired we had some smaller businesses within that sector before but we now have a bigger one which is the whole that we acquired here in november that has been only part of the last year but the meditech will probably be bigger as we go move forward here as we are moving into that sector somewhat and so so some some developments here as well uh you can also see all in all the the building of construction uh exposure and you can see that it's especially the part that is the residential one is is still at uh is is where we where we see some some uh headwinds in the market and that that you can see is is very small here on all north for for us and and it's actually reclined as well as part of the group so uh I think we have a good balance and a very diversified portfolio of companies within the group. Moving forward, I think a couple of highlights here. I think we are building our group with delivering on the 15% target every year over a business cycle where we feel that one third of that should come organically and two thirds from M&A and that corresponds currently to some eight to 12 acquisitions per year. And since 1st of April last year, we've actually made 12 acquisitions here. We posted eight during the fiscal year and then we posted another four here in April. So we are at the 12 acquisitions per year, adding some 10-12% of the group along the way and then the rest should come organically. It's very satisfying to see that organic growth has picked up here in the last quarter. We have been struggling with 1-2-3 percentage points for a couple of years and that was very satisfying to see the 6% here in the last quarter. The return on equity then should be at 25%. And we are currently at some 29% or so as we will see. So we are should do this in a very profitable way. So we continue with with a very established and well functioning business idea around what we're doing. And I think we are shown that so many times now that the model is very strong. And it works. So a couple of other highlights. Yeah, what we have been occupied in the last couple of years is then the scaling logic runs. And I think to be able to deliver the 15 or at least 15% EBT growth annually. And I think it is about building the organization and culture is about finding and delivering on the M&A opportunities and then to have the financing and get the flywheel to working in order to acquire more businesses. And that has been working very well for us. We have been thinking quite a lot about this and how to develop that. And therefore we also did the reorganization some five years that I think is now part of why we're doing a payback. Because we have now established our five divisions in these sectors and they're up and running now in a very good way, all five of them. And that is adding to our growth and profitability over the years. And we work in a very decentralized way. So it's good to see that this is functioning now on a divisional and company level. And you can see that the divisions are somewhat similar. Control is slightly smaller than the others, but picking up along the way as well. So growing and having healthy margins there as well. So building positions in sustainable segments with underlying structural growth is what we're aiming for and that we have proven here in the last couple of years that we are able to do as well with some really good M&A pace over some time now. And that also made us during the year then update our financial targets The 15% we reiterated and that we should reach the 2 billion within five years, we also reiterated, but we then set the EBITDA target of 20% in two to three years. And it's very satisfying to see that we now had it at 19% for a quarter. We will see whether we'll be at that level going forward every quarter, but because we have some seasonalities and stuff in there, but I think we are... really pushing to get to the 20% within two to three years. We communicated this during the fiscal year, so that was in, was it November or somewhere? Yeah, no, it was the Q3 report we communicated this, so it was in February, right? And we also then moved our profit over working capital from previously 45% up to 60%. And that is the target for existing and acquired businesses or when we're acquiring businesses. And we reiterated the return on equity target of 25%. So we are sort of stretching ourselves a little bit here by also then adding the buying and building niche businesses as a tagline a little bit on what we are trying to do. We're trying to buy really good companies and making them great. And then so the buying and building is a key thing that we're really working with in our companies, even to a larger extent than before. uh and one strategic aim is then also to have the proprietary products up to 85 and it's good to see that we communicated that that goal when we had surpassed the 75 you can see that it's been going up since then the percentage points or two every year and we are currently at 80 and we will we will hope that we will get that defy maybe in two three years time or so so it's uh we're basically on that trajectory as well Acquisitions then. Let's talk a little bit about the acquisition. As we are closing the year, we have now concluded some 12 acquisitions since 1st of April 2025 that added 1.4 billion in sales. And you can see that that's well above the 10% that we're aiming for. It's more like 14-15% of the group. So it's a really good level. And we have made some and this is part of our DNA. This is where we would like to be finding these nice niche oriented companies and building a group around that. We can look a little bit about the more recent acquisitions. So we move to the next one, which is the whole and I think is worth highlighting. We have as when we're looking at different acquisitions, we have we come across one or two bigger ones along the way. And this was one of them. This is slightly bigger than the average of the group. So it's 27 million pounds in sales and an EBITDA of 4 million. So an EBITDA level of 14, 15%, as you can see down there. And we are aiming then to improve this a little bit by both working on the sort of revenue side, but also then working on the cost and and and yeah making sure that we are charging the right thing for our products so this will this will be a major and important add-on to the tech sec division and it will also be a good new line of businesses that we will put in there also from a group perspective with adding the meditech sort of area into the tech sec so uh we are um yeah that was one you can see what uh during the quarter we also then acquired uh michael smith switch gear which is another uk company and it's working operating in a niche uh with with uh around electrification with different types of sustainable switch gears, low voltage switch gears and doing different type of electrical distribution assemblies headquartered in Leicester and we acquired 100% of this in April. and you can see down there to the right there is a very healthy company as well with some good margins there as well so adding to the to the electrified division and it's also the first acquisition the electrified division is doing in the uk so it's also a bit of a geographical expansion for that division During the quarter or here in April, we also acquired Nevex TopSafe, a company that is similar to the ProfSafe that we already have within the group. Really strong market position in Sweden and that's within safe storage with different types of safe storage solutions. Some 100 million in sales Swedish and the 15% EBITDA margin doing it very well in their niche. And we acquired 100% of this in April into the niche products division. The Highcon is another one we did here in April. which is then a supplier of high performance hydraulic tools and power packs for cutting, drilling and pumping in harsh environments. These tools are hydraulic, which is important, and the issue there where we find some really strong special applications that need these types of tools. And here you can see a strong development as well. You can see that this is in Danish. So it's around 90 or so Swedish million and a beta of 20% result. Good acquisition and a good add-on to the control division from April. So that was the presentation we planned to have here. It's good to close another really strong year. I think we had a strong performance in basically every aspect with some 6% organic growth with a new all-time high in tip of EBITDA margin and an EBITDA of 1.9 billion. So you can see how the figures are developing over time here. and then ebt about 1.5 billion and and the 17 percent ebt growth of the year and the return on equity is a very strong 29 percent and an earnings per share at an all-time high and an earnings per per share growth of 18 percent during the year you can see how that developed year by year here and then a and also an increase in the dividend per share from 220 to 220 So we're also planning for some additional M&A going forward and having a strong but and a growth in dividend but not exceeding that to an extent. So to build a strong balance sheet going forward as well. So with that I think we will round off and open up for questions.