Lagercrantz Group AB (publ)

Welcome to Lagercrantz Group Q2 Report 202627. During the questions and answers session, participants are able to ask questions by dialing pound key 5 on their telephone keypad, written questions you can post in the chat. Now I will hand the conference over to President and CEO Jorgen Wigg and CFO Karen Meligard-Jarf. Please go ahead.

Yes, welcome and good morning everyone. Welcome to Lagerkrantz Interim Report, our Q2 we released here this morning. And together with me here is Karin as well, our CFO. We will try to go over the presentation as we normally do with a short introduction. And then after that, we will go right into the numbers and present the report. And then we will also have some highlights at the end and round off with Q&A and questions from you guys. So welcome everyone and let's get started. We start with page number two where we see the just to give you the newcomers a bit of an overview to the group. I mean Dagen Krauns is growing gradually but we tried to yeah and we as you can see we are a nordic group or northern european group which currently some 87 I think it adds up to now profit centers growing little by little every quarter and you can see that we are developing along the way we are have more and more companies in the UK lately we have also been growing in Central Europe in terms of the Netherlands and also in Poland a little bit here lately but and you can see where we have our needles over to the right there We have in the last year or so surpassed 10 billion in sales and currently at 11.6. So we're growing quite in a high pace and we are currently some 4,000 employees within the group. We are firm believers in the decentralized way of working. with the accountability of freedom and running each of these separate units and profit centers and try to keep them as autonomous as possible in the different areas and under their own brand name in their own location and addressing their specific customers and markets in each of the specific units. Acquisitions is of course a central part of being a serial acquirer and we are currently running at the 8 to 12 acquisitions per year or so and it's good to see that we posted some eight acquisitions here in the first six months which is a little bit higher than we're aiming for and a bit before target. We now are also celebrating here and did during the quarter as well, celebrating 25 years as a separate company on the Stocko Stock Exchange. We were part of the Bergman & Bieben Group up until August of 2001 and are currently now running on our 25th year or 26th year really as a separate company. We have changed the content of the group over many years now, going from more of value adding distribution and sort of import related businesses, selling to many of the multinational companies that are buying our components and selling them all over the world. But the customers have been used to be quite of the big ones that are more domestic sales. But with now we are aiming more for proprietary products that where they have their own products selling out in the world. And then we're changing the model from being more import related to be export related. And you can see where we have our footholds in other parts of the market, other parts of the world down to the right here. where we are both operating in North America, but also in China and in India and a couple of other places that you can see. So that's a bit of an overview in the group. We announced our figures here this morning and it's glad to see that we posted a really good growth for the quarter and that also translated into good growth in terms of earnings. So we kept our trend here. You can see the trend peaking upwards there and we're aiming for the 2 billion here and this was another quarter in that direction where we're aiming for that here. We started out some three and a half or so, two and a half, three years maybe ago with the two billion and we're aiming to be there within a year or two from where we are today. So another strong quarter and you can see that the trajectory and we've had many quarters now in a row where we have grown both profits and revenues over time. So it's another strong quarter I think we posted here today. And Karin, maybe you can elaborate on the numbers a bit here then. Yeah, first we should go over the business conditions. Yeah, that's right. The business conditions, well, we think that the trends that we've seen earlier on remain during and remain positive during Q2. It is a summer quarter and in July and August it was slower due to seasonality, but also a bit slower than it used to be. But it picked up again in September, which I think was good to see. We saw that the businesses exposed to electrification, infrastructure, security and defense, the things we've highlighted before, to continue to deliver particularly strong growth, while demand in the construction sector, which we have been waiting for to pick up, but it's still a bit slow and a bit sluggish here along the way within that sector. And of course, the geopolitical situation in the world is, of course, adding to the uncertainty. So we are sort of hesitant. I think in many areas we see customers being hesitant to where things are going. as things evolve in different parts of the world with the effect in freight prices, effect in raw material prices, but also effecting the willingness to invest among customers. But we've seen some strong growth in some areas, so it is picking up along the way here. As I highlighted, we saw a bit of a softening during the July and August, but it strengthened again towards the end of the period, September then or along the fall here. Gross margins remain stable but signs of cost inflation was also something that we saw. We saw that that was driven by high raw material prices and freight prices that we've seen. So we are working deliberately now with also compensating through price increases among customers in many of our companies. So it's a theme that we're running as we normally do but maybe more fiercely and intensely at the moment. You can also see down to the bottom here, we see that we are gradually becoming more and more international. You can see that from the net revenues by geographical market down to the right there. We are growing in Sweden as well, but as a percentage of the total group, we're growing faster in other markets. And especially one that is really growing faster is the United Kingdom or UK, currently at some 10%, but also with some additional... M&A been done there. I think that will pick up even further as we move along. I also think that you will see us more and more into Germany and the Netherlands along the way as we grow. We've also been keen on measuring the proprietary products part of things and we are aiming for the 85% which I have maybe on the slide later on. But we are currently at some 80%. I think it was 81% actually for the quarter. but on the roll in 12 months, it's 80%. So that's also something that we are aiming for as a strategic aim because we see better growth and better margins within proprietary products than in the rest of the categories. So that's a bit around the business conditions. And Karin, then it's your turn.

Yes. Thank you, Juergen. And as Juergen mentioned earlier, we deliver another really strong quarter. As you can see here, our revenue grew by 22% with an organic growth accelerating to 12% compared to last quarter when we ended up with 6%. Acquisitions contributed with 9% and currency effects only added up to 1%. Our EBITDA increased by 21% to 530% and that resulted in an EBITDA margin of 17.8%. Our most important earnings profit after financial items rose by 24% to 425 millions. And cash flow in the quarter was somewhat weaker than we anticipated, but remained at the healthy level and net profit for the quarter amounted to 340. If we sum up the first six months, then our revenue increased by 20%. And then in the first six months, the acquisition contributed with 11%, while the organic growth amounted to 9%. And we had no material impact from currency effect. EBITDA increased by 18% to 1 billion 29 millions compared to 872 last year. and that resulted in an EBITDA margin of 17.4%. Our EBT profits of the financial items increased by 21% to 830 and the operating cash flow ended up at 549 millions. Return on equity improved to 31% and the equity ratio strengthened to 32. Our internal performance measure profit over working capital is in line with previous year, the same quarter and remained at 72%. And our earnings per share increased to 6.45 kronor per share. And then, just finally, during the first six months, we completed eight acquisitions with a combined annual sales of approximately 660 million SEK. And Jürgen will describe more about these later on, but these acquisitions were completed across several divisions and countries. And that strengthens our platform for continued growth.