Momentum Group AB (publ)

Welcome to the presentation of the Momentum Group's interim report for 2024. I'm Of Lilljus, CEO for Momentum Group, and I'm here with my colleague, Niklas Enmark, Vice President and CFO, and we will guide you through our report. Our agenda today is to give you some information about the highlights from Q2 and the development during the quarter, as well as financial information. We will round off with about us going forward, as well as the acquisitions done in the quarter, now to the highlights in our report. The business situation in our main markets in the Nordic region was generally stable during the second quarter of the year. The market continued to be characterized by economic uncertainty, with cautious customers and somewhat lower level of activity in some customer segments. The Group's primary focus, after market products to the Swedish industry, continued to generate stable sales in general, while sales of components were weaker. The Group posted a positive sales trend, which stable demand for the company's products and services in most customer segments during the quarter. A low level of activity in certain products and among certain export-oriented customers, particularly in pulp and paper, continues to characterize demand. This has been offset, however, by increased sales to other customer segments, such as automotive and to segments that are partly new to the Group, such as power generation and defense-related industries. Markets outside Sweden, particularly Denmark, were characterized by weak demand during the quarter. This was partly offset in Denmark by strong performance for customers in the pharmaceutical industry. The Group's revenue increased by a total of 41% -on-year, where acquired businesses contributed in particular to this growth compared to last year, which contained one less trading day. EBITDA increased by 35% compared with the same quarter last year. Acquired businesses contributed to earnings growth during the quarter, while comparable companies successfully managed to match a somewhat lower organic growth rate with corresponding low-cost increases to post-stable earnings. In the prevailing market, we continue to deliver strong cash flow and healthy profit growth per share. This once again demonstrates the strength of our decentralized business model. Now I will hand over to Niklas, who will guide you through our Q2 report.

Thank you Ulf. During the second quarter, revenue increased by 41% to 773 million SEK. Growth in comparable units was 1% and contribution from acquisitions amounted to 208 million SEK. The quarter included one trading day more than the previous year. As Ulf mentioned, we saw a stable demand for products and services across most customer segments during the quarter. A low level of activity in certain product segments and among certain export-oriented customers, particularly in pulp and paper, continues to affect demand. This has been offset, however, by increased sales to other customer segments, such as automotive industry, and to segments that are partly new to the group, such as power generation and defense-related industries. Markets outside of Sweden, particularly Denmark, were characterized by weak demand during the quarter. This was partly offset in Denmark by strong performance for customers in the pharmaceutical industry. Demand in the infrastructure business area was stronger in the second quarter following seasonally weaker demand in the first quarter. Some customers are also slightly more cautious, which is seen especially in companies with a higher portion of project and OEM-related sales. The aftermarket business, which accounts for approximately 90% of group revenue, has shown greater resilience through the economic cycle. Overall, the companies in the group displayed good delivery capacity during the quarter and purchasing prices and costs increased at a moderate rate. During the quarter, the acquisitions of KMK Instrument, Hydian, Veo Service, Sikama, ZRS testing systems and Minrox were completed and consolidated for parts of the period. Looking at the earnings in the group during the quarter, our EBITDA increased by 35% to 88 million SEK, corresponding to an EBITDA margin of 11.4%. It was acquired businesses that contributed to earnings growth during the quarter, while comparable companies successfully managed to match a somewhat lower organic growth rate with corresponding lower cost increases in order to post stable earnings. Operating profit rose by 31% to 77 million SEK, corresponding to an operating margin of 10%. Included in operating profit are the higher charges for amortization of intangible non-current assets as well as depreciation of -of-use assets and tangible non-current assets, both impacted by acquisitions completed. Acquisition-related expenses had an impact of 2 million SEK as costs in the quarter. Profit of the financial items totalled 70 million SEK, impacted by higher financial expenses due to higher borrowing in connection with acquisitions and higher interest expenses. Earnings per share increased by 17% to 1.05 SEK for the quarter. Accumulated for the -to-date, our six-month period, our revenue increased by 36% to more than 1.4 billion SEK, where growth in comparable units was 3% and acquisitions added an additional 352 million SEK to revenue. The number of trading days were the same as last year. Our EBITDA increased by 30% to 163 million SEK, corresponding to an EBITDA margin of 11.4%, whereas operating profit rose by 25% to 142 million, corresponding to an operating margin of 9.9%. Acquisition-related expenses had an impact of 4 million in the period. Profit of the financial items totalled 125 million SEK, and earnings per share increased to 1.9 SEK per share for the period. And now we return to our two business areas, industry and infrastructure. We start with industry, and there we have our two business units, power transmission and specialist. Within power transmission, development of sales and earnings, which consists of the company Momentum Industrial, were positive during the quarter. We are continuing to see volume growth, particularly in the automotive segment, from several customers. Also sales to defence-related industries, although still relatively small, are increasing its share of sales. At the same time, the weaker performance of pulp and paper customers are continuing, which we have commented on these last quarters. Also during the quarter, sales to metal and mining customers were somewhat weaker, but this is related to a number of larger projects deliveries in the comparative period that were not repeated this quarter. The companies in the specialist business unit displayed a stable sales and earnings level for the comparable units during the quarter. In addition, acquired businesses contributed with revenue of 25 million SEK, which also includes the acquisition of Hydeian Oy, which was completed during the quarter. The Swedish businesses noted generally strong demand, while demand was weaker for the Danish businesses that also are relatively more focused on project sales and sales to OEMs. Revenue rose by 8% in total to SEK 446 million compared with the same quarter of last year. Revenue for comparable units measured in local currency and adjusted for the number of trading days were unchanged compared to the previous year. EBITDA amounted to 61 million SEK, corresponding to an EBITDA margin of 13.7%. The business areas profitability measured as return on working capital amounted to 69%. And we now look at our infrastructure business area and start with flow technology. Companies within flow technology generally performed well during the quarter with favorable demand in Sweden. It was positive to note that demand was stronger in the second quarter following the seasonally weaker demand in the first quarter. Demand in Denmark and Finland was somewhat weaker. This is affecting the largest company in the business unit, Eskalon, and is mostly related to project related business, whereas the aftermarket business is performing better. Also in Denmark, the toll market is still affected by the very strong demand within their pharmaceutical sector, which mitigates the lack of demand from other sectors. It is important to keep in mind that the business area is highly impacted by the fact that a lot of the businesses are inorganic compared to last year, and especially so for the Flowtech business unit. Acquired businesses contributed 144 million SEK to revenue for the quarter, which also includes the acquisitions of Sikama and Mindox that were completed during the quarter. Within technical solutions, revenue increased from comparable units coupled with stable earnings during the second quarter. For the workshops, capacity utilization in the major workshops in Köping and Örebro was favorable, with revenue and earnings growth. Revenue declined somewhat for other workshops, but earnings were stable thanks to the initiatives implemented in the operations. Demand for the companies specializing in measurement, technology and control also remained positive during the quarter. Also for this business unit, the contribution from acquisitions have increased, adding SEK 40 million to revenue for the quarter, including the acquisitions of Comco Instrument, VeoService and ZR Assist testing systems that were completed during the quarter. In total, revenue rose by 141% to 332 million SEK compared with the same quarter of last year. Revenue for comparable units measured in local currency and adjusted for the number of trading days increased by 4%. EBITDA increased by 150% to 35 million SEK, increasing the EBITDA margin to 10.5%. The business area's profitability measured as the return on working capital amounted to 58%. And to round off, I would like to highlight some key financial metrics for the group. For the rolling 12-month period, the group's profitability measured as the return on working capital amounted to 59%. And for the same period, the return on equity was 29%. Looking at the cash flow for the first six months, the cash flow from operations before changes in working capital increased by 30 million to 153 million SEK. In that, it included a higher level of tax payments of 15 million compared to last year. The increase in working capital amounted to 20 million SEK during the period, resulting in a cash flow from operating activities of 133 million SEK, an increase of 21 million SEK during the reporting period compared to the previous reporting period. Included in this are positive effects from IFRS 16 of in total 39 million compared to 31 million for the previous year. Cash flow from investing activities for reporting period amounted to 108 million. And cash flow includes acquisitions of 90 million, settlements of deferred payments regarding acquisitions of 12 million, and net investments in non-current assets of 6 million SEK. Cash flow from financing activities was, besides acquisitions, affected by the corresponding negative effect from IFRS 16, as mentioned above, but of course also the dividend paid of 56 million during the quarter. Turning to the financial position, the group's net loan liability amounted to 381 million compared to 326 million at the beginning of the year. The total cash and cash equivalents, including unutilized approved credit facilities, amounted to 731 million SEK at the end of the quarter, which then includes the increase in the group's credit facility of 100 million SEK to 300 million SEK that took place in April. And now I'd like to hand over to Ulf, who will give you some final words from the last part of the presentation. Thank you,

Niklas. Now I'll give you some input about our organization and acquisitions. We have introduced a group structure for continued growth, profitability and development. The structure strengthens the conditions for organic and acquired growth in each business area by making better use of the breadth and expertise that has been built up in the group since the listing. Since the spin-off in March 2022, we have increased our revenue with more than 1 billion SEK and completed 22 acquisitions and 7 so far this year and welcomed more than 300 experienced colleagues. In order to create the best conditions for continued growth and to more clearly reflect our strategic focus, we have made an adjustment of the group structure based on the market sectors in which our companies operate. To do this, we want to utilize the expertise accumulated within the group, especially on the acquisition side and encourage knowledge sharing between companies with similar market conditions. Acquisitions are part of our DNA and the six acquisitions during the quarter proves that. The acquisitions of KMK Instrument, Hygian, WH Service, Sikama, ZRS Testing Systems and Minrocks were completed. These companies clearly represent a focus on establishing a presence in several interesting customer segments and our shared goals, a strong business culture, being a leader in our areas, a focus on profitability and a desire to improve. With seven acquisitions conducted so far this year, we have completed 22 acquisitions since our IPO just over two years ago and that have contributed to the group's excellent performance in terms of revenue and EBITDA growth. This also means that we have succeeded in creating a healthy profit growth per share for shareholders, something that we also noted during the second quarter. Continued healthy cash flow during the reporting period, coupled with our financial position, is enabling us to expand and has provided us with excellent prerequisites to maintain a favorable acquisition rate. In summary, we're continuing our established approach of developing and acquiring successful sustainable companies in the Nordic region. Thank you for your time and interest listening to our Q2 presentation, which are available with the report on our website. If you have any question or specific request, do not hesitate to contact us through our eR mail or by phone. Thank you very much once again and have a nice summer.