Ratos AB (publ)

Good morning and welcome to this presentation covering the fourth quarter and the full year of 2024 in RATOS. Our CFO Jonas Ågrup is unfortunately ill today. So with me in the studio I have as always our CEO Jonas Viström and also our Finance Director Mattias Junde and they will guide us through the results shortly. In the end of the presentation, you will be able to raise your questions in our Q&A session. And this webcast is also recorded so you will find it at ratos.com afterwards. Without further ado, I'll hand over to you Jonas Viström.

Thank you, Josefin and thank you everyone for attending this important morning where we will describe what I think is the best quarter and best year since I started in RATOS. So let's take a look on the fourth quarter. It was an important and it was a strong quarter. But I cannot enough underline with major one-offs because I saw in the first headlines this morning that one wasn't really aware of that if we back one year and look at Q4 2023, we had a positive one-off of 1 billion 656 million related to ABLE and we reversed a downwriting that was suggested by our auditors during the period when ABLE had tough times. And last year they told us we have to reverse that and go back to the goodwill we have from the beginning. ABLE has developed extremely well also in this year. So they have a record year this year and they have a record year the year before. When it comes to 24 Q4, we had negative one-offs of 256 million, more than 200 million of them were related to Plantagen and I will get back to that and also the NYTIC group and PFS. We had a merger of NYTIC and SEMCON into the NYTIC group. I will come back to that as well. And we merged HENT and SSC group to SENTJ. And Plantagen's restructuring is in line with plan and we believe and we hope that we will be able tomorrow to disclose the financial effects and numbers on this reconstruction. I think this is also a very important process that we had during the autumn 2024 and was finalized in Q4. Also, we took up our holding from 72 to 97 percent by acquiring Co-Group and shares. Precise infra has developed and this is not an exaggeration, extremely well since we acquired the company. If we look at the earnings, cash flows, etc. Why was this quarter strong? Well, just a bit increased with 23 percent. Our margin was better than last year. If we look at our core business, as you know, we have communicated that consumers should not be a part of future ratos. And again, Plantagen was very much affected because of the reconstruction. Stores were closed down and we need to get rid of the N inventory, to put it carefully, very low margins. So if we look at the core business, then EBITDA is just EBITDA 610 million and our EBITDA margin is 9 percent instead of 5.2. So that can be a hint of the future here. I'm happy to say, because the market has been still cautious. We don't have had the land as we used to have this year and it goes, I think, for everyone. We had a continued strong development in the industrial services and not the least the technical consultant companies, Nitec and Semcon, who merged, where we also saw organic growth in the technical consultants. Very strong reporter for construction, EBITDA up 40 percent in the tough market. Netsig sales declined, as I mentioned before, we have had a weak market, organic growth is actually minus five. And we did some acquisitions, one in Lidl and three in HL display during the year was that. Cash flow from operating activities continue to be very strong. We have a cash conversion of 350 percent. Rose and Royk improved a little bit compared to last year. These Rose and Royks are numbers we are looking very close into. If we take a look at a full year, all segments, except consumer, increased their EBITDA in spite of the market I talked about. So EBITDA increased four percent and the margin was seven point two. Again, if we look at the core business, actually, we have doubled the growth on EBITDA without a consumer and the EBITDA margin is eight point five Again, negative sales numbers, structural effect of one percent. I think except for the consumer market, the construction services market is also a very tough market. I would put them on second place after consumer in terms of bad markets. But still, our companies had a good order intake and also the order backlog grow. So they're very well fitted for going forward. And again, cash flow from operating activities for the year corresponds to a cash conversion of 148 percent. So also the year number are very good. And the board proposes to increase the dividend to one point three five. Now let's look a little bit into the business areas. I've said a lot here. But if you look at the net sales graph, you could see that we are not in a very good market. I mentioned that the technical consulting companies are actually growing and can I say do very good results. A very market in industry is the zero market. And we have also taken cost efficiency measures in TFS and you will see more of that. We're not happy with the profitability there. Adjusted EBITDA in spite of the weak market I talked about has grown with 8% and adjusted EBITDA in industrial services was strong at 21%. Adjusted EBITDA margin almost 9% a little bit down versus last year. But I'm actually satisfied what industry has done in total because of the or in spite of the weak market. So here you have closer numbers about the different segments. I think I've said the most here but we had in product solution and net sales growth. EBITDA again up 21% in EBITDA. If we look at product solutions, we were 7 million behind last year. I can tell you that those 7 million is a one off in DIAB. And that sounds strange but strange but we don't take one time costs and adjust for them if they don't reach 25 million. So it was a flat EBITDA quarter on an operational level. If we go into construction, the net sales decreased a little bit here also with 3% organic for we had a little bit lower sales in in the quarter. And that is basically the I mean, I've said that before that when it comes to sales, we should look on last 12 months because it's very much about project facing. For the whole business area, EBITDA grow 30% in this market. And Sentia, which I talked about earlier, they had a very strong Q4. EBITDA margin .5% for construction services. I'm extremely satisfied with that. And again, order intake up and not a little not a little bit. And order backlog amounts to 29 billion now and that is excluding Able who has a very, very strong order book. If we look at the segments, construction is actually down a little bit in sales, but EBITDA is growing with 40% and a profit margin or EBITDA margin of 5.9%. Order intake as you can see, stronger than last year order backlog still also higher. In critical infrastructure, Precis infra and Able has performed very well. Xbin group is not performing well, but they are performing much better than one year ago. Sales up 8% EBITDA in the critical infrastructure up 23% and the margin is 19% compared to 16.4. We had a temporary low order intake in this quarter, but the order backlog is stronger than one year ago. And then we come to consumer I think I've said the most but net sales decreased, we have closed a number of stores. But also the market has affected the sales. Adjusted EBITDA down because of to take the inventory down when when the shops have been closed. So that has affected the EBITDA and EBITDA margin. And adjusted EBITDA margin, minus 22, we had minus 15 one year ago. I also want to mention actually that KVD, they are also working in a very tough market. And if you look for a full year, they're actually are showing a little bit better result and better EBITDA margin. And I think that is strong given the market they are in. So with that, I will leave over to Mattias, who will take you through the financials. Please,

Mattias.

Yes,

and that says in the quarter, we're down 3%. Organic growth was also down about 5%. And this is mainly due to the consumer business area. The full year net sales was 32 billion. And that is 5% down from last year. Adjusted EBITDA was up 23% in the quarter. And both construction services and industry had very positive development compared to last year. If you look at adjusted EBITDA full year, we have about 2.3 billion. And that is up 4% compared to last year. If we go to the items affecting comparability, we have some large items in the quarter, a total of 256 million. And this is mainly due to reconstruction implantation, which is a bit over 200 million. If we go to the cash flow, we had a strong cash flow in the quarter. It was 1.4 billion. And this is mainly due to the change in networking capital in the business area construction and services. Cash conversion was amounted to 350% in the quarter. If you look on cash flow from operating activities full year, this was 3.4 billion. This was down a bit compared to last year, but still a strong cash conversion of 148%. If you go to networking capital, this has continued to decrease for each quarter. And at the end of the year, it was negative 0.5%. I would say that this is abnormal. We had also negative last year in Q4. And it's due to a lot of this will not continue to be negative, I would say in 2025. Main items was accounts receivable, which was lower, but also we have a higher net of other liabilities and receivables. And this is mainly due to less advanced payments to suppliers, and also effects of the reconstruction implantation. If we look on the bridges, we can start with the net sales. As I said, the total net sales were down 3%. We had an acquired growth of 2%, which is primarily related to add on acquisition in industry. We had a negative organic growth in the quarter of 5%. That's mainly due to volume, almost everything. And all business areas had negative organic sales growth. If you look on the effects effects, they were very small in the quarter and only amounted to 0.3%. Other is mainly due to Xbin implantation. If you go on to the beta bridge, we were up 23% in the quarter and acquired beta growth was about 4% and related to industry business area. We had an organic decline of 38 million. And that's mainly due to the consumer business. But it's also by both construction and services and industry which were had organic EBITDA growth during the quarter. FX effects was quite small, it was about 3% and mainly due to NOC in the negative results in the implantation. Other is mainly due to the Xbin correction last year, the reporting errors that we had that time. And if you go down, go to over to the leverage and everything and the financial statement, it was 1.3 times in the quarter, which is a bit up same quarters last year. If adjust for the items affecting comparability, we had leverage of 1.2 times. Net depth increased during the quarter mainly due to the acquisition of the shares in precision in front of minority shares. But it was offset by a strong cash flow. So the net increases was only about 60 million in the quarter. Compared to last year, we had a net that increased with about 95 million. And as you said, both Rose and Roik had slightly increased compared to last year. If you look a little on the financial targets, we see that the board has proposed a dividend of 1.35 sec. And that is 57% of the little bit higher than the normal payout ratio. But it's mainly due to that we have a very strong cash flow during 2024. And with that, I leave over to you Jonas for the final remarks.

Thank you, Mattias. Thank you. I think the free cash flow per

share were like 641 or 641. Yeah, for the full year. Yeah. Free cash flow.

Very good. So the final remarks, again, merger of the Nitecon, Semcon to Nitec Group, I think was really an important thing that happened in Q4. We have already seen synergies and I'm sure that we will see a lot of synergies in the first half year. They're also performing well, both from an EBITDA and also from organic sales in a market at various between areas here. The merger of Henten SSIA also very important. I think I've said everything about that. The plantation restructuring in line with plan. So the first court Sweden and Norway has approved this and now we just wait for this to be legally binding, which we hope and believe will be tomorrow. And then we will release the financial effects on plantation. Again, very strong quarter in construction and in adjusted EBITDA increased for all segments during the year, except them for for consumer and adjusted EBITDA increased 23%. And I don't know how many times we had said that the cash flow is strong, but we end up with that. And thank you so much for listening.

Thank you, Mattias and Jonas, let's open up for some questions. And let's do that in some sort of alphabetical order. So let's start to see if we have Henrik Hinse from ABG on the line. No doesn't seems like Henrik is with us might show up later. Let's move over to Svenska Handelsbanken and Julia Angelis strand. Please, Julia post your questions. The line is open. We'll see we can't hear you. Do you hear us? Oh, should we try to move on? On our list. Maybe Kepler Chevrolet, sorry, Kepler Chevrolet, you want to show by not with us? Have we albino mark Nordea? Should we give you a try? Yes, I've been here from Nordea. Okay, I can hear you perfectly well. Please post your questions.

Yes, perfect. So firstly, if you can give some more comment on what a stronger bit of development in construction stem from, and then also if you can give us some sense of how much of the order backlog is to be realized in in the five. And also any comments on the margin profile in the backlog. Thank you.

Thank you. Albin. Please, Jonas.

Well, I just said the strong. Your first why are we doing so good in construction is basically

why is the where's the margin so strong in construction in this quarter?

Yeah. We, I think it's two things. We have a big part. Should I look there? There? Sorry. First, first of all, we have a big part of our projects is done in a partnering model, something that has been developed through the years and was boost by the fact that we bought SSIA Group or Vestia a couple of years ago, who were solely working with partnering projects. And the idea was to get synergies with Hent already then. Hent was not so successful on the Swedish market. Vestia SSIA Group was successful on the Swedish market. So actually, SSIA and Vestia took over the Swedish market and Hent focused on the Norwegian market. That really in itself, the result of that was that EBITDA margins started to grow and has grown ever since then every year, actually. I also think that the fact that we have public customers to a large extent is also, they're less sensitive for the market, although they are sensitive, but I think it's still better to have these clients than private owned companies. So that's a long answer on a short question. But I can't avoid to say also that we put Hent's CEO in the board of directors for SSIA Group and vice versa. So they got to know each other and they have done projects together. And with that, we now create a leading Nordic company builder with EBITDA margins that not only this year has been high and with cash loan, it's not only this year been positive. I think it's the partnering model, public customers and the fact that construction is a local business and everyone is now in the group focusing on their business.

Thank you. And then the other question, how much of the order backlog, if you can give us some sense there of how much is to be realized in 2025 and also the margin profile in the backlog?

Yeah, I'm sorry, I can't tell you that. I don't have that in my head. The backlog, Mattias is very much larger than the annual revenue. So but I need to come back to you on how much if you don't know the number, how much of the very large backlog is taken during 2025.

All right. Thanks. No worries. And then just the one last question here. You talked about synergies in NITIC and SAMCON. What kind of synergies have you seen there? And can you give us something in terms of numbers? And then also what you expect in terms of numbers for 25? Thanks.

Well, as you know, these synergies is both on the sales side, but also on the cost side, of course. And this is the process that is ongoing now. And I'm sure you understand that I don't want to go into details here. But I have my own experience from that, of course, in my previous job. And this is quite similar to the acquisition we did then of Epsilon. And we gained a lot of synergies both on sales side and on cost side. So I don't want to comment on that at this, but we will, as I think I wrote in the report, come back during the first half year.

Okay, thank you. That's all for me. Thanks. Thank you.

Thank you, Albin. Should we try once again with Julia and Jellis Strand from Svenska Handelsbanken to see if you are ready to post your questions? Okay, let's try again. Can you hear me now? Perfectly well. Welcome, Julia.

Okay, perfect. Sorry, I had some technical difficulties. Okay, so and in terms of capital allocation, and it feels like that buybacks are off the table, and that you're possibly more interesting in continuing buying minorities. Is this something we could expect near term?

We don't give forecasts on what we're going to do before. I'm always going back to 22, when we had our capital market days and told people what we were going to do and then the Ukraine war came the next day, the day after. What I can say is that we will continue our work to get a more consolidated ratus group with higher profitability margins. And we should be a less smaller number of companies. So it will be a more important report to read, but more importantly, that we have real synergies over the line.

Okay, understood. And regarding, you talked about synergies in Stentia. Could you say anything more about that? Was this mainly related to sales? Or how should we think about that?

It is mainly related to sales. It is mainly related to sales. But of course, there are some cost savings also with doing this. But now we have one common goal in the Stentia group. There is not one goal for HENT and one goal for SSCIA group. And that foster that we go together and take the best projects with the best profitability in the best markets.

Okay, and will this be visible before end of H1? Or should we expect this to be visible later than that?

I think we will see things already in 2025. Yes. But this will continue to develop. But absolutely.

Okay, clear. I think that was all my questions. Thank you, Julia.

Thank you.

Okay, thank you very much, Julia Angelis Strand from Svenska Handelsbanken. Let's open up the line for Georg Attling at Pareto, please.

Good morning. I have a couple. The first one being in construction services, the margin, you mentioned facing as a positive lever here. How could you quantify the effect from facing in construction services?

I don't think I can do that. But I want to underline that this is not, you know, suddenly we increased our profit margin. If you look back through the years, it actually have developed a lot. Especially for Hent. If we look into the SSEA group, they had lower sales, more lower sales than Hent had in 2024. But still a good profitability. But I, do you have an answer, Mattias? No, sorry. But I'm sure and maybe we'll meet later today and we can look into the numbers more closely. But I can't answer that question. Okay. It's difficult to have to be CEO for 15 companies, you know, you don't have all the details everywhere.

Yeah, understood. On plantation, I understand that you can't give too much detail here. But on a high level, what sort of margins can we expect after this restructuring? Is it going back to the double digit levels or lower than that? And also on the timing effect in plantation? When will you see that margin improvement? Is that in Q2 already or gradually throughout the year?

I'm so sorry, Eor. I won't say a word about this before it's we have a legal binding decision. I don't want to make a mistake to say things and then it won't become legally binding tomorrow. So I need to answer that. I'm sorry.

Okay, but tomorrow you will be out with the press release with the financial impact.

If the courts have said that now it's legally binding. And that is what we believe.

Yeah, makes sense. Just final question here on the on the balance sheet. In my head, if you want to be fewer fewer companies, you want to sell a couple of companies, you don't want to do a platform acquisition, you don't want to do buybacks, and still you want to have leverage between one and a half and two and a half doesn't add up in in my head, could you just help me to clarify how you're going to allocate the capital to bring you back to the leverage guidance?

Thanks. Well, we're not only going to sell companies, of course, we will that certain companies in our group are growing significantly. And I don't think it's I think I can say this. If we take one example, HL display, we haven't talked so much about them. I think we said they had organic growth. Yeah. But they continue to do outstanding numbers. We want to have companies that are market leaders, I used to say is they should be number one or number two on the markets. HL display is now number one in the European markets. So this is one example. Another example is of course, the technical consultants, which now, if we look at the Nitech Group is number one in digital solutions and product development. That is also an example of a company that we want to be much bigger. So it's not that we should just sit on a lot of money here. We want to restructure the group. And we want to have and I use two examples here to grow more significantly. I hope that was the answer.

Yes, thank you. That's all I have.

Okay, anyone else who has a final question, please raise your hand in the Teams meeting so we can see that you have a follow up. No, doesn't seem so. Well, thank you, Jonas. Thank you, Mattias. This webcast was also recorded so you can find it afterwards at ratos.com. Thank you so much for watching us today and goodbye.