Ratos AB (publ)

Good morning, everyone, and welcome to Ratos and the presentation for the first quarter 2025. The day will look like this, or the hour will look like this. We have with us in the studio, we have Jonas Wihlström, our CEO, and our finance director, Mattias Junde, who is stepping in for our CFO, Jonas Ågrupp, who can unfortunately not be with us today. First, we will do the presentation and then we open up for questions. And I should also like to add that the webcast will be available on our website after the presentation. So I think with that, we should get started. Please, Jonas.

Thank you, Katarina. And thank you all for joining this morning where we will present a record quarter for Ratos. We had a strong start of the year. Adjusted EBITDA is up 32%. All business areas actually increased their EBITDA. ROSE is continuing to go up. We have divested Airtime. I think we will close it in mid-May. And we have completed the reconstruction of Plantagen in February and we're showing strong results already in the Q1 for that. Also, we have had strong order intake in construction services and we have a limited direct exposure to US. I will get back to that as well. Also gratifying is that our EBITDA margin continues to grow. If we first take a look at our EBITDA development, we actually have an EBITDA CAGR of 28%. And if we would continue like this, it's over 30%. Report to the EBITDA was even higher, but we had one time positive effects. mainly due to the fact that we paid the composition gains for the reconstruction in Q1. That also affected our cash flow, and the cash flow, if you take that into consideration, was stronger, also that was stronger than Q1 last year. Q1 is a weak cash flow quarter for the Ratos Group. Looking at net sales, the majority of the 4% is due to discontinued operations in Plantagen with all the closed stores and also discontinued operations in Expin Group. We were also affected by a negative calendar effect for industrial services. One year ago, we had 150 million plus in sales because of add-on acquisition. It's very gratifying also that net sales for product solutions are increasing with 9% despite a market that is not at full speed right now. I think for newcomers, maybe we could show the segment companies. I think you've seen them all, Aleido and IT Groups, VTFS and in industrial services and so on. So let's go to next slide here. Here's a summary of both the business area and segments. And starting with industrial services, there is a negative calendar effect, which affected EBITDA with 8 million because of one loss working day. We continue to have challenging markets in clinical trials in TFS. Nitech Group are really creating significant synergies. I'm sure these will be over 50 million actually in cost synergies. Things are going very well there right now. Product solutions, over 13% in EBITDA margin. EBITDA is growing, sales is growing. And actually all companies increased both their revenue and EBITDA. And we also had increased order intake for Diab, HL Display and Lidil. Those three companies, by the way, are those who have exposure to the US market and I'm coming back to that. In construction and services, we continue to show construction, I should say. We continue to have good EBITDA margins, continue to have very strong order intake. It's plus 186%. And the order books are record high. We have very strong order books in Sentia, but we also have strong order books in Able. Last but not least, we divested or we signed a contract of divesting Airtim. We will close that, I think, in mid-May this year. So the Airtim numbers are in the Q1. If we go to critical infrastructure, again, very strong order intake and it was up 20%. Continued strong results in precise infra and able. And X-Bing Group continues to improve their EBITDA, but we are still showing negative numbers, but much smaller than last year. And we will, during this year, make sure that we can have positive results there as well. Consumer reconstruction, I've already mentioned it, shows very positive results. Some 60 million SEK in this small quarter. We have saved OPEX of 400 million plus. Our debts, our financial debts are down 1.5 billion. Also worth to mention is that KVD continues also this quarter to improve their EBITDA like it was a good year for them also last year, but even better this year. Well, I think I mentioned it all here, actually. Reduction of stores went down to 89 in Norway and Sweden, and we discontinued the operations in Finland. 11 stores were closed there as well. Cost reductions I mentioned. We had, of course, a revenue decline in the quarter due to closed stores. It beat up 60 million and decreased lease liabilities 1.5. And don't miss out that Plantagen remains to be the largest and best garden center in the Nordics. Visit them next time. Well, just a few words about the one-time effects we have in Ratos. It's totally positive because of plantation. In Speed Group, we have taken costs to reduce the staff in the staffing business. There are new EU rules around that. So unfortunately, we need to reduce the staffing business in Speed Group. Nitech Group, all is related to the merger of Nitech and Semcon into the Nitech Group and these six millions are directly affecting the cost synergies. And TFS has still a weak market. We have changed CEO during the quarter and we have taken six million for cost and efficiency matters. And I mentioned the positive one-time effects we had. We gained a lot of EBITDA as a one-time effect for the debts taken down from tax and suppliers. It's also gratifying to see, or should you take the cash flows maybe, Mattias? I just mentioned that it's over 100%. Exactly.

Thank you, Jonas. Yeah, as you can see, the cash flow from operating activities was down with about 150 million. in the quarter and this is mainly due to changes in networking capital and the networking capital was affected by the composition dividend that was paid out during the quarter of about 200 million. So adjusting for that it was actually better than last year and the quarterly cash flow. As Jonas mentioned the QN is normally our weakest cash flow quarter due to increased inventory build-up in consumer business and so forth. For the last 12 months, we have a cash flow amounting to 3.3 billion and with a cash conversion of 135%. So still looking very good. If you go over to the bridges, Jonas has mentioned a little bit about it, but in total the net sales were down 4%. We had an acquired growth of 1.9% and this is related to add-on acquisitions in the business area industry. We have negative organic sales growth in the quarter of 2.4%. And all business areas had negative organic sales growth. FXFX is primarily due to NOCSEC in the quarter and amounted to negative 1.2%. And the other column there is due to discontinued operations in XBIN and Plantagen. If we go over to EBITDA, we have an adjusted EBITDA which was up 32%. Acquired EBITDA growth was 5%. And as I mentioned, we post in the business area industry. Organic increase was 13 million. And it's mainly due to EBITDA improvements in consumer and also a larger share of associate company in the quarter. FXFX is negative in the quarter, 3.9%, and it's mainly due to a stronger SEC. Another is the discontinued operations in exponential implantation. If we go over to our financial targets, you can see that EBITDA is the goal to have 3 billion during 2025 and the last 12 months we were up in 2.4 billion. Leverage should be between 1.5 to 2.5 times and we was at 1.5 times in the quarter. Since year end, it has increased with 0.1 times. And from last year, it has increased with 1.1 times. Net debt increased during the quarter with about 800 million. And that's mainly due to a negative cash flow in Q1. Compared to last year, the net debt has increased with 300 million. And the dividend payout should be between 30 to 50%. And then your general meeting approved the board proposal for dividend of 1.35 sec. And the payment was done by April 2nd and amounted to 442 million in total. And with that, I think I leave it over to you again, Jonas, for final comments.

Thank you. I think we have said it all already. A record quarter, actually. And again, and a bit increased in all business areas. Divested bear team, completed restructuring, implantation. and a strong order intake both in construction and infrastructure actually and also we don't display these Mattias but the order intake in product solutions has also been good actually during the quarter I forget to mention that I think product solutions, we talked too little about them, a really strong quarter, I would say. And again, industrial services had one day week shorter, so it affects sales and EBITDA negatively. I think that was all, Catharina. Yeah, no, it wasn't. Rath is going forward. Well, our focus is a group with fewer platforms, with higher operating margins, higher return on capital employed and stable cash flow growth in what we see as attractive markets. We will continue to have focus on value creating add-on acquisitions. It's fantastic to see for HL display and others are now also starting with the value they have been creating through synergistic add-on acquisitions. And new financial targets will be released during the second half of 2025. 2025 is just eight months left of that or so. So it's about time that we've released new financial targets in the autumn. Thank you so much.

Thank you, Mattias. And with that, we open up for questions. And we will do it like this. A number of the institutions have reported ahead of the meeting that they will be present or you will be present. So I will try to be fair here and call you in alphabetical order. So with that, I start with ABG. Please, go ahead.

Hi, good morning. This is Henrik Hintze here at ABG. First, just some questions on the one of cost. Could you explain in a bit more detail what the situation in Speed Group was and what review to take these costs there?

Well, it's unfortunately is that we need to reduce the staff. Speed is not only third party logistics. We are also helping clients through a manpower business and the manpower business So it doesn't affect our core business. The manpower business will be reduced and it costs money, as you understand, for severance pay and so on. So that's the whole thing about speed. Speed is otherwise developed well, actually, but we have to reduce the cost in the manpower business.

All right. And TFS, the market there is a bit weak at the moment. What are you seeing there? Do you think it will get worse before it gets better or has it sort of stabilized at a lower level?

Well, TFS is quite a substantial part of the market. It's biotech companies, and there are the problems. Financing for biotech companies are still tough, even though interest rates are coming down. We have also a new CEO in place since two months, I think. And as a new CEO, at least it's my experience, is that you try to take away extra costs also when you have gone through the business. What about to forecast the market? Well, So it's an uncertain world now, but in general, this is something that will come back if it happens next quarter or next year. I'm sorry, I can't say that, but we are adjusting the costs now to make sure that we have a good profitability also in TFS in tough times.

Okay, very good. And then finally from me, then I'll let the others go ahead. But you've taken quite a few one-off costs now in this quarter and in previous quarters now in Plantage and Speed Group, TFS and MyTech. Do you expect this will continue in the coming quarters or are you mostly done with this now?

Well, yeah, and the one-time cost in plantations was positive. We have adjusted. Our reported EBITDA is better than the adjusted EBITDA. When it comes to what we can see, I think I wrote that the merger of Semcon and Nitec Group, there we are taking segment by segment. I think we will see some more costs in the Q2 to finalize the merger to really create hard cost synergies. Apart from that, I don't think we can see anything in the horizon for that. But it could be a small amount there in Q2, I believe. I hope.

All right. Thank you very much.

Thank you.

So did we have more questions from ABG?

If not, we move over to Danske Bank. Please go ahead. And if not, we go to Handelsbanken.

And then we have Nordea.

Yes, hello, Albin here from Nordea. Just two questions from me. First, if you can comment on Plantage and the start now in April and maybe the beginning of May, but mainly post Q1. How's the start been?

I'm not so sure I'm allowed to do that. Actually, we... I mean, it's not whole of Ratos, but I think Plantagen is an important company. And to disclose that, I feel nervous about that. What do you say, Katarina? Yeah, I think... I advise you to go down to Plantagen and see. Count customers. You can both find out that and very good products. We are quite positive to Plantagen's development going forward.

Yeah, thank you. I guess Q2 is an important quarter, so that's why I asked. But we can move on. So, yes, another one. I guess you have had this question before, but given you have 1.5 now net debt, EBITDA, X leasing, and also Airteam coming in here in middle May, probably, and also your own stock is trading at six times EBITDA. So, it's like if you believe in Your current portfolio is worth more than that. It's quite hard to not see buybacks as a good way to allocate capital here. So any comments on that one?

You are not the only one. And this is something we're, of course, discussing. We have actually done... quite serious analysis. We have talked to experts, etc. Swedish Match was certainly a very good buyback program. We haven't seen anyone else. But you can... We can have a talk about that, but our analysis says that it's not a good idea, especially for us. I mean, we think that the value creation we have seen in HL display and start to see in other companies with synergistic add-on acquisitions are very value creating. The average, including arbitrage on the multiple, HL displays have an average EBITDA multiple of 5.4, I think, for all the acquisitions they've done. And they exclude real synergies. This is just without synergies, it's 5.4. So we have had an enormous value creating there.

All right, that's clear. Thank you.

No further questions from Nordea? If not, so we move on to SEB. And those were the ones who had reported presence, but I'm wondering if Pareto might have joined us.

Yes, hello, George here from Pareto. I have a couple of questions. Firstly, on the critical infrastructure segment, it's down 15%, but with some effects from discontinued operations. So what I'm wondering here is just what's the growth excluding those discontinued operations and also in XPen what's left here after a discontinuing part of that business? Is it only what was previously Rattatech or anything else also still in the group?

If I answer your second question, maybe you can check the first question. No, Exbin is today, as you say, Ratatech, but also ES Infra and TKBM. ES Infra is a profitable business. And I think we did a flash on the tunnels we're building in Stockholm. Correct. I think you were there, Katarina. But these are the three companies to answer your questions.

And if you look on the net sales growth, we had a negative growth of XBIN of 7%, minus the 7%, but also precision flow was lower in the quarters. It's not just XBIN group on sales. No. Yeah.

Okay. And then I'm wondering about the order backlog here. So very strong intake in this quarter, quite tilted to construction. So will these orders be delivered in a lot of them in this year or is this for 26 and after that?

Yeah, some of the orders go certainly into 26 and maybe 27. But we are not uncertain about 2025 that we have orders enough. So...

And services is about 13 billion is within 12 months. So at least I don't know for nine months, but for 12 months, it's about 13 billion. That's excluding our team. Yeah, exactly. So it's basically both construction and critical have a large part in the coming 12 months.

Yeah, that's very clear. Thank you. Just a final question again on plantation. I know you can't comment on the start, but can you say anything about the weather here in April? Because it's been quite cold. So I guess that's not ideal for plantation.

The honest answer, I don't know. It was cold yesterday, for sure, and windy. But I can't report that. And I don't have the numbers for the weekend either. But one thing is for sure, plantation is very much stronger now than they were one year ago.

Perfect. Good to hear.

That's all I had. Thank you. Thank you so much.

Thank you. Okay. With that, I don't think we have any more questions. So Jonas, to you, do you have any final comment before we say goodbye to everyone and wish everyone a great day?

No, thank you for joining. It was a good start of the year in many aspects. I would say in all aspects. So looking forward to see you soon again. Thank you so much.