Sdiptech AB (publ)

Thank you and very much welcome to this presentation of our first quarter 2024. I'm Bengt Leyström and together by my side here we have our new CFO Susanna Settelius which joined just a few weeks ago so I'm very happy to have her here also here on the call and today's presentation will first start off with a brief presentation of StipTech itself in case with new listeners and then we will present the outcome of the first quarter and then end with some outlooks for the near future. But let's look into Stiptec in short and who we are. We are a company that acquires and develops companies that all work for creating a more sustainable, efficient and safe society. And since that is built into much of infrastructure, we also call ourselves an infrastructure technology group, even though we are not operators of infrastructure. But our company's customers typically are. And we have organized our business into two business areas where we have three sub segments each, and we will get a little bit more in those details later on. But we have the resource efficiency business area where we have companies taking care of our scarce resources of the planet within water and sanitation, power and energy and bioeconomy segments that we have selected. And the other business area is called the special infrastructure solutions, where we have companies dealing with air and climate and see products and services within air and climate. and safety and security solution, as well as transportation and logistics. And the reason why we have chosen this segment is that for all of these, we believe there are some very key drivers for growth. First of all, the drive then for more sustainable, efficient and safe societies that we all have and have had for a long time. But also then that much of the infrastructure is old, so we need to renovate and replace and modernize the infrastructure that drives demand. We also consume more and more of all this, not the least of resources, which become more and more scarce to some extent. That is also a good driver for development and growth. And as well, we see a lot of regulations within this area to make sure that we really will be doing things that in the long run. So all of these drivers together support us and our companies in the growth for the future. And I think we have proven that not least this quarter by having a very solid growth more or less all over the group. To summarize, we are 40 business units, about 2,400 employees. And we have had a compound growth on our profit since the introduction on the stock exchange in 2017 of almost 40%. And by now we have almost 80% of all our turnover contributes to one or more of the United Nations sustainability development goals. On the right hand side, you see where our companies are residing. It's in the Nordic countries, UK, Italy, the Netherlands, and Croatia right now. We will come back to the more split of our revenues, et cetera, later on in the presentation. So that's a brief introduction to StipTech. Looking at the first quarter and a summary. We saw a strong net sales of 1.3 billion Swedish, which was an increase of 24% compared to the same quarter last year. Of those 24%, 10% was organic, excluding currency effects. The currency effects was about 2%, meaning that the remaining 12% came from acquisitions. And looking at the profit, the adjusted... 151 million, which was also an increase of 24%, 5% organic. Also here, we had some 2% coming from the currency, meaning that about 17% was contributed by acquired companies. And since both the increase in turnover and profit was the same, we have the same margin as last year, 19.1% on the last 12 months basis. This means that we now have a group that generates more than 5 billion Swedish in net sales over a 12 month period and a decent cash conversion of 73%. We will come back to these figures in a bit more detail. When it comes to acquisitions, we did one acquisition in the quarter of JR Industries. We actually presented that acquisition already in the Q4 presentation in February. Since this was in January, we acquired JR. But we have done an additional acquisition in April after the quarter one, and we'll come back to that one as well. Some other highlights is that we see a very, for us, favorable market conditions and a solid demand continue. As I was explaining, we see that we have strong pretty much resilient growth drivers within our sub-segments. And we could see that also in our profit growth. So even though we had some pretty tough comparables last year, which we have very good organic growth all over 2023, all the four quarters, we anyhow could show a 5% profit increase and 10% sales increase in this quarter, which we are, of course, very happy and proud of. Our cash flow is pretty strong, we think, about 170 million Swedish coming in, which gives us, of course, headroom for investment, capex, etc. And as I mentioned, when it came to the actual cash conversion, it was a little bit lower below what we aim at, the 80%. We will come back to that as well, but still for being the first quarter of the year, pretty decent cash flow. We could also see that our debt ratios were decreasing compared to the same quarter last year, which is an effect of that we have a good cash flow, but also that we have a bit lower pace of acquisitions. All in all, this resulted in an increased earnings per share of 12% for the quarter than 2.71 Swedish per share. Looking a little bit more into the quarter, as I said, the sales increased 24%, 10% organic. And it was the organic growth were pretty much in the two business areas. So both business areas are performing very well. And we don't see any signs really of a slowdown. So we see business as usual for this quarter number two and onwards. And so it's a stable situation all in all. Of course, for different business units, they can go a bit up and down quarter from quarter to quarter, but that's in their business. So that's nothing strange, but all in all for our 40 business units altogether, it's a very solid and stable situation, both with order intake and sales. When it comes to our EBITDA margin, it was 18.8%, more or less the same as last year. You may recall that we have mentioned 20% the number of times that we're aiming at, Some of the later acquisitions have been great companies, but with slightly below the average EBITDA margin, we're not there yet. But of course, we're aiming at that still. But it's very much given by the companies we acquire. And when it comes as well then to the EBITDA margin, we have some effects from two companies that we are still having savings activities, restructuring activities. to business units that are a bit exposed to a new construction. We have that already in Q4, and we said at that time that that would continue into Q1, which it did. But it's a pretty small effect all in all on the group. But it hits the margin a bit since they have a turnover. And you can see on the right hand side of the chart there that the margins have been very stable now since more than a year. two years, but slightly above 19%. These sales in itself have grown, increased with 29% compound growth since 2017. Looking at the EBITDA development, as I said previously, it's about 40% on average since 2017. Pretty stable, as you can see from this chart as well, even though then this quarter was An effect is that we did some, not as much acquisition last year as we have been doing previously that of course affects the total increase of profits during this year. But I will come back to the acquisition ambitions for this year a bit later. And again, most comparable units had very good results, both in sales and profit than last year, and also acquired units, they performed as expected. Then turning into the two business areas and starting with resource efficiency. They had an increase of their sales with 16%. But a profit increased by 25%, meaning that some of the businesses with a higher than average beta margin performed very well. Some examples of that is our unit for taking care of sludge and turning that into fertilizers. And another example is our units which rent out equipment for electricity. for temporary events and building sites. And there were others as well within this business area, not the least our most recent acquisition, one of the most recent acquisitions called Heatwork in Norway, which also have during the winter part of the year, but they perform very well as well. So all in all, great companies with good profit margins performed very well, meaning that the beta margin increased them to 24.5%. And again, as you can see on the right-hand side, we have a business area both in sales, margins, and profit levels. Special infrastructure solutions. In this quarter, they saw an increase of sales of almost Here we of course are affected by having the acquisition of JR coming in here and JR is a big company. So that affected the numbers and also the profits increased by 19%. And especially in this business area, we have some of the we acquired JR, but also GAH refrigeration and ELM and the forklift attachments. All big companies performing very well, but they have a slightly below the average beta margin. So that means also that the beta margin here decreased a bit. And in this business area, we have these two business units we were talking about that had some temporary negative effects on the result as such, but very small amounts, but affecting the beta margin because of their turnover. Also this, looking at right hand side, you see the development for this business area great development over the years and has leveled out at around 20% of the data margin if we look at the last 12-month basis. Then coming to acquisitions, as you can see, we have been acquiring pretty much during the years. Going all the way back to 2016, we have had a target of acquiring a profit, a run rate profit of 90 million. And we increased that target in 2021 to be 120 to 150 million of acquired run rate profit. But we saw them last year with the increasing interest rates and the focus on debt levels and the increased cost of capital that we took a decision to slow down the pace a bit. We only acquired actually two business units bringing in 50 million swedish of run rate last year and we said then early on that this year 2024 we would increase the speed a little bit to be perhaps slightly below the 120 so around 120 million profit and we have so far done the jr and the water tech which we did a few weeks ago adding up to 65 million uh swedish in And the outlook still is very well, very good for acquisitions. We control the pipeline ourselves. We take the decisions on which speed we run these processes since they are typically not any structured M&A processes. It's us contacting companies that typically don't even know that they should sell their company. But after a few years of contact, we perhaps can convince them to sell to us. And we have a very long relationship with them before actually closing a deal. That means that the ones we are contacting today, that are companies we will acquire in two, three years time. And also that the companies we acquired today is companies for some time. interest rates have gone up and cost of capital have increased meaning that we are perhaps not willing to pay as much as previously and that of course then extends the negotiations with the sellers but we're still very comfortable with that we can reach this goal for this year and of course we never do an acquisition if it's not a very good company so we're not acquiring for the sake of it but it's given our other financial targets we acquire in a very controlled and low risk pace. And as I mentioned, in addition to JR Industries, which we acquired in January already, we acquired WaterTech of Sweden. That's actually our first Swedish acquisition since almost five years ago. A small but very skilled company outside Stockholm that deals with for water treatment and they have already started a cooperation with our danish company called chemitech that are dealing with the same things as well as our uk-based company water treatment products which also dealing with specialized chemicals for industrial water treatment and that's an example of how we see this that we are focusing on certain segments and niches that If we acquire similar type of companies, they can cooperate on the top line, so to say, on their sales, but not really aiming for any cost synergies, even though perhaps we can get some of that. But that's not the rationale for acquiring these companies. So that's a very good example of how our companies we acquire can benefit from being a part of the StipTech group. So with that said, I will then hand over to Susanna.

Thank you very much Bengt. And first of all, I just want to say that I'm very happy to be here at StivTech and I'm looking forward to working more with Bengt and the rest of the team. And with that, a couple of comments, firstly on the sales split. And I understand these charts have been quite stable over time. So revenue by type. So proprietary product stands for a little bit more than half. And then roughly 20% each on installation and service. And the installation and service that we have in our portfolio, it's mostly on our own products and it provides a good margin and to some extent also recurring revenue. Previously, we had more service and installation also on other brands, but it's been a conscious decision to shift focus over time. And then regarding the geographical split, UK is the number one market, and the number two market. And like Bengt mentioned already, in April, we made our first acquisition for five years in Sweden. with water tech. And then looking a bit at the cash flow and cash conversion. So it's been a solid quarter with cash flow from operations at 167 million SEK, which corresponds to a cash conversion of 72%. And that is within our ambition, which is between 70 and 90% of cash conversion. We do see a significant improvement here versus the same quarter last year when we had a cash conversion of 45%. And the reason that we've had this improvement is that we made a targeted effort together with our group companies to review their inventory needs and to work with customer payments, for example, And this is something that we will continue to work on going forward. And then a few additional metrics. So profit after tax increased to 170 compared to 96 million the same quarter last year. The main reason here is, of course, the revenue increase. And I mean, we're very pleased to see this development also considering the interest rate levels and tax increases that we've had for the past year. And then earnings per share as a result increased as well to 2.71. Then looking at the debt leverage ratios, If we compare those to year end, there was a slight increase, which was caused by acquisitions in this quarter. But more importantly, and as planned, they go down versus the same quarter last year. So with that, I would like to hand back over to Ben.

Thank you, Susanna. Well done after just a few days here in the group. summing up with some highlights for looking ahead. As we said initially here, we don't see any real signs of slowdown. So it's a continued solid demand in our business units and in the segments we're operating in, which is our thesis. But even though we had also mentioned strong comparisons from last year, where we had a very strong organic development all through the year. But we benefited from positions in these more or less non-cyclical sectors. And we will continue with the acquisitions. We have done a bit more than perhaps half of what we're aiming for this year. So coming acquisitions this year will perhaps be a little bit smaller. But still, we have a big number of companies in our pipeline, which we are discussing with currently. So we don't see... that's slowing down really. So we will most certainly be able to reach our targets and we have good financing capabilities to do that, both from cash already at hand, but also from committed credit lines. And given that we will continue with what Susanna said to reduce the debt leverage, we will do our acquisitions in a careful but still steady way. And also a few words on our sustainability efforts. As you may know, we have both as an official target and related to our bank loans and also to our sustainability linked bond. We have a goal of reducing our CO2 footprint by 50% counting from the year 2021. And of course that is a lot of activities going on and they take effect, take some time before they take effect. So we have a little bit lower ambition for the first years of this cycle. And then hopefully when we come to 2026, be able to see that total of 50% reduction. So far for the two first year, 14%, which is actually spot on the plan. We're a little bit above actually. We also, of course, do the preparations for the CSRD, which affects us when it comes to different reporting responsibilities, et cetera. And we're also looking into the opportunities to commit to the science-based targets initiative for the sustainability goals. But we do need to do some research. And so before we can commit to that, but it's already going on. So that's really our way we look at the nearest future. So with that said, we will hand over for questions.