Sdiptech AB (publ)

Thank you and welcome everyone to this presentation of StipTech's report for the second quarter. As already mentioned, it's myself, Bengt, placed from here with our CFO, Susanna Sotelius, that will guide you through the quarter and also a brief look ahead. But let's start with just some words about StipTech in short, as most of you know. We are a technology group that are acquiring and developing companies that all work for a more sustainable, efficient and safe society. Much of that being built into infrastructure. So that's also why we focus a lot on finding companies within the infrastructure sector that will support this future. And we have divided our business into two business areas, resource efficiency and special infrastructure solutions, where we have three sub-segments each, which you can see from this slide. and what's common for all these six industrial segments is that we believe that are sustainable drivers for growth much because of that we all want a more sustainable efficient and safe future and but also that the infrastructure of today is quite old so it needs to be renovated or replaced we also consume more of infrastructure and more of our resources. And as well, we're going into the direction of more sustainability. We also put some more regulations around all of this. So all in all, that means that the companies we look at to acquire and the ones we already have are well positioned for a sustainable, good demand and growth over time. And as you can see to the right hand in this slide, our companies currently, they are residing in the Nordics, UK, the Netherlands, Italy, and Central Europe based in Croatia. All in all, 40 business units, as we call them, since they are more legal entities, but we call them business units, which we follow up and report on. And we are currently almost 2,400 employees. And we have had a very strong profit growth since 2017 when the B share was listed over 38% in average. And since we have a strong focus on sustainability, how much of our turnover is actually contributing to one of the UN sustainability development goals. And for last year, 2023, that was 79%. So that was StipTech in a brief presentation. But let's go for the main topic of today then, the second quarter. And as a summary, and we will get back to all of this in more detail, we are very happy and proud to present that we had a strong sales growth, 9% organically excluding currency effect. All in all then together with acquisitions, acquired companies, we had a 19% growth, almost 1.4 billion Swedish in a quarter. Our profit almost developed the same way, 13% all in all, which 1% was organic, excluding again the currency effect. And that number was then 260 million in adjusted EBITDA. We were happy to see that our activities and measurements we have done to improve the cash flow had effect. So we had a cash conversion, as we calculated. But in absolute numbers, it meant that almost 200 million of cash flow from the operations was brought into the group. Which, of course, adds to our position to be able to continue with our acquisitions further on. And we will come back to that as well, of course. The margin was somewhat lower than last year, but more or less in line with last quarter, 18.7%. And part of that was that we had a sales mix shift. Some of the companies that have been very, very profitable have a good quarter, but not as good as last year, but still good. But we're also taking some measures and costs for restructuring of one of our business units, the one that we still have within our elevator business in Central Europe. But we will comment on that as well. During the quarter, we acquired one company, Watertech of Sweden. It's a small company, but it's a company that's complementing our other companies within the water treatment area. So they cooperate already with the Chemitech in Denmark and the UK. We did also actually divest the company, which we don't typically do, Frigotech, a company that services and installs different types of cooling equipment in warehouses and shops, et cetera. And the reason for that being that they are We're not really part of our main focus in the business. As you know, we're focusing on product-based companies, companies that control their own product and their product development. It could also be software, of course, or more productified services, you could call it, but pure service and installation of other companies. products is not our focus and Frigotech being a very small company in the group and also perhaps would have a better future with another owner. We discussed and had a careful consideration about what to do and together with the management decided to divest the company and they are now part of the Nordic Climate Group where they have much more in common with our sister companies than what they had with us so nothing dramatic really and it's nothing that we do typically because we are forever owner to our companies but in this case we thought it was of value for for all parties then looking a little bit more on the distribution of our business in turnover by type of revenue. As mentioned that we focus on product based business and as you can see from this chart we have 60% of sales is product sales and then we have an even split between installation and service and that is then mainly on our own products. We like installation and we like service because that brings added revenues and profit to a hardware offering. So typically our products, you cannot buy from the shelf as just as a piece of hardware, but instead we install it and we service it over the software also attached to that hardware. So we get a long-term relationship with our customers and also then recurring revenues. Another way to split the sales is through the geography. And here you can see that UK is our main geography when it comes to where our customers are. So this is really who is receiving our invoices. And Sweden is less than 20%. And then we have a split between many countries. So UK is, of course, very important. And for us, UK has been a very stable economy. when it comes to infrastructure operations. And we'll see what the new government in UK will do. They have promised to add more funding into infrastructure initiatives. So perhaps we can benefit some from that. And yet another way to look at our turnover is to split, or rather our profit, to show the split between our different business units. And this chart is to show that we don't have any company above 10% of our total profit. And as you can see, we have a pretty big number of companies between 4, 5, and 10%, which is a good risk diversification, we believe. For some years ago, we had a few larger, in comparison to others, business units. But now, as you see, it's a pretty decent and a good split, which means that we're not dependent on one or two business units performance. So all in all, a good diversification. then looking into our acquisition activities and as you can see from this chart we have reduced the activity levels not the least last year because of the increasing interest rates which meant that we when calculating how much we're willing to pay for a certain company we reduced that price which of course meant that the dialogues with sellers take longer But also that we wanted to bring down the debt leverage a bit. And we think we have done that. We are still on a path of reducing the overall debt level somewhat. And interest rates have stabilized and started to go down a bit as well. So for this year, we have said that we increased the pace to perhaps 100, 120 or so in acquired profit, which means that we have acquired about half of that through the two acquisitions we have made already then. In addition to WaterTech then this quarter, we acquired a pretty big JR Industries in Q1. But it means that we should acquire some 40, 50 million of round rate profit in the second half. And we have a very and we have a strong pipeline in order to shield that. So that looks promising.

Yes. So in order to look a bit closer at the financial numbers for the quarter and starting overall for the group. So what we see demand and sales continue in general for our companies. And this resulted in a quarterly revenue of around 1.4 billion. And on rolling 12, the revenue is now at 5.3 billion. That was a sales increase in the quarter of 19%, of which nine, like Bengt said, was organic growth. Also year to date, we've had 9% organic growth. Then for the margin, we can also see that it continues to be stable. It was 18.7% in the quarter, 18.8% year to date, and 18.9% rolling 12. And then moving to adjusted EBIT A. We can see that several of our especially larger business units are showing stronger profits than last year. We also have some acquisitions contributing, Chemitech, JR, Watertech versus last year. Then we also do have some challenges. Bengt mentioned, for example, our elevator unit where we've been working with restructuring efforts and had a negative result in the quarter. I will come to this when we talk about segments. And yesterday, we had 3% organic growth. In the quarter, it was 1%. And then if we look a bit more at the segment, and start with resource efficiency, so our companies within water and sanitation, power and energy, and bioeconomy and waste management. So resource efficiency had a good quarter. We see that in some of the larger and also high margin units, we had a strong growth. One example being IDE, our company for temporary electricity solutions that had different projects in this quarter that contributed. And also other companies that we have within power and energy had a good performance in the quarter. And then the new companies Chemitech and Watertech are also part of resource efficiency, and they performed in line with expectations and contributed. And the overall numbers then for resource efficiency was a sales increase of 15%, adjusted EBITDA increase of 24%, and the margin increased as well to 22%. And then if we move to next segment, so special infrastructure solutions, where we have our companies within air and climate, safety and security and transport and logistics. And here we think it's important to mention that special infrastructure solutions had a very strong second quarter last year. Sales then grew by 50%, adjusted EBIT A grew by 63%. So it's been quite challenging comparables for a number of of business units here. And if we look at the challenges here, I mean, that's been one of the challenges, and that has resulted in a couple of our business units not being able to show better results than last year, basically. On the negative side here, we've also had the remaining elevator business that we have mentioned a few times here. where restructuring efforts are still continuing. We had a negative performance in the quarter of minus seven. Our aim and ambition is to turn that company to profitability towards the end of the year. If we look at the positives instead, we have of course JR Industries that's contributing from acquisitions and then A couple of our largest business also with high profitability have been going strongly here in special infrastructure solutions. So a couple of examples of well-performing companies here is ELM, which is our customized forklift equipment business. GAH, our customized equipment for cooling last mile transportation. and also Hiltip, and Hiltip is producing road maintenance equipment, and it's based in Finland. And so a bit pros and cons, and the total result is a sales increase of 21% in the quarter, EBITDA increase of 8%, and then a margin decreasing slightly to 19%. And cash flow, cash conversion. Now, we are pleased to see this development continue. It's been going on in the right direction for some time. We are still putting in quite a lot of effort in order to work with the companies to keep improving the cash flow and cash conversion. and cash flow amounted in the quarter to 197 million or 83% cash conversion and this despite increasing sales. The rolling 12 number is 84% and this is well within our sort of internal aim of being somewhere between 70 and 90%. If we look at Profit after tax and earnings per share, those numbers have been going down compared to same quarter last year, despite an increasing EBITDA. And the reason behind this is higher interest cost and tax. And just as a comparison, if we look at free cash flow per share, that trend has been increasing and free cash flow per share is now higher than earnings per share. So it's at 12.12 for LTM. So above the 11.34. And finally, our debt leverage numbers, they are showing a decreasing trend. We believe this trend is going to continue over time. But it's just good to bear in mind that the timing of acquisitions can, of course, affect these numbers. So it's going to go a bit up and down, but the long-term trend is going to be downward. And with that, I'm leading back over to Victor.

Thank you Susanna. And a few words then about looking ahead. As I mentioned in the beginning, we have selected our industrial segments based on that, that they should be pretty resilient. Of course, they can go up and down quarter by quarter. And for example, now in different seasonalities, the next quarter is this quarter we're already in, then Q3 has all the vacation period, et cetera. But all in all, we have a solid platform and a solid growth underlying our businesses. And we believe we have a good diversification then, as I mentioned, with all the 40 business units of different sizes, but that no one is really too big. So it's a good split. When it comes to the quarter three, we could also mention that it's a pretty tough comparison during that quarter. We had some 20% organic profit growth and sales growth last years, of course. We will do our best to meet those numbers, but we'll see. And also then looking at the acquisitions, as I mentioned, we had a strong financial position and we have a very strong pipeline. good pipeline and we control the processes ourselves so we we can try to at least then even out when the acquisitions eventually are completed and executed instead of being since we're doing it ourselves not relying on structured deals and the like so we're very much in control of the speed of when the timing and when the acquisitions is actually happening. But we're optimistic about that. And we will also then based on our leverage situation and on the interest rates, we're slowly but steadily most probably increasing a little bit the speed of the acquisitions going into next year. But that we will see, of course. But Our aim is to acquire and still grow the company from acquisitions and a good solid organic growth. With that said, we open up for questions. We have already received a few questions on the chat, but perhaps we would let the conference call questions in first.