Sdiptech AB (publ)

Thank you and welcome to our webcast regarding the year-end report for 2024 as well as the fourth quarter. We will start with some highlights from the year and the quarter and then walk through some KPIs and a little bit about our acquisition. activities and then finally present some of the new organization that's in place from first of january and wrap it up with some highlights for an outlook for the future so as a summary of 2024 we are happy to have increased both sales and our profits our adjusted edita had a very good year 2023 so there were tough comparisons especially in the second half of the year so so we're happy with having a 13 sales increase and 10 on the profit also considering that a number of our acquisitions were made in the last quarter in q4 and so we didn't get so much revenue or income from from those acquisitions but they are rolling in now during 2025. and the organic growth on the revenue side was three percent the profit side and negative two percent and especially that was because of the second half year where we had a minus eight percent in in both quarters but again with some very tough comparables from 2023 but we will get back to those All in all, an almost 5.2 billion in revenue, Swedish kronor, and a adjusted EBITDA of a little bit more than 1 billion. All in all, that means an EBITDA margin of 19.6%. We have said that we are a group typically between the 19 and 20% EBITDA margin. So we're right in the middle of that. Very happy to see a good cash flow coming in during the year. Also record high of 823 million SEC, which corresponds to a cash conversion of 83%. Meaning then all cash coming in from the operations and deducted by the taxes paid and then compared with the result before taxes. So that's a very good, typically perhaps around 80% or so. We'll also get back a little bit more in detail about that. We made acquisitions, five high quality companies, all in all adding almost 110 million in a run rate data. Also that we will get back to. And if you look on the map on the right hand side, you can see the geographies where we are today and also where we focus our acquisition activities. So it's in the Nordics. And we did one acquisition this year in Sweden and one in Denmark. And we also focus on the UK, where we did two acquisitions this year. And then also in northern Italy, where we made one acquisition during 2024. We also have Netherlands on our radar and have so far one business unit in there. and we also then as you may have seen announced yesterday the first acquisition of 2025 which also will present further on these acquisition activities during q4 meant that that ratio increased a little bit short term but as you know we have to roll in the profits from the acquisitions made we don't report pro forma figures so it's just a few months of revenue and income coming in, but the full debt as soon as we have made the acquisition, including provisions for earnouts in the future. What's also very happy to see that we reduced our CO2 intensity measured as our CO2 emissions compared to our turnover. And we reduce that during the year with 10%, which means that we have reduced it all in all 24% since 2021. And the goal is to reduce it with 50% until 2026. Then having a look at the quarter there, we had a little bit lower increase in our sales, 3%, of which a negative six was organic. And our profits were up to percent in total and the organic was eight percent a lot of that weaker performance was due to that we still have a few business units exposed to the construction sector and we have some specifics there of one of character which we also will comment a little bit more upon The profit was more or less the same as for the full year, 19.5% and exactly the same as last year. So it's a very stable EBITDA margin quarter to quarter. Also Q4, as well as the full year, a strong cash flow, 300 million from the operations, which means 109% in cash generation conversion. That's of course not a... possible to have that long-lasting but it's very good that our activities and measures we have done in our business units are paying off. As I mentioned we did three acquisitions adding almost 50 million and we will present those in a little bit more detail soon. Looking then at the chart depicting the sales and the adjusted EBITDA margin year by year, and also the last four quarters on the last 12 month basis. As you can see, the profit margin has been very stable since 2022, between 19 and 20%. And we have also had all in all a CAGR of 25% since 2017. What we have added in this chart now is that we show the organic growth for each full year. And as you can see, it has varied. One modest year followed by a better year and followed by a more modest year, more or less every other year. And that's, of course, tough when you have a very good year, then it's tough to meet those comps. But I think that will even out as we as a group grows and become bigger. uh so the average during these six years as you can see in this picture is six percent organic sales growth from 2019 which we think is very good and in line with our targets of having a five to ten percent organic growth Looking then on the sales split, and this is then the revenue again. If you look on the left-hand side, you see how turnover is split between the types of revenues. As you know, we are looking for and acquiring companies that have their business product-based or services that you could call it the product-defined service more or less, something unique at least. And that's 60% of our revenue. We like also service connected to those products we sell, because that's recurring revenue ticking in, and that was 23% for last year. And then installation, typically of our own products. You who have been tracking us for some time see that that installation piece of this pie has reduced and that's also because we have been reducing our exposure to the construction sector most of those companies have their revenues in this category of installation but we're decreasing that bit by bit we don't want to be exposed to business segments that have a strong dependency on their overall economy. We like resilient businesses that does not affect too much about the outside, different types of economies going up and down. Looking at the geographical distribution of sales, it's more or less the same as previous quarters. It's about 20% in Sweden, 18% to be more precise, 42% UK, And then our other home countries, Italy, Norway, 5% each, and then some other countries. And as you see, we have the rest of the world and rest of Europe as we acquire product based companies with export capabilities. As you can see, we have in the US about 4%. And I guess you have noticed that there are discussions about tariffs. But our companies mainly Hilltip and RDM selling to the US will probably not be affected that much. Hilltip because we already have a subsidiary in the US where we manufacture and we manufacture more locally, so kind of made in the US. those products and then rdm our resource data management company who provides monitoring and control of cooling equipment that's more a license based business and not so much products so that would probably not be affected by any tariffs coming along looking then on the profit development in the same way with the organic growth in the circles. You see also then that we have flattened out during last year on a 12-month basis, more or less the same numbers, Q2, Q3, Q4, which also means we don't have that much seasonality really in our group any longer, even though there could be fluctuations. We have had a CAGR of 34% since 2017. and an average organic growth of 5%. With that, I hand over to Susanna.

Thank you, Bengt. And then we'll have a look at the segments. And this is the last quarter that we will be reporting the segments this way. So starting with resource efficiency, our companies within water and sanitation, power and energy and bioeconomy and waste management. If we look at the quarter, sales was flat versus last year. Adjusted EBITDA decreased by 16%. And the margin decreased as well to 19.1%. And some of the factors contributing to this, it's that some of the business units, especially some of the larger ones, didn't really manage to reach up to last year's numbers. And those were very strong for this segment. There was an 80% adjusted EBITDA increase from 22 to 23, so very strong comparables here. For this segment, we've had some exposure, some minor exposure to the construction industry, and the demand was weaker in the quarter. On the positive side, we see a strong demand, for example, for a unit for charging equipment for electric vehicles and also for our smaller units in water purification. And if we look at the year, it ended up on revenue of 1.8 billion Swedish. adjusted EBITDA of around 400 million Swedish. And then if we turn to our other segment, special infrastructure solution, so our companies within air and climate, safety and security and transport and logistics. The quarter was more positive for this segment. There was a sales increase of 4% and adjusted EBITDA increased by 15%. The margin rose to 22%. If we look at the business units, a majority of the business units are growing versus last year. Some of the business units that are growing is our unit within transport refrigeration, winter road maintenance and underground infrastructure. Then we also have a few acquisitions contributing in this segment. It's JR, Eagle, and Dado that are contributing in the quarter. Yeah. And then in the quarter was burdened by a one-off from one of our business units that is exposed to the construction sector. And this one-off relates to a few projects that are now completed and it did have significant effect also group level. If we look at the year for the segment, Sales ended up on 3.4 billion Swedish and adjusted EBITDA on around 700 million. Moving on to the cash flow, and the bank has already mentioned a couple of words about this, but we did have a very strong quarter or a strong end of the year when it comes to cash flow. So cash conversion was at 109% in the quarter, corresponding to a cash flow of 2 million. We've been talking the past few quarters about the improvements that we've made together with the companies. to improve the working capital efficiency. Of course, this is one contributing factor, but there is also timing effects in the quarter. Cash flow ended up at 823 operating cash flow versus 628 last year. So that's quite a good increase, I would say. And cash conversion rose from 68 percent last year to 83 percent this year. So in the higher span of the range of 70 to 90 percent that we're looking at internally. And then moving on to some additional metrics, so profit after tax and earning per share. Looking at the quarter, both of these measures rose. If we look at the full year, they are slightly down versus last year, and that is due to increased interest rates for the full year. And then finally, the debt leverage numbers, also briefly mentioned by Bengt, goes to 225 for financial net debt measure and 3.30 on the net debt measure. And the reason for the rise is the acquisitions that we made in the quarter, so that was fully expected. And with that, I'm handing back over to Bengt.

Thank you, Susanna. And talk a little bit about our acquisitions then. As I mentioned, we did five acquisitions during 2024. Started off already in January with a big one, JR. and then the smaller acquisition in fish water tech and then in q4 then these three acquisitions i will present on next slide and this follows really if if you see on the chart here on the left side um we follow our ambitions that from 2023 we reduced it a bit to bring down interest costs and average a bit and then 24 ramping up as interest rate being stabilized and even coming down a bit and now then for 2025 we've said we will most probably and our ambition is to be within the 120 250 million span of acquired run rate a bit up we started off like last year and quite good with an acquisition already uh yeah actually during this weekend announced early yesterday morning for phase three i will mention a few words about them as well here All in all, our pipeline is very good, very solid. We have our in-house team that are sourcing and screening for new potential targets all the time in our most preferred geographies, which I explained previously. and our financial position is good. We have good credit lines from our financial institutions and that's our base, our major part of our financing and we actually increased that credit line a bit here last week with another 250 million and As a complement to that, we also have our bond, sustainability link bond, which we issued in August 23, but made a tap issue in November last year, 24. And that has always been the strategy to come out on the bond market to become known, so to speak, of the bond investors so we can get the better and better interest rate on the new issues. And actually then the tap issue had, it was more or less half the margin of the initial issue than the year before. So that's a proof that we have being accessed by the bond investors and they see us as a very good investment case. And we will not issue more bonds of the same kind. We have a framework of 1 billion, but so far outstanding 800 million. If we will issue more bonds in the future, that will be new on the new frameworks and new maturities. These bonds mature the existing ones in August 27. Looking down a little bit more in detail on the three acquisitions made during Q4. We actually did the Eagle automation system the same with our Q3 report. So we presented that call, but they deal with the solutions for hostile vehicle mitigation, high security products, gates, pollards, and other things. Pollards, sorry. and other things and unfortunately then you could say say for that type of products with more unsecure world and more and more type of buildings that require this kind of security physical security nowadays not only governmental buildings and such but now also sports arenas shopping centers state data centers other sensitive business as well as public spaces the pedestrian streets or yeah whatever So they are a very good outlook for the future for that company. Then in November, we acquired Dado Labs in Italy. They measure the pollutions coming out of different industries. and do different environmental sampling and that's according to rules and regulations within the EU and they are the kind of high-end provider of the most sophisticated testing equipment so customers being the laboratories performing these tests. And since this is a EU wide regulation, they have a great possibilities to to increase their sales out in Europe. And they are already in France and Spain as well, even though still at small, small volumes. But anyhow, so we also have great expectations on that company. And then in December, we also acquired Windex Agro in Denmark. which are also a sampling company, but soil sampling to make sure that the agriculture sector has the best prerequisites for their business to grow plants. And that's a need for that worldwide. So they sell globally and in South America, for example. Still a very small company, but with a good outlook. So all of these three very typical StipTech acquisitions, and they all solve at least one of the UN's sustainability very clearly. Then yesterday we announced the acquisition of Phase 3 Connectors, which is a little bit bigger company. It has an annual EBIT of around 3 million sterling. Based out of Liverpool, as you see on this page, mainly one pole connectors used at temporary electricity situations, either if it's on events, such things, or in, for example, a data center for backup electricity or other places where you need that to be able to plug in or plug out. electricity and the beauty with their products is that you cannot mix these up that's why you have different colors and you cannot even physically put the green into a blue or vice versa so foolproof kind of equipment in order for field technicians to to work under these with some sometimes tough conditions A very good company also solving one of the UN sustainability goals. And we welcome that team as well and should have a very good outlook. They have already today some business in common with at least two other companies in the group as well that are using their products already today. So that's an example where some colleagues in the group come up with the suggestion that we should look closer to this company. And we had our databases, but we had not been digging too deep into that yet. But we did found a very good target to negotiate with and eventually acquire. So far, the presentation has been based upon our existing business areas. But as you may know, we presented that already the last quarter in October and the new organization, which is then valid from 1st of January this year. So instead of two business areas, we have four. And the purpose is to make it more transparent, both for US investors, but also for entrepreneurs and potential sellers of companies where they will belong if they become part of the group. It shows even more clearly than our focus on these type of business segments, the supply chain and transportation segment to the left here, which is our biggest one when it comes to sales and profit. And then there we have nine business units. And then we have our energy and electrification where we have 11 business units. And also quite sizable business area. And then we have our water and bio economy a little bit smaller, but not too much. Another 11 business units and then safety and security with 10 so far. As you see, they are quite different in sales volume, but they all have very decent profit margins, typical for their different business sectors. And we see clear trends for future growth into all of these. So with the new respective head of these business areas, we will continue to develop and try to find new companies that belongs to each of these. The geographical split will still be the same and we can buy and acquire companies from any geography into any of these business areas. But we strongly believe that this will be of benefit in many different perspectives. And you find in our report now some pro forma figures for 2024 and 2023 quarter by quarter, as well as lists of which companies belongs to which business area. And then finally, looking ahead in a bit, we see, as I said, solid pipeline for future acquisitions. We have a good financial position. We are recognized by entrepreneurs and a lot of discussions going on. And then on the more market and demand side, There are some geopolitical and economic uncertainties, I guess everyone can see, but our strategic positions should support the continued long-term growth ahead. So, of course, very difficult to say about the future and we don't give any forecasts, but we think we are well positioned anyhow. have the new organization in place and as you may also have noticed it was a separate press we have then um being able to welcome a new head of our m a team he starts in may peter helsing just coming from sct and sca group where he was head of m a there and he will be A good contribution to our team with making both big and not least very small acquisitions as well and used to talk to entrepreneurs and also used to having a team and leading the work and the processes as we do. So and he will be part of the group management team when he joins. And we will continue to buy more companies and become more diversified, but still focusing on the segments that we have listed. So with that said, I think we can hand over for questions.

If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Max Baco from SEB. Please go ahead.

Hello, Bengt and Susanna. Thank you for taking the questions. Perhaps starting with the construction exposure here and one of us that you spoke about. Just wondering if you could elaborate a bit. I mean, it seems to be a quite, also on a group level, significant impact. So if you could elaborate on what type of projects these were and also how you intend to avoid such outcome in the future here.

uh yeah of course we don't go into each and every customer project but as we have said we we don't i must say don't really like the construction business doesn't have the dynamics we're looking for and as what could happen happened that you have projects then being having too much costs in relation to the revenue being boys And this is really not very new. It's older stuff from early last year and even a little bit in the year before, but where there have been discussions with customers of could we invoice this or not? And eventually it ended up with a yeah having to take more costs than we could cover up with invoices to customers so that's the purely one-off effects on on actually two very specific projects and regarding this having a risk for this in the future i would say not very likely since this type of business we have reduced i think we have managed a number of calls it's swedish construction company we have had doing shell completion work inner walls etc into new buildings and we have actually reduced the business so it's more or less only a very small project office and then merging it now into another existing business not very much related to this construction so the business that we have reduced and reduced but been forced to unexpectedly really for us take some extra cost last quarter okay okay sounds good um and then basically the final question uh

on Metus or the remaining elevator business, if you have an update on the progress of the potential divestment, if you can say anything about that.

Yeah, that's another business where we don't have the address as we want. It's also related to the overall construction and property economy. This company operates, have a lot of revenues in Germany, which you all know has been pretty tough. we have decided to divest it it takes some time we have split it up now in three parts production installation three separate parts and we're having discussions then with potential buyers to buy this but it's 300 employees and it takes some times to get everything sorted out and we had to take some additional costs in q4 could still be some costs in q1 that on the side but eventually we will divest this during the year and hopefully earlier than later during the year okay understood that was all for me for the moment thank you very much taking the questions

The next question comes from Niklas Savos from Redye. Please go ahead.

Hi, Bengt and Susanna. Thanks for the presentation. First question I have is market-related, and that's sort of, have you seen any shift in how governments in Europe look at sort of kick-starting growth now again after a few lackluster years. And maybe if you could elaborate how you think that could impact you.

I'm not sure I understood it. If governments kick-starting business, what did you say?

No, no, no. I mean that they choose to invest in infrastructure. I mean, support infrastructure investment through fiscal policies.

No, and we haven't seen any super big signs, but we know that the new government in the UK at least should, it shouldn't be a disadvantage with that government. They have said a lot of things. We're waiting for them to prove it, that they will put clarification of, for example, which we could get some benefit of. Otherwise, we don't see any real sign. Unfortunately, but as I said, not the opposite. So we're not dependent on anything.

I mean, do you need? Yeah. Yeah. I mean, are you are you sort of dependent on the growth? I mean, growth to return for you to return to organic growth now and when sort of organic growth normalized a bit during this year?

Governmental initiatives. Was that your question?

No, the question is if you think that you could drive organic growth within your businesses even with this sort of slow GDP development that we have seen and see currently.

Yeah, that's at least our analysis, even though it could be ups and downs. Many of our businesses are a bit project related because, you know, you could get the the order for the project this quarter or you get it the next quarter or you get it, but you cannot start until next quarter, for example. So it is a bit I'm certain when the actual projects, for example, start and we can start to recognize the revenues. But in the long term, we still see the same trends and we have some companies that are more or less totally independent of their overall economy. and such repairing broken pipes in the uk or taking care of sludge from italian water treatment plants and so on that has nothing to do with the economy at the same time there are of course some that are a little bit more dependent on kind of maintenance capex decisions it is but that tends also to be very stable over time So we're not a super rocket when all the economies goes booming, but we're not either downwards where the economies goes a bit the harsh way.

Last question. You have issued equity in the past to finance part of your acquisitions. I mean, you're a more stable company now with access to quite cheap financing. So you are able to finance your growth without raising equity. Curious to hear your view on this topic at the current stage.

Yeah, currently it's not in our plan to issue equity. Like mentioned, we recently issued or made the tap issue on the bond. We also extended the debt financing slightly. So we don't really see that it's an appropriate timing to issue equity.

Yeah, we don't.

But you don't close the door for that in the future?

No, our growth plans is not dependent on that. So since I think the last time was in November 22 for equity. But as Susanna was saying, in order to continue our acquisition path, we're not dependent on issuing any equity. So that's not the prerequisite or not the plan either.

Good. That's reassuring. Thank you so much.

Thank you.

The next question comes from Simon Jensen from ABG Sundahl Collier. Please go ahead.

Good afternoon, Bengt and Susanna. First of all, I just want to add a bit to Max's question about the construction-related units. know how you view the sort of momentum for those affected units within q4 but also potentially you know have you or how you view the momentum into q1 and q2 and also how we should view the comps for those units

As mentioned, the one that had the one of effects in Q4 is more or less non-existent during 2025. So that will not be any effects of that in any material way. Other companies we have, they are of different kinds, but they are a bit their customers are within the construction business. And of course, they could be a little bit dependent on activity levels, but also very different. We have a company in the UK renting out equipment to building sites uh especially in the london or area in the midlands area and there's still a lot of construction going on so they're decent business but a little bit lower activity now than a year ago and the other one we're thinking of is a norwegian company renting out or selling equipment for making possible projects winter time so they're throwing up the ground for example but also dealing with pest control in buildings and other things and that has also been a little bit weaker but that has also bit seasonality into their business so it could have effects in this q4 but i wouldn't say any major one

And comparing with the case that we now had in Q4, that was, you know, larger and project related. And it's not really the same kind of business for these other companies.

All right. And in terms of comps, do you have anything to add?

No, not really. So as I said, it's quite similar.

yeah as i said these one effects effects are not there and and the other companies hopefully will be running as usual now in q1 so all right thank you and the other question from my side is regarding the cash flows i mean the cash conversion improved quite nicely in q4 and i wonder if if maybe you can talk about if there were any sort of non-recurring factors here or if you expect you can keep the cash conversion on a higher level compared to previous quarters going forward.

I think, like I mentioned, the 109% that we had in the quarter, it's of course not a sustainable level over time. So there's definitely some timing effects there. But if you look at the underlyings, we do see that inventory, for example, reduced. with quite good levels in the quarter. And there are also improvements in other areas. So I think, I mean, we aim to have similar levels as the full year with variations, of course. But like I mentioned, our internal aim somewhere between 70 and 90, I think that's going to be somewhere where we're aiming for next year as well. So if you compare it with, I believe it was 68% in 2023, we should definitely be above that, more like the 24 levels overall.

All right, thank you. That's all for me.

As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad.

While waiting, if anyone else has a telephone question, we have one written in the chat, and I think that's a little bit caused by mistake, misunderstanding. It's regarding our CO2 reduction ambitions. As I mentioned, we had a 10% reduction in the intensity in 2024, but accumulated from 21, it was 24% reduction. And our goal is to have a 50% reduction until 26 in total so that means we have another 26 percent to go and as you could think that activities to reduce co2 emissions they don't take it take effect immediately for example it takes some time to replace your vehicle fleet take some time to do other activities to reduce your energy consumption so that's is according to our plan we had planned so so far being at the minus a 20 reduction and taking the other 30 percent six but now we're a little bit ahead of that plan with a 24 reduction so far So it's not that bad as someone wrote here and we don't need for 20% each year. So it would rather be 13% reduction each year and we hope to be able to reach that. That was so far the only written question as we see it.

There are no more phone questions at this time. So I hand the conference back to the speakers for any written questions or closing comments.

Yeah, and since no more written questions, we would just like to thank you for listening in on this webcast on this call. And wish you all a nice afternoon.