Sdiptech AB (publ)

Hello, everybody. Welcome to StipTech's presentation for the fourth quarter. I'm Anders Mattsson, CEO of StipTech, and I will be presenting here today together with our CFO, Bengt Leistrom. A short intro to StipTech for any new listener on the call today. StipTech acquired, developed, and created a long-term home for niche companies within attractive infrastructure. Today we consist of 31 companies in the group and we operate in a decentralized structure and each company is responsible for the day-to-day operations. We divide the group into four business areas and each business area has a clear structural underlying growth trend that we see for the future. For the full year 2025, Stiptik as a group has 4.5 billion SEK in revenues and 968 million SEK in adjusted EBITDA and an adjusted EBITDA margin of 21.5%. And these are numbers for our core operation, excluding companies that are currently being divested. To start with, I would like to give you some highlights to the quarter. On a strategic level, we have made clear progress during the quarter with our divestments. Today, we have signed eight out of the 11 companies for completion. A short and long-term target for return on capital employed is being implemented for each business unit. And we have done one acquisition in the quarter, which ties nicely into our growing cold chain cluster. Financially, we're satisfied with a strong organic sales growth of quarter, showing a good demand for our products and services in the market. I also would like to highlight the strong cash conversion of 134% in the quarter, primarily coming from reduction in working capital levels. Supply chain and transportation had a challenging quarter, but outlook looks strong. Priorities going forward, many of our companies have a strong return on capital employed, but we have a number of companies we can improve going forward. To be able to reach our growth target, we need to acquire in a high pace, which is in the plan for 2020. And we have several companies in the group with good momentum, and we need to ensure that we are growing smart. And by smart, I mean being prudent with working capital and CapEx to facilitate that growth going forward. I also would like to follow up on the implementation of our four key strategic pillars that we presented on our capital markets day during Q4 last year. The first one is around portfolio management. I already mentioned the progress of our divestment, eight have been signed for divestment with new owners. We have achieved an enterprise value of full year 2025 EBIT times six for these companies, which then is in line with our expectations of the value. We have also been more prudent on which companies to allocate CapEx to during our budget for 2026. And that's also according to our updated framework on how to look at CapEx investment going forward. Second pillar, as we call proactive ownership, we have defined a short and a long-term target for each company according to the DuPont framework. We have some outliers in the group we need to focus on, but the majority of our companies have a great return on capital employed number as a base. I think we'll go through that a little bit later, but on average 62% for the year. We have also aligned incentives towards capital efficiency in bonus plan for 2026. The third pillar is about disciplined and return-focused M&A. One example of an action here is that we have implemented a cash flow parameter in all earn-out discussion that we have in early stages for the LOIs with each and every potential acquisition. We have also intensified local sourcing companies. This is not a short-term fix, and this is something that's going to be very important for us going forward to be able to increase hit rate and also efficiency in our sourcing. The fourth pillar is around clusters. Our latest hack was linked to our cold chain cluster, which is now four companies connected. And just for example, the commercial due diligence was very efficient and straightforward as we already had a lot of information about the market and actually even the company in the group. So in summary, glad to report a strong momentum in implementing our key strategic initiatives. However, we all know that it's not just a short fix and we look forward to a long-term mindset shift as well for us as a group. Then we are coming into the financial development in the quarter. We are satisfied with the net sales development in the quarter, plus 3% in total and 6% organic sales growth indicate the strong demand for our products and services in the market. The currency effect of negative 8% is substantial, of course, and it's exposure to the sterling. In the quarter, we had a stable We had stable development, sorry, for three out of four business areas. We were expecting more sales from supply chain and transportation as we have over the in the year. We have invested for higher volumes. For the full year, we achieved 6% sales growth and 3% organic growth. The year started weak, but improved during the second half of the year and reached a solid growth number for the year. A trend that we foresee to continue in 2026 as well. No significant change in our geographic distribution of sales, with UK as our largest market. Proprietary products is at the same amount as previously, with 67% of total sales. If we then go to adjusted EBITDA in the quarter, adjusted EBITDA came in at 255 million SEC. Organic growth was flat and a large negative effect from the currency of minus 7%. Flat organic growth is primarily a result of a weak quarter in the business area supply chain and transportation with three large companies that have invested for future growth. I will come back to that. I will give you some highlights per business area later as well. The margin of 22.4% in the quarter is strong, even though lower compared to an exceptional margin. For the full year, adjusted EBITDA increased by 3% to 968 million SEK. This is an organic decline of 1% and mainly due to the weak first half of the year. The full year margin of 21.5% is in line where we see the more we expect our adjusted EBITDA margin to be between 21 and 21.5%. We need to ensure sustainable growth and also new acquisition with potentially lower margins coming in and being part of the mix. So with that said, I will now hand over to Bengt and he will continue with more financial update.

Thank you, Anders. And I will start then with some numbers for the full group. What you just described, Anders, was for our core operations. But looking then on the profit levels for the full group, as you can see on the left hand side for the full years this year and a couple of years back, we have had a strong average growth of 24%, even though it was then slowing off in 25, where it only increased 1% compared to last year. Of that 1% was an organic decline of 4% and another negative effect from the strong Swedish currency, especially against the British pound sterling with a minus 3% currency effect on the full year. And then for non-comparable growth, that is the companies we have effects from the one we divested was plus 8%. So all in all, quite good. But of course, then the Sanders also said the first half of the year was a bit sluggish. And for the quarter for the full group, the quarter EBITDA was an organic plus minus zero. Looking then on the return on the capital employed, as you can see on the right hand side, we have a chart showing on one hand the actual capital employed, which has been reduced a little bit from last year. The improvement then from 12.6 to 13.5 is mainly because of an increased EBITDA for the group. Looking at, and of course, the 13.5% is much lower than the return on capital employed in our operations, where the average for our core operations, that is excluding the goodwill and material assets that we book in connection with the acquisitions, continue to be strong around the 60%. We also show the number from another popular KPI, the profit over working capital that some peers focus a lot on. We focus more on the return on capital employed, but anyhow, it has been quite steady around the 80% for a number of years, which is of course an important KPI as well and a sign of how we manage and get profit out of our working capital. looking down at the cash and cash conversion you can look on the to the left hand bottom and you see the cash flow generation on this mention as well it's a very strong for the last quarter um exceptionally strong i would say perhaps in 134 percent but that was mainly due to reduced inventories and also getting the money in from our customers and we have had that focus for some time now and of course the activities continue to improve this even further going on even though perhaps the cash flow generation will not be at that level consistently over time a yellow marked area where we have our ambitions between 70 to 90 percent over the different quarters to stay there in the cash flow generation and conversion Another important KPI is then the free cash flow. That is then not only the cash flow from our operations, but also reducing with the leasing part and any capex that we do in the quarter. And for the last 12 months, that free cash flow per share have been almost 17 Swedish kronor per share, up from almost 13 a year ago. In that chart, you also see the earnings per share, which is somewhat lower. It's around 12 kroner per share if we exclude goodwill write downs that we did during Q3 2025. And that is lower than the free cash flow. That is based on that we do some accounting when it comes to IFRS rules in connection with our acquisitions. So for example, we need to book non-cash interest rates, discount rates for our provisions for continued considerations. And that hurts with about a kroner and 50 euro per share. So that explains to some part the gap between the free cash flow and the actual net earnings per share. But all in all, we are satisfied with a quarter from a cash flow perspective, and we'll continue to work on that. then look at the balance sheet. From a leverage perspective, one of our financial targets are now to have our total net debt leveraged, the total net debt compared with the EBITDA to be below three. And for the quarter measured down, of course, on a 12-month basis, it was then below, it was 2.84. And you see the trend on the left-hand side of this slide. We also have another KPI for our debt, and that's what we call the financial net debt, which is all debt but excluding the provisions for earnouts. And that one did also decrease to 2.12. And the main reason for this is that the net debt was reduced because of cash flow coming in both from the operations and from, for example, the divestment of one of the companies that we closed them last year. And these are now provisions is always tricky to understand fully the impact on the leverage and so on. But you see on the right hand side that our provisions booked as a debt has decreased over the years as a share of the total net debt. So coming from almost half or even more than half of all the debt is now 25% of the net debt and that is number we expect to decrease as each and every acquisition become a smaller part of the total picture. And during this quarter, we did some write downs of these provisions. And that means that the actual model works that if some companies under earn out are performing a little bit less than expected, then we don't expect to pay out the earnouts that we have booked. So we release some of that debt and that makes an income. But that's not including in our adjusted EBITDA numbers. It's one offs and we have detailed those in the report towards the end if you want to dig into that in more detail. Right, so I hand over back to Anders for the business areas.

Yes, thank you Bengt. So we have updated the presentation and going through a little bit more in detail in this area now. Starting with supply chain and transportation, our largest business area, we had a poor performance, a relative poor performance in the quarter, an organic decline in adjusted EBITDA of roughly 9%. And the result is mainly due to three business units, transport refrigeration, GEH, They actually came out of a four-year earn-out, and we have increased investment to ensure a stable operation going forward. On top of this, two larger customers have throughout the year been postponing the orders, and that was unfortunately into 26 as well. The other company, our company within winter road maintenance, Hiltip, have invested in an improved factory and organization in the US to be able to serve the North American market locally. And the cost for this has affected the result, but we are convinced that this is the right thing to do. as shipping in containers from Finland with finished goods is not a long-term solution for a market where we see great potential for our products for the future. And our company within Port Automation, Certus, has experienced projects to be postponed during the year, and we were awaiting that to happen in Q4. And those global bigger projects, we feel it's the global uncertainty that is affecting these kinds of major decisions for the larger ports in this example. However, we have in the business area or not long-term as we see it, and we have a positive outlook for 2026 for the business area as a group. Within the business area, we are also happy to announce the acquisition of Store late in the quarter, company based in the Netherlands and fits well, as I already said, into our cold chain cluster. Storr provides partition walls for refrigerated transportation. They have a product with a very high precision, which is needed to be able to separate frozen food from chilled food, for example. And the business model is interesting because the end customer, they usually don't know exactly how they would like to fit the lorry when they buy the bigger lorry. So Star can actually come in and tailor flexible solutions depending on the needs, which also then can change over the lifetime for the lorry operator. So we look forward to continue to develop this company as part of the STIT tech going forward. Then we're coming into energy and electrification, which had a very strong quarter. Net sales 281 million and adjusted EBITDA of 73 million. That's an organic sales growth of 14% and roughly the same adjusted EBITDA organic growth as well. And also on top of that, a strong acquisition coming in Q1 and delivering a very strong result for the year. Our return on capital employed, as you can see, is below the average in the group. And we have a few companies where we see improvement potential here. And that is primarily around inventory management. The demand is strong for several business units in this business area. I just would like to highlight one company. has a very strong year and that is Unipower company from Allingsås. They offer equipment for measuring and monitoring power quality in the networks and as we know when renewable energy sources grow and also the network is growing itself, power quality becomes even more important to protect critical applications in a production environment or it could actually be in a hospital for example. And even though we had a great 2025, we see the demand is still there and we see that's going to continue for the future. On other notice for this business area, we have the new leader, the new head of the business area started in January. And it feels great to have recruited somebody that is actually based in UK for such an important segment for us, where the majority of our companies is in the UK. If we then move to water and bioeconomy, they deliver a solid result in Q4, which is positive after a relative weak development in Q1 to Q3. Net sales is 241 million and adjusted EBITDA at 56 million. Organic sales grows 9% and adjusted EBITDA grows of roughly 5%. In the business area, we see that we have We have more potential. And in 2020, we decided to make a number of leadership changes to the local businesses. We have the right products. The market is there. So we have said that we need to focus on more or bringing in more commercial oriented leadership in some of the units. And we believe this will have a positive impact for the long term development of the portfolio. Then we go to the last business area, safety security. They had a development in line with last year and kept up the high margin of 29%. Organic sales growth of 1% and organic... Just the DBA grows of 2%. For the full year, Eagle Automation had a very strong year. I mentioned it the last quarter as well, but Eagle, they provide high security gates, bollards and blockers. And Eagle's products are certified to withstand vehicle attacks, which is then a specific certification needed. And customer segments or data center and airports, for example. And the strong development has led to further needs for expanding their assembly facility in the UK. And just to tie it back to our framework around where to allocate CapEx, this is a good example of where it makes sense to increase CapEx to expand the operations to get that market share that is out there for us to gain further. Then we're moving into M&A. In the quarter, as we said, we finalized the latest acquisition of Storr and total acquired growth landed at 50 million SEK in 2025. For the full year, we have been more selective, which has helped us to decrease the leverage as a group as well. And this is something we have... been able to achieve and we now look forward to our ambition in 2026 for M&A. And as part of our updated strategic initiatives, we will be strict on our valuation principles and prioritize cash flow or IRR for each investment we're going into. Another action is that we would like to intensify the local sourcing throughout our existing companies as well. So with that said, we are looking forward to more acquisition in 2026. Yeah, and just to give you the summary of the quarter, what we presented here today, we've had a solid financial result in the fourth quarter with many KPIs in the right direction. Most of the business unit develop a stable result in Q4, except from a few businesses in supply chain. and transportation, but we see for 2026. We have had the selective M&A agenda in 2025, but that's going to be a strong focus now, 2026, going forward. The strategic initiatives, we are happy that we have made good progress with those. And I'm also very glad to have him in place now going into 2026 as well. And the outlook remains positive for us as a group. So that was all from the presentation here today. I think we can open up thanks for the.