Studsvik AB (publ)

Thank you very much and welcome to our Q4 report of 2024 and also the full report of 2024. With me I have my CFO Peter Teske and we will go through both this but also highlighting the facts around the acquisition that we also press released this morning of Black Star Tech that will come at the end of the presentation. So let me start with a very short brief of what we do. So we are a trusted advisor in the nuclear science and technology business. Nuclear is obviously a technology and energy source that's been around from the late 60s and 70s and 80s and there is a lot of plants around. There is a lot of waste that has been produced. There is a lot of technology that needs to be revitalized and modernized. And we play in the full chain of what is now nuclear but also new build takes a bigger and bigger part. But there is a lot of work to decommission sites and this will be ongoing because the sites, nuclear sites will not be forever. They need to be modernized and at some point they will be decommissioned. And that's a very lengthy and complicated process that needs very advanced technology but also competence that we can provide. So we work in that. We work very much in a lot of our recent success and discussions about how we can support the longevity and extending the life of the global fleet. And we have several offerings in that area as well including fuel and material testing, waste management and also our software business that we come more to later. There is also now as you read constantly in the press more modernizations and also building totally new concepts. So both building traditional what is called Yen-3 reactors where we particularly work with light water or water cooled nuclear power station but also going into more SMRs and EMRs. The next generation of smaller modular nuclear power plants. And we also work with those vendors and supporting them in development. So really a support and a company supporting the full chain of what is happening in nuclear industry. And outside that we are also involved in life science applications for isotope production to different medtech equipment. If we then go into our results for Q4 and the results for the full year. I'm very proud to say that we had very strong growth in the quarter and is actually one of the strongest quarter we had in over the last 10 plus years. Up to almost 248 million in the quarter. That is a good sign that this market is alive and very much active at this moment in all our business areas. Also for the full year we had similar growth. And so also that is strong indication that the year is strong and that means that it's a sign that the customers wants more. There are more opportunities that we take. If we then look at our profit side, I think it's fair to say that we, I saw when I joined them that was also in motion when I started that we need to do something with our cost profile. And as you can see here we have done an adjusted operating profit of 20.5 million. Which is OK but not in line. We should actually have grown that based on that we have actually growing net sales. And the adjustments here we do for the expenses around our downsizing project and some adjustments of our inventory as well. But strong growth, strong profitability but the profitability we can do more. I would also like to mention that the board of directors is proposing a dividend of CX2 crowns per share

to the AGM later this spring. If I then go a little

bit into detail into the four business areas that we manage the company under. And I start with the one we call decommissioning and radiation protection services. And this is basically when we help our clients to decommission nuclear power plants. This is about tearing down metal, tearing down concrete, measuring radioactivity. So we do that in a safe way and classify in different ways to go to different waste treatment facilities. And it's a pretty big setup for us. This is mainly done in Germany and Switzerland for us but we are actually in some of the plants here in Sweden. We acquired a company called Extrem Borgersåg EBS in the southern part of Sweden in August last year. And that is now integrated and we have seen good sales and profitability contribute into the numbers that you see here. So a big part of the growth there actually comes from the integration and sales of EBS products and services during the second half of 2024. And I also want to mention this sounds like this is going to go away but I was in Germany last week. And it's actually very much the peak of decommissioning has not even started. We are not even there yet so this is a work that will continue for many, many, many years to come to make this in a safe way. If we then go to the business that we primarily perform out of our site north of Nyköping in Sweden called Studsvik. This is a laboratory where we use our hot cells where we can actually handle highly radioactive material and do testing for a research center, for power plant owners, for waste suppliers, for fuel suppliers. And this is an area where we had some problems during Q3, even the progress of the progress in the project. We have turned the quarter here. The efficiency program is concluded. We have much better throughput in the labs, specifically in the second half of the quarter. And we have had a very strong water intake in this area in Q4. So now we look forward to stronger and stronger quarter going into next year. And we have, as you can see here, turned the corner both in terms of revenue but also coming back to profitability in this area.

Although the profitability is not where it should be yet.

If I then go to ScanPower or our software optimization software that we provide to basically 50 percent of the light water type reactors in the world. And we are a worldwide leader in the development of that. And that gives our customers the possibility to choose from that from many more than one fuel vendor. And also that's very important for continuity of their services, but also getting the right price points there. We have we offer that throughout the world, but specifically in this quarter, we had a very strong sales into the US market to one of the largest utilities in the US. So very strong sales, strong operating profit continuing to that. And I was also in the US the last couple of weeks and it's a very strong team. We have confidence with all the big utilities there and it's a really good base to grow further into the US, which is the largest nuclear country in the world. And last but not least is our waste management technology. This is a small business area for us and it's also turning what we're doing that we used to do a lot of consulting, a lot of work with our metal treatment technology. But we are now turning that into work more and more to do business development with our in drum solution. You can see the pictures here from a drum before and after the treatment. We basically reduce the waste with some 90 percent. And this is extremely important for many of our customers have a big problem of where to store this and get the volumes down because this is expensive to store. We have several of those discussions ongoing both in the nuclear and the health care sector. Other than that, the quarter was affected by some delays in our metal

treatment licensing business in the UK. With that, I hand over to CFO Peter Teske for some more details on our financials.

Please, Peter. Thank you, Carl. And I would start up with our describe our net site, net sales for the group. And here you see a picture where we have our quarter sales since 22 and to 24. And you see all our four business areas in this diagram and also you see the others. And that's basically our elimination we do in the within the group. And as you see that we have a strong quarter behind us, an increase with seven point nine percent in local currency. And as Carl mentioned, it's the second best quarter in the last 10 years. And all our quarters in 2024 was better and higher net sales than the last year. And in total, we increased with eight point four percent in local currencies. And then if we go into our business areas, we see a DRPS and that's the bottom of this diagram. And they have a sales of 94 millions in Q4. And one big effect in this quarter is our acquisition of EBS. And they have a real positive effect of the sales. But also we see that the underlying business in Germany and Switzerland are performing good. And then if you look at FNT and that's in the middle, they have a sales of 86 millions. We also see, as we mentioned before, a big momentum in the production, at least in the second half of Q4. And also Stuttgart Scampower had delivered a strong quarter compared to last year. And that's mainly driven by the soft sales of our software program, Gardel and CMS5. And if we go further in more detail in our business areas, I would like to highlight some parts. And if we start up with our DRPS, as you see in the top left, our net sales increased compared to the quarter last year with 20.9 million SEC. And the operating profit increased with three point two million. And also here is EBS, a big contributor of the increase. But also we see our other business develops in a really good way. And as you all know, one third of our business in Germany is based basically the blue color, which means that the revenues is coming by every hour. And then we have the fuels we build per hours. So we see in those months like December, whereas there is a lot of holidays, we have a lower revenue. And then if you go to the top right, we have the fuels materials. And there we have an increase of 5.6 percent. And that's on the year compared to 2023. And here we see especially that Q1 and Q2 during the year was really good sales. And during the Q4, we have a lot of work and we took some cost in the efficiency program. And also we had some inventory impairment losses. And on the group level, we see in 2025 that the cost efficient program will lower our cost on 20 million. And that's on the group level. But we see most of them will affect the F&T during 2025. And then if you look at Scampower, I would like to highlight the operating profit here. You see that we have increased with operating profit with 4.9 million compared to last year. And there also we have in 2024, we had the fraud that we announced during the summer. And that's affect the business negative, the operating profit with negative with 7.5 million. So still the fraud where we are performing better than compared to 2023. And also we have the smallest business area, waste management. And that's basically license sales and engineering work. And we see that there is a negative development on that one during the last quarter. And much focus there has been on the business development of the Indrom facility that's now up and running

at the site in New Shopping. And if we move further and

see the adjusted EBIT of the quarter, and this one is for the full group. So the EBIT for the quarter was 1.6 million, but the adjusted EBIT is 20.5. And that's therefore, as we mentioned before, we have the efficiency program and also that's inventory impairment losses. That's all the difference between the EBIT and adjusted EBIT. And also what we've done during Q4 is that we have some remeasurement of the deferred taxes in US and Germany. That of course doesn't affect our EBIT, but it will affect our tax. If we look at the diagram you see in Q3 2024, that was negative. And that's because we had the fraud

booked then. And here we have some more

details of our P&L. And here I just want to highlight where you see the items that are affecting the comparability of the group when you compare 2024 to 2023. And also here you see on the gross profit that if we exclude the items that are affecting the comparability, we are basically on the gross profit in real numbers compared to last year. But of course we aren't happy because of the gross margin in percentage has been lowered. And that's also why we're doing this cost efficient program. That also affects our sales and administrative expenses that are higher. And that's also of course because we have the made acquisition of EBS. But also here is a lot of focus now when we go into 2025 to lower and be more efficient. So lower our cost and be more efficient. If you see on the other operating expenses, there's a big difference between 2023 and 2024. And that's where we have booked the fraud.

And if you go further, we have our cash flow. And

we have lower cash flow during this year. And that's, yeah, of course we had lower profit levels that affect our liquidity. But also we've done some investments in the Indram as we've spoken about. But also done some investments on site at Stutsvik. We see that our invoicing has been really good during the second half of Q4. And our trade receivables has increased with 75 million compared to when we closed the Q3. So we are expecting and collecting some more, have a positive cash flow here during the beginning of 2025. And also here, as you see, we are focusing a lot on the cash flow even

during 2025. And if we then look at the

balance sheets, I just want to mention, you see that the changes here on the inventory side. And that's basically due to the write down we've done. You see on the trade receivables that has increased compared to last year with almost 40 million. And also you see that our acquisition of EBS, we have higher investment levels than compared to last year. We have increased our

long

and

short term loans. And if you then go to our, we have three financial

goals in a group. And that's we have the growth target of 6%. We have a solidity target of 40 and EBIT of 12%. And as you see, during 2024, we reach our growth targets and we exceed it with 2%. And also, if you look at the EBIT, we don't really reach it this year. But we have done the efficiency program that we hopefully will give 20 million during 2025. And also during 2024, we had the fraud of 7.5 million. So that's basically if you go look at the financial during 2024. And one final thing that we want to mention on this call is during Q1 now, we will do an organization change. That we will merge waste management technology with our fuel and materials and technology business. And that will affect you in the first quarter 2025. And that's due to we want to streamline our internal operation and our activation on the market. So from 2025, we will report the segments, the three segments, fuel waste material technology, decommunition and radiation protection services, and also statistics scan power. So three business areas. And also that we are updating our report, quarterly report. So hopefully you will see it more visual and also more better communication in that one from the start of Q1 2025. So that's all for me and I will hand over to Carl Therén.

Thank you, Peter. And we will directly move over to the acquisition we announced alongside our report today. And it's a company called Black Star Tech. And as you read, this is taken from the press release. It extends our software capability. So we now also can use software, have software for remote condition monitoring and loss of offsite power. This is acquired as an asset deal from the large company Constellation, which is the largest producer of carbon-free energy. They operate 20 plus nuclear power plants in the US. So what is this then? The Black Star Tech product family leveraged lithium technology batteries. So it's a new generation batteries. Today, most of the batteries doing this kind of backup in the power plants are lead based. It's firmware and software. Firmware is the software that is closest to the hardware, in this case, the battery backup systems. And connectivity to the mission critical solutions. And this is the use case here, obviously, that you need to know that you are in this case, the emergency lighting will work in an emergency. So instead of going out and checking these batteries manually, we have software to control and monitor. So we know that these lamps basically will work if required. So basically lowering the maintenance costs, lowering the operational cost of this as one example, I can later can use to be more used to be part of Constellation. Interesting here is that you see in the red bullet there is that we develop this software contracted by Constellation. And that is now the software that we are buying back, you can say, from Constellation together with some inventory and the controls of the hardware. So we are very much aware and knowledgeable in this area. We now take it on as a global product and support a global market for this. Also important to note that this acquisition is not expected to have financial impact on such materiality that it significantly affects the groups results or financial position during 2025. So here is a more visual picture. You have software that we have developed, but it was owned by Constellation up until now. And it's monitoring for safety related battery monitoring controls and that is already in service and done. We have done also then firmware and this is an interesting remark. A lot of this hardware that will be used is obviously manufactured in China. And the utility really want to come away from that there is any software that is developed in China. So we have contracted by Constellation what we have now is that we have our own firmware that we have developed. Meaning that our customers can feel safe that this is developed by Western controlled company with all the heritage in this industry that we have. There are also opportunities to further control other types of hardware. We have given examples here of for example 4G, 5G networks into the power plants or also remote firing protections. But the initial applications is very much around the emergency lighting. So making sure we can support ship the emergency lighting but also control them and monitor them in a safe way in a software that is actually accepted and certified to be in nuclear power stations. We buy 40 patents. We buy 10 trademarks. We have this is an ongoing business already up and running. There are a little bit more than 10 separate initial customers in the US, i.e. nuclear power plants that are running these emergency lighting with monitoring software. We will also continue to work with those customers but also drive these to other utilities both in the US and outside the US. It's a very large market that opens up for modernizing these kind of equipment. When life extends these problems now is going to be extended to live until 2050, 2060. There's going to be a digitalization and modernization required throughout

the world utility plants.

For summary, we're in the growth of our software business. You remember that we had a very strong year and strong business with the ScanPower. This is yet another step to give that business unit more products to sell on the worldwide basis. It reduces a clear business case for the customers by reducing operational maintenance costs for important safety systems like emergency lighting. We are also in a very good position to do this because of our brand and our heritage and our certification to support nuclear power plants with both software and hardware installations. This is initially focused on the nuclear power plants, but there could also be other critical infrastructure where these kind of systems are required. We would also explore those opportunities. As I said before, it will not affect our financial position during 2025. With that, my last and final slide, which is the outlook for the group. In 2024, we have experienced top-line growth, reduced our costs and engaged positively with many customers. We have laid a solid foundation for future growth and profitability. The growth you saw, the profitability is also measured that we have already taken and concluded in terms of cost-cutting. But also there are general things around how we buy things and how we manage our investments that we are now looking after to make it more efficient. By that, we enter 2025 with strong team, positive market climate, two new acquisitions with EBS and Black Star Tech, and all our existing products and services into a market that is very much alive. And a lot of things happen with the nuclear market as we speak. So with those concluding remarks, I think our presentation is finished. Thank you very much for listening. Then we can take questions, if

any. Thank you. If you wish to ask a question, please dial 5 on your telephone keypad to enter the queue. And the first question comes from Stefan Knutsson from ABG. Please go ahead.

Morning, Carl and Peter. Thank you for taking my questions. I have a couple. Firstly, on Scampower, positive results here in the fourth quarter. How much of that was driven by licensed sales? And would you say that these license sales are recurrent or more of a one-time sale?

So a big part of the growth comes from licensed sales. We have a software business that is recurring with the strong maintenance and maintenance contract with these customers. But there is a mix of licensed sales and recurring maintenance and software upgrade business. So it was also driven

by license sales to some big utilities in the US.

Thank

you for that clarification. And then on the decommissioning and radiation protection services. I just noticed that a lot of the profitability here in Q4 and also a bit in Q3 was driven by Extremboren Sogtechnik. How is the underlying profitability developing in Germany and the Benelux countries, for example?

Well, I would say if I now remember correctly that our profitability for the base business in the RPS was pretty strong in Q3. And in Q4, this is a very sensitive business in terms of allocation of revenue. So if you have more of a holiday season, you run into a tougher profitability situation. And so it's correct that in Q4, the profitability was very much driven by EBS. But this is a strong business. It's very well managed, but it's also tight on margin. So for the quarters where we have different things disturbing, we have lower margins. And for the quarters where we have less things disturbing, we have a reasonably strong margin for the kind of business this is, which is very much a time and staff related business. Having said that, EBS is currently the main thing we get from EBS is their current business. We are now into several projects in Germany where we include EBS as part of our offering around the RPS. And that's when we have hoped to get a better competitive position. And also that would hopefully drive more profitability

into the sort of base business as well.

OK, very clear. And then finally on fuel and materials. I just wonder if there is anything structurally now when you have initiated your cost cutting program that prevents you from reaching back to historical profitability levels?

No, I think thank you for a very good question. No, I don't think so. This is a business also which is very complicated sometimes. It is depending on some very complicated fuel transport. There is hot cells that we need to be very safety aware. There could be things that stop hot cell deliveries and work for days sometimes when there is a problem. But there is nothing in general that will stop us to come back to historical profitability levels. And as we wrote in the report, we have a very strong order situation in that area. So it's very much an execution related

task at this time.

OK, thank you very much for those answers. I get back in line.

Thank you, Stefan. If there are any more questions on the telephone conference, please dial the Poundkey 5 to enter the queue. Otherwise, we will move into the written questions. And I ask Karl and Peter if there are any written questions.

Well, there are some questions about the developments that we had with China in the Swedish press. And we have basically nothing more to say. This is an HR thing. We do work with Chinese customers through our research programs where Chinese customers are part of bigger consortia that are that are using our services. And other than

that, we have nothing to say around our Chinese business.

If there are any more phone questions, please dial Poundkey 5 on your telephone keypad. There seems to be no more questions. So I hand over to Karl and Peter for any closing comments.

Thank you for listening. We will move into 2025 with a lot of activity, a lot of acquisitions to take care of. We will talk to you again in late April.