Vestum AB

And welcome to our presentation of Vestum's report for the first quarter 2024. My name is Simon Gothberg and I'm the CEO of the company and together with me I also have CFO Olof Andersson. Let's have a look at some highlights from the first quarter. Demand remained relatively stable throughout the quarter however with a Slightly negative organic growth of 3.5%, reaching sales of 1.24 billion. Adjusted EBITDA came down a bit to 100 million in comparison to 119 million in the same quarter last year. And the margin in Q1 2024 came in at 8.1% in comparison to 9.3% last year. And this drop was mainly driven by seasonality effects from an early Easter, strong reference figures from last year, and a somewhat weaker market in some of our segments. That said, the strong development in the water segment continued, and we have now successfully delivered increased sales and profits for five consecutive quarters in this segment. Cash flow generation was strong in the quarter, with operating cash flow amounting to 210 million with a cash conversion of 151%, and while free cash flow per share grew by 96%, which is quite outstanding. This means that leverage remains at 2.5 times EBITDA, which is within our financial targets. We've also completed the strategic review and successfully refinanced the outstanding bond of 900 million, with bank financing and existing cash. And this could be done thanks to a very strong cash flow in the last couple of quarters. And we have now an improved capital structure with lowered interest expenses of roughly 30 million while significantly reducing risk. So after spending the last two years focusing on the balance sheet and ensuring that we have the right capital structure in place, It's also great that we're now back at pursuing acquisitions again and now mainly with a focus on the water segments. Let's have a look at the segments and starting with the water segments. As mentioned, demand remained strong for our products, especially in the UK, which is our largest market. The quarter generated sales of 215 million and a beta of 43 million with a margin of 20%. And this means that we generated organic EBITDA growth of 39%. On an LTM basis, we're now above 150 million in EBITDA with a margin of 20%. And the underlying market here is driven by underinvestment in water infrastructure and climate change. And we're expecting continued stable demand going forward. As mentioned, we are now actively pursuing acquisitions to the segments. Moving on to the services segment, here we're exposed to the installation industry, mainly in Sweden, which continues to face a tough market with lower demand from property owners. Sales is now at historically low levels, but should also mention that the first quarter was impacted by the early Easter that occurred in March this year compared to April last year, which meant three and a half less working days in March. The first quarter generated sales of 415 million and an EBITDA of 32 million. As with the previous quarter, I think it's fair to say that we've done a good job in defending our margins as we managed to generate 7.8% EBITDA margin in Q1, which is basically in line with the same period last year. On LTM basis, we are still at a double-digit EBITDA margin of 10%, which stands out in comparison to the industry as a whole. Lastly, let's have a look at the infrastructure segment. We experienced continued stable demand with sales of 610 million, although we beat the decrease to 37 million. And this was mainly due to the early Easter and strong reference figures from last year. And we have during the quarter won several new projects, which will generate profits throughout the year. On an LTM basis, the segment generates sales of 3.2 billion and an EBITDA of 323 million, corresponding to a margin of 10%. And as for the services segment, we are humble about the short-term development as we're facing an uncertain market. But we think that we are very well positioned with high-quality players in growing niches of our infrastructure. Now over to Olof.

Thank you. We'll proceed to have a look at our net sales and EBITDA development over the past couple of quarters. And we begin with a chart on the left, which shows net sales, where we were down slightly compared to the same period last year. And this graph also clearly shows how Q1 is a seasonally smaller quarter driven particularly by the infrastructure segment. If we move on to the chart in the middle showing EBITDA development, you'll see that EBITDA was weaker than last year, driven by the services and infrastructure segments, as Simon mentioned earlier. And finally, in the chart to the right, the EBITDA margin followed the same pattern as EBITDA, decreasing by 1.2 percentage points compared to the same period last year. Looking at net sales growth, Q1 decreased by 3% compared to last year, and the organic growth was negative 45 million sec, corresponding to a drop of 3.5%. Moving on to operating cash flow during the last 12 months, we continue to see strong operating cash flows and cash conversion, and the development in Q1 was driven by a positive networking capital development. So that was operating cash flow. Now let's look at free cash flow. And we define free cash flow as cash flow from operating activities. So that is including interest and taxes paid. And then change in networking capital. And then we subtract capex spending, i.e. investment in fixed assets. and we also subtract leasing amortization. So basically free cash flow is cash that can be used for dividends, acquisitions and repayment of debts. So for the last 12 months, the free cash flow amounted to 496 million SEK. And that was an increase in a sequential increase up from 421 million SEK in the previous quarter. Let's move on to net debt and leverage development. The net debt is represented here by the pink bars and amounted to 2.0 billion SEC down from 2.5 billion SEC same period last year, which corresponds to a decrease of 20%. Leverage remained at 2.5 times sequentially from last quarter. And it is worth noting that When taking into account earn-out debt, the leverage multiple actually decreased from 2.8 to 2.7. As Simon mentioned earlier, we've revised our capital structure by in April redeeming the bond that was maturing in the autumn of 2024 using our cash, but also by increasing and extending our credit facilities. So we don't have any remaining bond or credit facility maturities in this year or the next. And by that, I hand it back to you Simon.

All right, thank you. Let's summarize. So the quarter generated stable volumes and profitability, however slightly lower EBITDA margin in comparison to last year. And the water segment continues to generate high growth. And I think with our market leading product technology specialists In water infrastructure, we feel confident in continuing to deliver strong growth and profitability going forward. And cash flow has been very strong. We have now generated an LTM free cash flow of half a billion SEK. Thanks to a solid cash flow, we remain within our financial leverage target of two and a half times EBDA. The strategic review has been concluded and we managed to significantly improve the capital structure leading to lowered annual interest expenses of roughly 30 million. We've also streamlined operations with divestitures meaning that we have reduced operational risk while also strengthening the financial profile for remaining operations. And in addition to this we have completed a reorganization and office move in January 2024 leading to annual cost savings of approximately 10 million. As mentioned throughout the presentation, we are now actively pursuing acquisition opportunities and this will be focused on the water segment as this is where we are expecting highest growth and where we have extremely well positioned platforms that are keen to grow with acquisitions. On a final note, economic cycle uncertainties remain high, but with a strong focus on efficient capital allocation and well positioned businesses in the growing infrastructure sector, we feel confident on delivering profitable growth over time. And with that, we open up for questions.