Vestum AB

Hello everyone and welcome to our presentation of Vestum's year-end report for 2024. My name is Simon Gothberg, CEO of Vestum and together with me I also have Olof Andersson, CFO of the company. Now I'd like to start today's presentation on giving a short summary of the full year We have accomplished so much and delivered on almost everything we set out to do at the beginning of the year. We went into the year with a strategic review with the ambition to increase our focus on core business consisting of leading suppliers in growing market niches and technologies in infrastructure. while also deleveraging. And we have done just that, divested non-core companies and increased the level of specialization in Vestum. Product companies now make up 63% of our profits and our financial net debts, including earnouts, were reduced by 38% to 1.4 billion SEK, down from 2.3 billion. This takes us to a leverage of 2.2 times reported EBITDA, which is well in line with our financial targets. For many of our businesses, the market has been quite challenging throughout 2024. And this can be seen in the decline in sales growth of minus 3.8%, of which minus 6% organically. Sales reached 4.2 billion with an EBITDA margin of 10.5%. Operational cash flows remained stable and increased to 665 million, while free cash flow decreased to 204 million. In 2025, free cash flow will be positively impacted by our improved capital structure that will be in place from March and onward, meaning full bank financing as our last outstanding bond of 600 million will be redeemed, saving approximately 70 million in interest costs per year. Acquisition-wise, we made our first acquisition in two years in Q3. And given our strong balance sheet, we are now in a good position to make acquisitions again. Main focus for platform acquisitions will be on the two segments, flow technology and niche products. Let's have a look at some highlights from Q4. As mentioned, the challenging market conditions have remained for certain parts of our business, but it's good to see that organic growth is going in the right direction as there's been a sequential improvement compared to Q2 and Q3. We generated organic growth profits in two out of three segments, water and infrastructure, while the services segment continued to face a rather tough market And in order to streamline Vestum, strengthen our balance sheet and position us for growth, as previously mentioned, we've divested a number of contracting companies in the infrastructure segment at an attractive valuation. And thanks to solid cash flows coupled with the divestitures, we have successfully deleveraged to a 2.2 times reported EBDA. As we have strategically repositioned Vestum, a new group structure was announced to clarify our strategic focus on growing niches and technologies in infrastructure. And going forward, capital allocation will shift from deleveraging to growth. Let's have a look at the segments, starting with the water segment. Demand has continued to be strong with sales growth of 31%. driven by both the PDAS acquisition and organic growth. Essentially, all markets have performed well, and as with previous quarters, highest growth was seen in the UK. The margin was, as expected, lower than last year, driven by the acquisition of PDAS. That company, though, continues to perform in line with expectation and continues to improve its EBITDA margin. We have, after year end, secured two significant distribution agreements with Xylem, a global market leader in water solutions, which will positively impact our UK operations in the years to come. For the full year, the segment generates 20% growth and a beta margin of 19%, which is in line with last year. Moving on to the infrastructure segment, sales growth in the quarter compared to Q2 and Q3, but remained negative at minus 8%. Profitability improved for the second quarter in a row with an EBITDA margin of 11%, mainly driven by our product companies. The products represented 50% of the segments EBITDA. For the services part of the segment, focus remains on improving profitability. Lastly, let's move on to the services segment. As with the infrastructure segment, growth continued to improve sequentially compared to all three previous quarters in 2024, but remained negative at minus 8% as we're still facing a challenging property market. And although it's good to see that sales growth improved, profitability was negatively impacted by mainly three factors. less working days in December, lower volumes, and some credit losses. Overall, the margin came down to 5%, which of course is too low for the segment. But as the market now picks up with higher volumes, which we really have experienced since end of summer, and with an increased focus on higher margin projects, the profitability will improve for these companies. Now, as we have spent the last two years on strategically repositioned Vestum, and to clarify our strategic focus on growing market niches and technologies, we have implemented a new group structure from January 1st, 2025. The group will be divided into the three segments, flow technology, niche products and solutions. Starting from the far left here, flow technology, We're focused on market leading products that improve water infrastructure. The segment offers pumps, filters, measurement technology, pipe systems, and other float technology products. The segment generated strong sales growth of 15% in 2024 with a margin of 18.4%. And going forward, we will invest in both organic and acquisitive growth to the segment. Moving on to the middle part, niche products. Here we have leading product companies in selected technology niches. The segment offers mainly safety systems, containers, and fasteners. Sales dropped for the segment in 2024, driven by the companies with exposure to construction and markets. The full year beta margin of 12.3% is quite low. should be about 15% for the segment. And we will continue to focus on improving margins for certain parts of the segment while we'll invest in growth in others, both organically and in new platform acquisitions. Moving on to the far right here, Solutions. Here we offer specialized solutions for maintaining, developing, and streamlining properties and transport networks. Segment offers renovation of concrete structure, solutions regarding ceiling layer and technical installation as well as other installation services. The segment has overall faced challenging market conditions in 2024, with sales dropping some 7%, while the EBITDA margin came down to 7.1%. And the margin here should be above 10%, and we're continuously working to improve the profitability.

now over to uh olaf thank you simon let's have a look at our net sales and ebta development over the past couple of quarters and let's begin with the chart on the left which shows net sales where we saw a decrease compared to the same period last year driven by the services and infrastructure segments if we move on to the chart in the middle showing adjusted eba development We see the same pattern with a decrease, which in turn was driven primarily by the services segment. And finally, in the chart to the right, the EBITDA margin also decreased compared to the same period last year, again, mainly driven by the services segment. And that brings us to the next slide, which is net sales growth. And we saw negative organic growth of 7.7% in the quarter. At the same time, the acquisition of PDAS contributed positively to net sales growth. And in total, net sales in Q4 decreased by 2.5% compared to the same period last year. We'll proceed to have a look at operating cash flow during the last 12 months. And the operating cash flow increased versus last quarter, mainly driven by change in net working capital. And cash conversion also increased somewhat compared to previous quarter to a quite solid 105%. 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 change in net worth and capital. And then we subtract capex spending, i.e. investments 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 debt. and for the last 12 months the free cash flow amounted to 204 million SEK and that corresponds to 49% of EBITDA. It's worth noting that the free cash flow presented here is negatively impacted by the divestments we've made in the sense that all operating cash flow generated by the companies that are being divested has been excluded in accordance with IFRS 5. But the positive effect on financials that we get from these divestments is obviously not reflected here. So that's important to note. Onto the net debt and leverage development. So the net debt is represented by the pink bars in the chart and amounted to 1.4 billion SEC down from 2.1 billion SEC same period last year. Leverage also decreased from 2.1 times to 2.2 times sequentially from last quarter, driven by the divestments that we have mentioned previously. Also, earn out debt was reduced to 19 million sec in Q4. And when taking into account earn at debt, the leverage multiple was 2.3 times. And by that, I leave it back to you, Sami.

All right, thank you. So in summary, we have sequentially improved organic growth and continue to deliver strong results in the water and infrastructure segment, as also seen in Q3. In the services segment, however, profitability continues to be impacted by a challenging market. And we are seeing signs, though, of recovery in 2025, as seen by the sales volume development throughout 2024. Our capital structure will be heavily improved in Q1 2025, as we are redeeming our last outstanding bond and transitioning to full bank financing, leading to substantial annual costs, annual interest cost savings. The level of product companies continues to increase and reached 63% of Group EBITDA in 2024. And we have established a new group structure for growth and expect to make new platform acquisitions in the next couple of months. Our capital allocation focus will shift from deleveraging to growth, as we're currently evaluating several acquisition candidates and organic growth initiatives. And as with previous quarters in 2024, market uncertainties remain in the short term, but the positive shift in market outlook has continued in Q4, and we expect to return to growth in 2025. And with that, we open up for questions.