Vestum AB

Welcome to our presentation of Vestum's Intervene report for Q1 2025. My name is Simon Gothberg, CEO of Vestum and together with me also Olof Andersson, CFO of the company. Now let's have a look at some highlights from the quarter. Our focus on growth and investments in both organic initiatives and acquisitions has proved successful. In the first quarter, Vestum generated an organic growth of 3% while profitability was strengthened. And this is the first time in two years that existing operations have generated positive organic growth. Leverage came down to 2.1 times reported EBDA, mainly driven by divestitures. And cash flow decreased as expected in the quarter. driven by an increase in investments in organic growth, increased working capital tie-up, and some financial one-time costs related to the early redemption of Vestum's last outstanding bond. And the investments mainly relate to geographical expansion in both our UK operations within Flow Technology, where we have market leading positions within water infrastructure and within the niche product segment in the Swedish market. And after end of quarter, we acquired Nordtech, a UK market leader in monitoring and control technology in the structurally growing energy and water distribution sector in the UK. The company generates high margins and high return on capital. The acquisition will be consolidated into Vestum from the second quarter. Now let's have a look at the segments, starting with the flow technology segments. Demand has continued to be stable with sales growth of 13% driven by the PDAS acquisition. And we have faced some tough reference figures from last year, mainly in the UK. But even so, we continue to generate strong numbers. The margin was as expected lower than last year driven by, again, the acquisition of PDAS. And as with previous quarter, PDAS continues to perform in line with expectation and continues to improve its EBITDA margin. And focus for the segment going forward is growth. Moving on to niche products, the positive growth trend continues. And for the first time in two years, we break negative growth to neutral development. while the EBITDA margin improves from 9.7% to 10.0%. Certain parts of the segment continues to face a challenging market where we focus on improving profitability and while we're still allocating capital to growth in other parts where the return on capital and demand remain high. Lastly, let's have a look at the solutions segment. We have divested several companies during the quarter, including the largest and third largest company in the segment, meaning that sales and profits in absolute terms decreased. The first quarter is seasonally the weakest quarter of the year. However, organic growth in the segment is positive, mainly driven by increased demand within our niched infrastructure services companies. Profitability strengthened in the quarter to an EBITDA margin of 4.8%. and we are foremost focused on continuing to improve profitability in the segment. As briefly mentioned in the beginning, we have completed a fantastic acquisition after end of quarter. The company is Nortec and is a UK market leading designer and supplier of monitoring and control technology to the UK energy and water distribution sector. Nortec has proprietary products specializing in fault location communication and automation as well as the proprietary software platform i host nortec has been a supplier to our existing uk companies pump supplies and pdas for a decade and this is basically the main reason why we were successful in making the acquisition the company shows great financials and will strengthen our already very strong position in this space in the UK. And we look forward to leveraging our position in further acquisitions down the line. Now over to Olof.

So let's have a look at net sales and EBITDA development over the past couple of quarters. And if we 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 divestments in the solutions segment that Simon mentioned previously. And if we move on to the chart in the middle showing adjusted EBITDA development, we also see a decrease driven by the same divestments. And finally, in the chart to the right the EBITDA margin increased by half a percentage point compared to the same period last year driven by the fact that the divested businesses had lower profitability than the remainder of the group but also by the niche product segment which increased its margin compared to last year and we move on to sales net sales development and The divestments in the solutions segment put pressure on the net sales in the quarter, as I just mentioned previously. But we saw positive organic growth of 3% in the quarter. Again, as Simon mentioned before, this was a trend shift after two years of negative organic sales development. And in total, net sales in Q1 decreased by 9% compared to last year. So moving on to operating cash flow. And I should say that this is operating cash flow for the last 12 months. And the operating cash flow and the cash conversion decreased compared to the last quarter, mainly driven by changing network and capital, but also by higher cap expanding, which in turn was mostly driven by investments in our flow tech businesses in the UK and some of the niche product businesses. So that was the operating cash flow, now let's look at the free cash flow development and we define free cash flow as cash flow from operating activities so that is including interests and taxes paid and change in net working 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 the free cash flow has, among other things, been quite negatively impacted by one-off expenses, mainly driven by the early repayment of bonds, which we have done during this 12-month period. So in total, these one-offs add up to just under $14 million approximately 25 million occurred in the first quarter of 2025. And it's important to note that this change in our capital structure is expected to lead to significantly lower financial expenses going forward. So let's move on to net debt and leverage development. And the net debt is represented here by the pink bars and amounted to 1.4 billion SEK, which was slightly lower than the previous quarter. And leverage also decreased slightly from 2.2 to 2.1 times sequentially from last quarter. And earn-out debt was reduced slightly from 19 million in Q4 2024 to 17 million in Q1. And when taking into account earn-out debt, the leverage multiple was 2.2. And by that, I hand it back to you, Simon. Very good.

Thank you. So in summary, we have, for the first time in two years, showcased organic growth while the EBITDA margin is improved. The flow technology segment continues to do very well, and we expect this to continue, not least supported by acquisitions. Our new capital structure was established in March 2025, and we're now from April and onward looking at significant interest cost savings. Our capital allocation will continue to be focused on growth. As with last year, market uncertainties remain in the short term, partly driven by the current global trade barriers. We don't have any direct exposure to the tariffs, but the level of uncertainty that we are now experiencing is never great. That said, we have truly laid a new foundation for Vestum, both platform-wise and balance sheet-wise, and we will now start to capitalize on the structural improvements implemented in recent years, which we look forward to. And with that, we open up for questions.