Vestum AB

For the first part of the conference call, the participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing pound key five on their telephone keypad. Now I will hand the conference over to the speakers. CEO Simon Gothberg, please go ahead.

Hello everyone and welcome to our presentation of Vestum's interim report for Q2 2025. My name is Simon Gothberg, CEO of Vestum. I will today present the report myself as our CFO Olof Andersson had to be with his wife as they're expecting their fourth child any day now. Okay, let's have a look at some highlights from the quarter. We have continued to invest in growth both organically and through M&A. Organic growth was plus 4% while cash flow improved by some 50 million. Profitability was in line with last year as shown in the adjusted EBITDA margin of 10.1%. We've completed one acquisition in the quarter and also invested in increased capacity for several of our production companies. These investments have led to an increased leverage, which is now at 2.65 times reported EBTA. Moving on to the segments, starting with Flow Technology. Sales grew by 32%, mainly driven by acquisitions. We continue to see overall solid underlying demand across the segments. with some different characteristics depending on geography in the nordics we are generating both sales growth and improved profitability in the uk the market is currently preparing for the new five-year investment plan amp8 which came into effect in April 2025. The new plan includes over 100 billion of water infrastructure investments and will greatly benefit the segment in many years to come. That said, the market is a bit cautious in the short term as clients are currently in resource planning and allocation mode, and we're expecting to see positive effects of the new investment plan in the next few months. We are also planning to execute on additional UK-based acquisitions to the segment before year end. And this will strengthen our already very strong position in the UK. Moving on to the niche product segment, we continue to perform in line with last year. And it's good to see that we continue to improve profitability as shown with an uptick in the beta margin from 11.6% to 12.4%. The margin expansion is mainly driven by our companies with infrastructure and markets. Going forward, we continue to focus on improving profitability while also allocating capital to growth in certain parts where the return on capital and demand remain high. lastly let's have a look at the solution segments we have divested several companies during the year including the largest and third largest company in the segment meaning that sales in absolute terms decreased organic growth was positive though just like in q1 profitability dropped to 5.0 percent mainly driven by our installation businesses with construction and markets. And these installation businesses represent roughly 60% of sales in the segment. And we expect profitability for these companies to improve as investments in the Swedish construction market recover from the historical low levels that we currently experience. And the remaining 40% of sales in the segment consists of specialized infrastructure services businesses. And volumes and profitability for these companies were at decent levels in Q2 and continue to improve. Moving on to net sales and EBITDA development of the last few quarters. Let's begin at 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, as I previously mentioned in the solution segment. But the decrease was to some extent offset by acquisitions. And if we move on to the chart in the middle, showing adjusted EBITDA development, we also see a decrease driven by the development in the solution segment. which again was mentioned on the previous slide. Finally, in the chart to the right, the adjusted EBITDA margin was aligned with last year, showing a slight decrease compared to the same period last year. Again, driven primarily by the profitability in the solution segment, but to some extent offset by the positive development in the niche product segment. We move on to overall net sales development. In total, net sales in Q2 decreased by 7% compared to last year. The divestments in the solution segment put pressure on net sales in the quarter. But as mentioned previously, this was to some extent offset by acquisitions. And we saw a total positive organic growth of plus 4% in the quarter, a sequential increase from 3% in the first quarter, which reinforces our view that the previous downward trend in sales development has reverted to growth Now let's look at free cash flow. We define free cash flow as cash flow from operating activities, including interest, taxes paid, and changing network and capital. And then we subtract capex spending, i.e. investments in fixed assets. And we also subtract leasing amortization. So free cash flow is really cash that can be used for dividends, acquisitions, and repayment of debts. The LTM free cash flow was 120 million, an increase of more than 50 million compared to Q1, driven mainly by lower financing costs as a consequence of our improved capital structure. Moving on to net debt and leverage development. The net debt is represented by the pink bars and amounted to 1.6 billion. an increase compared to the previous quarter driven by the acquisition of Nortec and also by the fact that we have invested in new facilities in several of our existing product companies. As a consequence of these investments, leverage increased to 2.65 times reported EBITDA per Q2. Investim's earnout debt was 32 million at year end. And even when taken into account earn at debt, the leverage multiple remains at 2.7 times reported EBTA. So in summary, we continue to generate positive organic growth and solid cash flows. The flow technology segment continues to do very well, and we're expecting this to continue as the market outlook looks highly promising. We are focused on investing in growth in the segment and will continue to strengthen our positioning by making additional acquisitions, mainly in the UK, as the market is preparing for high growth in coming years, supported by structural investments in the market. And in the short term, however, the market is a bit cautious, driven by the ramp up in AMP8. But again, all looks highly promising into 2026 and onward. We're still facing challenging market conditions in certain parts of the solution segments as the installation businesses face higher than normal competition and as a consequence, price pressure. We're expecting profitability to improve for these companies as construction investments in Sweden rise from the historically low levels that we currently see. We've created conditions for cash flow to remain at solid levels, not least driven by our improved capital structure, along with a strengthened portfolio of companies in the group. And as with previous quarters, the short-term market situation remains uncertain, but the mid-term market outlook is positive. And with that, we open up for questions.

If you wish to ask a question, please dial pound key 5 on your telephone keypad. To enter the queue, if you wish to withdraw your question, please dial pound key 6 on your telephone keypad. Next question comes from Simon Johnson from ABG. Please go ahead.