Vestum AB (publ)

Welcome to the Vestum Q3 2025 report presentation. 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 5 on their telephone keypad. Now I will hand the conference over to the speakers. CEO Simon Gothberg, CFO Olaf Andersen, please go ahead.

Hello, everyone, and welcome to our presentation of Vestum's Interim Report for Q3 2025. My name is Simon Gothberg, CEO of Vestum, and together with me, I also have Olof Andersson, our CFO. Okay, let's have a look at some highlights from the quarter. We continue to sequentially improve profitability with an adjusted EBITDA margin of 11%. Overall, we experienced stable volumes in the quarter with some uptick towards the end of the quarter, with September being the strongest month. That said, we're facing some tough comparable figures from Q3 2024, as that was the strongest quarter last year. This led organic growth to drop somewhat to negative 2% in Q3 2025. We have continued to invest in our leading product companies, which is reflected in increased CapEx. These investments primarily relate to geographic expansion in the UK within the flow technology segment. And as volumes grew at the end of the quarter, we also saw an uptick in working capital. As a result, cash flow decreased during the quarter, but for sound reasons. Moving on to the segments, starting with the flow technology segments, sales grew 10%, mainly driven by acquisitions. Overall, we saw a stable performance across all markets, but with some variations. As in the first half of the year, we're experiencing solid demand and profitability in Scandinavia. In the UK, the market has been preparing for the new investment plan AMP8. under which more than £100 billion will be invested over the next five years to improve water infrastructure. And although these investments have yet to materialize in the markets, we generated solid organic growth in the UK towards the end of the quarter, with September being a very strong month, which proves our resilience and ability to grow in verticals that are not dependent on AMP8 or extreme weather. because there's been none of that in Q3. Profitability measured as EBITDA margin strengthened from 18.1% to 20.7% compared to last year. And after the close of the quarter, we completed an acquisition in the UK. I'll come back to that later in the presentation. Overall, the market outlook for the segment remains very favorable and we expect stable development going forward. Moving on to niche products, we continue to perform in line with last year. And it's good to see that we sequentially continue to improve profitability as shown with an uptick in the beta margin from Q2. However, compared to last year, the margin dropped a bit driven by tough comparables. Going forward, we continue to focus on improving profitability. Lastly, let's have a look at the solution segment. As mentioned in previous quarters this year, we have divested several companies during the year, including the largest and the third largest company in the segment, meaning that sales in absolute terms decreased. The EBITDA margin in the segment sequentially strengthened from 5.0% to 5.6%, but declined from 9% compared to the previous year. The market continues to be characterized by high competition and price pressure, although we did see some improvement towards the end of the quarter in both volume and pricing, and our focus remains on improving profitability for the segment. Moving on, it's great that we have successfully closed the acquisition of Dynamic Fluid Solutions, or DFS, as they're called. This is a great company that fits very well into our flow technology segment. We first visited the company about four years ago and I've been working with them via some of our other UK companies on different customer projects for a number of reasons or for a number of years and are now very excited to have DFS as part of our business. The company is a UK-leading provider of advanced pumping and fluid management systems for the water and wastewater industry. They have developed their own products in-house and has captured an important part of the UK pump hire market with its innovative pumping systems. The majority of sales are from rental, with rental durations ranging from one week to over three years. The rental sales volumes are characterized by a high proportion of recurring revenue, and continue to grow. Looking forward, the addition of DFS positions us very well with the significant water infrastructure investments that are expected in coming years in the UK, not least driven by the new investment plan, as previously mentioned, AMP8, as well as the new nuclear power station, Sizewell C, that is to be built on the East Suffolk coast. This business is located in Suffolk. We're now accelerating our geographical expansion and look forward to collaborate on customer projects and procurement with several of Vestum's existing flow technology companies. Now these pump supplies, which is one of the largest suppliers in the UK of electric submersible water pumps. And the acquisition strengthens our already very strong position in water infrastructure. Now over to Olof.

Thank you, Simon. Let's have a look at the net sales and EBITDA 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 divestments in the solutions segment that were completed in Q1. But the decrease was to some extent offset by the acquisition of Nortec. And if we move on to the chart in the middle showing adjusted EBITDA development, we again see a decrease driven by the development in the solutions segment. And finally, in the chart to the right, the EBITDA margin decreased compared to the same period last year, but increased sequentially compared to the previous quarter. Moving on to the next page, which is net sales growth. And in total, net sales in Q3 decreased by 13% compared to last year. And if we break down this decrease, we see that 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 the acquisition of Nortec. And we saw a slight negative organic growth of 2% in the quarter. Now let's look at free cash flow. 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 LTM free cash flow was 70 million SEC, a decrease from 120 million in the previous quarter. And this was mainly due to a build up of net worth and capital, which we expect to reverse. in the coming one or two quarters. It was also to some extent driven by higher CAPEX spending as we have done some important investments in our growing businesses. And I also want to point out that the LTM figure is depressed by the extraordinary financial costs of roughly 25 million, which we incurred in the first quarter of this year when we redeemed our last outstanding bond. Moving on to net debt and leverage development. The net debt is represented by the pink bars and amounted to 1.6 billion SEK. Leverage increased slightly in Q3 from 2.7 to 2.8 and this was due to LTM EVDA being lower than the previous quarter. Bestum's earn-out debt was 25 million SEK at the end of the quarter. And if you include the earn-out debt in the net debt, the leverage would then increase to 2.9. And by that, I hand it back to you, Simon.

All right. Thank you. So in... In summary, the full technology segment continues to do very well. We're expecting this to continue as the market outlook looks very promising, not least driven by our latest acquisition. We're still facing challenging market conditions in certain parts of the solution segment, mainly in Sweden, as competition remains high. We are expecting profitability to improve for these companies as construction investments in Sweden rise from the historically low levels that we currently see. Cash flow, as mentioned, was impacted by growth initiatives in the quarter, but we have overall created conditions for solid cash flow generation going forward. We did see some positive signs toward the end of the quarter with, again, September being a rather solid month. That said, it's a bit early to determine whether this marks the beginning of a new positive trend characterized by profit growth. And with that, we open up for questions.

If you wish to ask a question, please dial pound key five on your telephone keypad. To enter the queue, if you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Jakob Marken from Danske Bank. Please go ahead.

Yes, good morning, guys, and thank you for taking my questions. First of all, I have sort of a question. On page 22, you split out organic growth effects and divestment and acquisitions. I'm just wondering if you can help us a bit on sort of the 18 million negative organic growth sort of based on business areas and also if you can help us with how much came from the divestment and how much was acquired growth in the minus 96 million.

Yeah, sure. Hi, Jacob. Jacob, it's Simon here. So let's try to dissect that question a little bit. So the divestitures that we did earlier this year, they contributed with 131 million in the solution segment in Q3 last year. And looking at organic development per segment, I'd say that In the solution segment, it was a few percentage points down, somewhere between 3% and 5%, and quite flat in the other two segments. And as you can see in the Flowtech segment, you can see the contribution from Nortec, which is the only acquisition we've done that that was part of Q3 now, but that wasn't part of Q3 last year. And you can see the figures on, is it page 18, perhaps, in the report. So they did 14 million, I believe, in EBITDA. Let's see, did you have any other, was there any other detailed questions on the growth, Jacob?

The next question comes from Jakob Marken from Danske Bank. Please go ahead.

Thank you. I was dropped from the line. But I didn't have any questions on that part. But I had another question. So you say that September was sort of a stronger month and that you started to pick up some more demand. I was just wondering if you could say something about October. How is it feeling currently and also how we should view cash flow? If you start to get some better demand, should we expect the working capital tie-up to also be in Q4 or how should we think about that?

Yeah, sure. So as mentioned in the report, September was the best month in the quarter. September is typically, it's typically September and August are the two best months, right, in Q3. But September was also actually a bit better than last year. And the working capital tie-up was also seen in September. And putting those two together, That basically means that volumes are picking up. Then obviously what matters is the margin in those volumes. There's only been three weeks of October, As you know, we do have some visibility in many parts of our business. And looking at the Flowtech segment, the market outlook looks quite promising for the next few months. And then looking at the other two segments, pricing did come up a little bit over the last couple of weeks, last month or so. But I mean, that said, it's still a... a tough market for the sort of the end markets of solutions and these products. in Sweden. So it's a bit early to say if this is the beginning of organic profit growth again. That was the first part of your question. The second part was working capital release, right? So yeah, we did. I mean, if you look at cash flow from operating activities before change to working capital and the cash flow analysis, things are looking quite good, right? And then the question is, when do we release that working capital? And it could be in Q4, but it could also be in Q1. I mean, if it's January 2nd, it basically means that it falls into Q1, right? But it's still, yeah, so it depends really.

Okay, thank you. That's all for me.

Okay, thank you.

There are no more phone questions at this time, so I hand the conference back to the speakers for any written questions and closing comments.

Okay. Word is back to us. It seems like there's a busy day with lots of reports today and not a lot of questions. Thanks so much for taking the time. See you again next time. Okay. Bye-bye.