Volati AB

Good morning, everyone, and welcome to today's webcast presentation with Volati. With us presenting today, we have the CEO of Volati, Andreas Stenbäck, and CFO of Solix Group, Martin Hansson. We'll open up for a Q&A after the presentation. You can either type in your question, or if you're calling in, please press star nine to raise your hand and star six to mute yourself when you get the word. And with that said, please go ahead with your presentation.

Thank you. Thank you for listening in to our quarterly presentation. We're happy to have Martin Holsson with us today as well. He's the CEO of Solix Group, and he will tell you a bit more about that platform or business area once we get there. So let's start with our presentation and I'll go directly into page three and talk a bit about the most recent quarter. So I'm very happy to see that we're back to organic growth, even though it's a small number. It's thanks to a very strong organic growth in Salix, which shows a positive and strong number. And it leaves us with an overall sales growth of 9%. The EBITDA growth of 11% is good. It's much thanks to Salix, which shows a very strong year-over-year growth of 50%. which Martin will tell you a bit about more later on. Etiketto had a decline, a small decline in the quarter and that's mainly because of a disappointing slow start in the quarter. We have however seen that the development has gradually improved in the course of the third quarter. In industry, three out of four platforms showed EBITDA in line with or back to the last year, while we have Corventa that showed a decline because of the lack of floodings. We'll get into that a bit more later on in the presentation. Looking at the numbers, sales and EBITDA, I already commented on that, but we're at the 2 billion in sales and 200 million in EBITDA. The operating cash flow increased by 11%, roughly 200 million, which was very much in line with what we expected. And that has also left us with a lower net debt EBITDA compared to last quarter. So we're now at 2.8, which then leaves us with room for acquisition. Specifically, if you take into account that we have a strong Q4 ahead of us, that's typically a strong cash flow quarter. Taking a step back, looking at the last 12 numbers and the yearly numbers, we're now at 8.4 billion SEK of turnover and 720 million of EBITDA. As I usually comment, Volati is best evaluated over time. And the average yearly EBITDA growth since 2019 has been 16%. But what one could also see on this side is that since 2021, we haven't lived up to our financial growth goal of growth of at least 15% per year. That basically means that we should double every fifth year. And since 2021, we've seen a slowdown, and that is, I would say, solely because we've had challenging market conditions in the majority of our platforms. That also means that we have created a growth gap that we need to close in order to live up to our financial goal. And on this next slide I have a way of illustrating that growth gap. So this basically means that if we are to close that by the end of 2027, we need to show an EBITDA of between 1.1 and 1.5 billion of EBITDA. In recent years, when we've been meeting lower demand, we are taking long-term structure measures within the platforms. I've spoken a lot about that in recent quarterly calls. These will then benefit us when the market returns. What does that then mean? That means that we will show accelerated organic development, and that is what will help us to close this growth gap. At the same time, we will need to maintain the same acquisition pace that we've done in the last years. So we need to both work with the organic development and maintain the acquisition driven growth. So this was to touch a bit upon our financial growth target. And again, we should grow of at least 15%, 1.5% per average annual growth. And what we've seen now in this quarter is that we're at 10%. And we've actually now have five consecutive quarters where we have improved that number. But in order to close the growth gap, we need to surpass that financial goal for some time. So we need to be beyond 15% for quite some time in order to close the growth gap. Also, what can be seen is once we start showing growth, which we have now done, the return on equity is starting to improve. So we've had quite a few quarters now of improvement also on return on equity. And we're now at 19%. We should be of at least 20%. So we're clearly getting there. And when it comes to the net debt to EBITDA, we are in line with last year. And that means rooms for acquisition. So next part of this presentation is to dig in a bit more into the three business area. And then very happy to introduce Martin Hansson, which will start by telling you a bit more about Solix Group.

Thank you, Andreas. My name is Martin Hansson and I've been the CEO of Solix Group for just over four years and it's a very exciting opportunity for me to be here and say a few words about Solix today. So I would like to start with the last point here and tell you that our headquarter is in Malmö and we're altogether some 700 employees in Salix. A proud, engaged and a competent team, which is the core of our business. I'm very, very happy to be here and tell a little bit more about what we do. And what we do is that we are a proud trading company that primarily provides products for the building trade and the building industry. That is roughly 80% of our business. There is also a strong offering of products for agriculture and forestry and home and garden. So as you can see on this chart, we have a long history. We were established back in 2006 as a group, but we have roots back to the 19th century. So we have a number of companies with a long experience in the market and in the trade. So we have done some 14 acquisitions since 2019. So the combination of operational excellence and acquisitions is how we would like to grow and develop our business. Our main market is the Nordic region with a focus on Sweden. We have some two thirds of our business in Sweden today. And we are, of course, curious to further explore opportunities in the Nordics and even outside the Nordic region. So I would like to tell you a little bit on the right hand side of the chart as well. So we have three business areas in Salix. As you can see, we have great and strong businesses and some very strong brands and we combine that with an excellent reach in the trade in the Nordic region. So this is how we believe that we best can create value is the combination of strong business, strong brands and an exceptional reach into the Nordic region in terms of the building trade and the building industry in particular. So if we move on to the result for the quarter, we deliver 19% growth in the quarter. You heard Andrea saying that we would like to close the gap. We leave I hope, three to four years behind us where the market has not been so easy. The building market in the Nordics has been challenging and we see that we have maybe lost volume in the region of 25, even 30% in this period. This is a quarter behind us where we see organic growth of around 8%. And we see this growth coming from, in particular, the DIY segment. So home improvement and DIY segment is where we see the indications of growth and that impacts us in a positive way. So the DIY segment in the way we measure it is around 20% of our total exposure. So an 8% organic growth and overall 19% growth for the quarter. If we move on and look at the EBITDA, the EBITDA ends up a little bit above 50% growth. And as you can see, 12% EBITDA margin. So this comes from that we over a period of time, as Andreas also said, have done structural meshes. We have worked with supply chain efficiencies, purchase improvements. And also, if you look back here over the last couple of years with the volume loss. We have corrected our prices, price increases, price corrections, as well as a more normalized Swedish krona. The freight cost for us is more normalized, meaning that we have now a platform for both internal measures that we have done over the period and more normalized outside environment that we believe that we are in strong position for further growth in solids. So when demand recovers, we believe, together with great people, engaged employees and managers, that we have a good position to grow both organically as well as through acquisitions.

Okay, so thank you, Martin. Now we're going to talk a bit about Etiketto. And as can be seen, Etiketto showed a strong sales growth in the quarter, which is attributable to the acquisition of Pleave Group in Germany earlier this year. Organically, which I touched upon earlier, we had a slower start of the quarter than expected in Sweden, which, however, has gradually improved. As expected, we've seen a decline in the margins, as Clever, which was roughly one fourth of the total sales in the quarter, are operating under significantly lower margins than the group as a whole. And this is where our value creation through acquisitions come in. As can be seen on the graph on this slide, we did a number of acquisitions in 2020 to 2022, which basically left us with a margin of 15.6% in 2022. What then happened is that we gradually improved the margins over the course of two years, which was basically done by improving the profits in the acquired companies. So these are the kind of measures which we do when we do the acquisitions. And this is a core way of how we create the value in Etiketto. Looking at industry then. So basically, three out of four platforms showed an organic development of EBITDA in line with or better than last year. And then we had Corventa, which came in significantly lower because of the lack of summer storms and floodings. And I want to point out that the core business of Corventa is developing as expected. But the ones of you that has followed us over the years knows that when we have strong years or summers, in particular in Corventa, meaning that we have floodings where we need to help and support our customers, both through sales and our rental fleet, then we have a very strong profit contribution from Coromanta. And we didn't see this. It's been a very dry summer this year. If we exclude Coromanta, we see improved margins and a significantly improved EBITDA actually in the business area industry. And that is despite the markets for Patek, particularly Tornum and St. Derek still being challenging. And why do we still see this improvement? Similar to what we've done in Salt Lake, we've been focusing on these long-term structure measures to meet the lower demands in the platforms that we have. So Tuner Group is still facing a historically weak market. It's the agri-market that we mainly operate within, but we're also meeting some softer comparables in the second half of 2025. Sankt Eriks is still facing a similar market as in previous quarters, meaning that we have a weak demand in the construction segment. And what one needs to keep in mind is that Sanctirix is a bit later in the cycle than, for example, Solix. So we haven't seen the real uptick in the construction segment for Sanctirix, while we have a stable demand in the infrastructure segment. So let's go into the acquisition segment of the presentation. The pace for the last two years, I would say, has been okay. And we have been and are working very actively on building an M&A pipeline in our platforms. Right now, I would say that the outlook is positive. We have several qualified leads that we are working on. But as I've said before, in this type of course, M&A takes time and a deal is not done until it's closed. So there is still uncertainty out there, but I would say that our deal pipeline is good and I would consider it's very qualified. Looking back at what we've done since 2020 then, basically what this slide shows you is that our add-on acquisition strategy to the platform works. We've done 27 acquisitions, adding some 4.2 billion of annual sales. And the last 12 months, we have concluded and closed three acquisitions, adding some 750, 750 million of annual turnover. um so and then in order to make the acquisitions we have to have also the capacity i already touched upon that the net that vbta is where we expect it to be within our range or our financial goal rate and we have had uh also a strong cash flow in the third quarter, and we expect yet another strong cash flow quarter in Q4, because that's how it typically is. So we will continue to expand the M&A room further. And once the market comes back, once we start closing that growth gap that I've been talking about, both me and Martin, then the net debt to EBITDA ratio will improve, as also we will get an organic EBITDA expansion. And then, before concluding this presentation, I have some exciting news that we shared in our quarterly report, and that is that the Volati board of directors has decided to evaluate the possible spin-off and separate listing of Salix Group. SOLIX Groups came into Volati through the acquisition of Le Monde Industrie about 10 years ago. Since then, SOLIX has developed into a very strong and independent platform within our group. We will now evaluate the possibility for SOLIX and also the remaining Volati to pursue the continued value creation independently. This is an evaluation which will now take place and the ambition is to conclude it and have a possible planned listing during the year 2026. So, to summarize, we had a strong development, I would say, EBITDA development in the quarter. The growth is picking up, and it's very much thanks to SOLIX Group, which had a 50% EBITDA growth. We do see the effects of the long-term structural measures. SOLIX is a good example of that, but we do also see that in some of the platforms within business area industry. Once the market returns, we expect accelerated organic growth. And we do also have, I would say, a strong pipeline of qualified M&A leads, meaning that we have a good foundation for continued growth through acquisitions. And then finally, and importantly, we will now initiate the evaluation of a separate listing of Solix Group. So with that, I leave the word for any potential questions to Martin or myself.

Thank you very much for the presentation, Andreas and Martin. And yes, let's open up for the Q&A section here. If you're calling in and would like to ask a question, please press star nine to raise your hand and star six mute yourself when you get the word. You can also type in your questions in the form located to the right. And we'll start with the first question here. You have previously done a spinoff of Bokusgruppen. What is your experience from that?

It's a good question. We had, I would say, a successful spin-off of Bokusgruppen in 2021. And they actually had a quarterly report yesterday. So I think since that listing, they have had a revenue increase of some 15 plus percent. They have significantly improved their margins. And I think the share price have almost doubled. So I think from my point of view, Bokus Groupen is a good example how separate listing can reduce complexity, increase focus, release energy to create a lot of shareholder value.

Thank you for that answer. You said in the CEO statement that the acquisition pipeline is strong. Can you elaborate on that?

Yes, as I said also during the presentation, M&A is long time work and we've been now focusing on add-on acquisition, value adding add-on acquisitions to our platform for many years. I think that hard work has now put us in a position where we have several good qualified M&A leads in awesome several of the platforms, leaving us in a good place. So with that said, it's all about getting the whole way and closing the deals. Sometimes it gets paused along the way and postponed. And sometimes you simply don't get an agreement with the seller. But where we are right now, I see that we are in a better position than we've been for, I would say, many years.

Thank you, Andreas, for that answer. And in the presentation, you showed a slide about the growth gap that needs to be closed. How exactly will you achieve that?

It's another good question. I think what's important here to think about is that, yes, M&A is an important growth driver for us. And the way I look at it, we've had a good M&A pace the last couple of years. We had a pause, I think it was late 2022, early 2023. But other than that, we have been able to maintain the acquisition pace as a at a fairly good pace. So the growth gap will be closed by organically taking back some of the profitability that we have lost thanks to lower demands. Basically, we have had a tough market in the majority of our platforms. So while we have taken the opportunity now the last couple of years to work on this long-term structural measures that will benefit us once the markets come back and we will see an accelerated EBITDA growth or profit growth. So the gap will mainly be closed by basically organically development and taking back the profit once the markets return.

Thank you. And that's a wrap of the Q&A section here. Thank you very much. And Andreas, do you have any concluding remarks before we end this session?

Yes, so basically what I would like to say is that I think it's very obvious that we have a lot going on, which of course gives us a lot of energy at Volati and Solix. We do see some positive signs now in some of our end markets. the M&A activity. It is where it should be. And now we also have a possible spin-off of Salix group to evaluate. So there will be a lot happening around Volati and Salix next coming years. And I think it will be very exciting to follow us.