Thank you, Operator, and most welcome to everyone to Adtech's first quarter report presentation. Today's setup is that we will use approximately 15 minutes to summarize and give our comments on the results and then open up for questions. As usual, just a brief summary for any newcomers, a quick run-through of the key fundamentals of AdTech. We are a group of 150 plus independent and strictly decentralized companies operating in 20 countries with a clear business-to-business offering. We operate in six business areas, all with the clear strategies and the value proposition centered around niche products and solutions primarily to manufacturing and infrastructure sectors we have our successful dual growth engine approach focused to develop and grow the business organically together with our local entrepreneurs and then complement and strengthen our strategy strategic niches with acquiring leading niche companies with a strong offering and fund our acquisitions primarily by own cash flow that's how the model works size wise we have now a turnover rolling 12 of around 23 billion and run the operations with an ebitda margin at around 16 percent and employ slightly less than 5 000 employees throughout the organization and a small and efficient central team there you have ad tech in a brief summary with that said let's head on to the quarterly highlights all in all we can summarize a good start of the new fiscal year despite the geopolitical uncertainties the market situation improved for the group with high customer activity and a very solid order intake broad-based I would say total net sales increased by six percent during the quarter organically in line with last year and no effects from FX this quarter our EBITDA increased with 11 percent and we improved our margin compared to last year to a high level of 16.6 percent we strengthened our cash flow and closed two acquisitions during the quarter a bit more on net sales the overall business situation was good as i said we grew top line six percent which means it was from from acquisition but solving contributions primarily from business areas automation electrification and safety segment wise if we summarize all business areas the main drivers in the quarters were electronics with products and solutions for electrifying equipment special vehicles had a good quarter primarily towards mining and defense markets solid contributions also from medical and also transport sector where railway and marine were the main contributors also the niche segment traffic safety also this quarter contributed in a good way with the continued positive development all in all high customer activity as i said the broad-based order intake positive book the bill during the quarter in part of the business we've seen a tendency for customer to play some framework orders to hedge against uncertainty and feared price increases and delays going forward due to the uncertainties that we have around us i will come back with more details about market development in each business area very shortly ebitda then increased with 11% also here solid contributions from automation electrification and safety we continue to improve our gross margins across the board so all business areas increased gross margins it's very satisfying and we report an improved EBITDA margin as I said 16.6 percent The positive development is primarily due to continued improvements in the product mix and solid contributions from acquisitions, but also positive effects from active pricing initiatives and, of course, also earlier communicated restructuring measures in a handful of companies, primarily in automation and safety, where we now see good effects. strengthened our cash flow and the profit of working capital remained at high level a few words on each business area then from the top starting with automation as you can see in the slide the business situation clearly improved in first quarter a broad-based increase in sales and a good leverage on both earnings and margins and the market situation strengthened we have now had five quarters in a row with a sequential improvement in order intake and that is is a strong indication for us the underlying demand for product solutions for defense industry remained very strong also order intake in mechanical industry medical and process had a positive development within medical is primarily oem supplying diagnostic and analytical equipment and within segment process, it's the full processing OEMs that are the main drivers. So a solid recovery in automation that we've been waiting for and clear positive effects on earnings and margins. Moving on to electrification, also a very strong quarter where market situation was strong, a very good order intake here. net sales increased with 27 percent driven by a solid business momentum in basically all main segments mechanical industry and defense the only exceptions the latter defense industry must due to very tough comps here we have projects that are not linear it will can come one or another quarter. It's also great to see that a battery group continues to develop positively with good contributions to many of our customer segments. Strong contributions from acquisitions, primarily Ramme in Germany, which are focusing on the marine segment. In summary, a very strong quarter for allocation, broad-based growth, solid contributions from the acquired company, as I said, and EBITDA growth of 43% with a high margin of 16.2. And in the margin, I would say that it's partly boosted by very strong performance from acquisitions with a slight positive seasonal effect in this quarter. Energy experienced a very With positive market development in the first quarter, the electrical transmission business recovered in a very good way with high order intake after period with fewer project rollouts and a lower order intake earlier quarters. High demand also in distribution and transport while power generation was stable. sales were down in the quarter as expected due to very tough comps but with an improved product mix our margins increased to 19.5 percent forward looking we have a very strong backlog and good business momentum indicating a strong year but tilted towards the second half of the financial year as we indicated already in the q4 report but again the products are now coming in just as we had expected the overall market situation within industry was good in the quarter but with variations solid demand in mechanical industry electronics subsea and waste management but companies exposed to forestry and sawmill industry order intake remained weak we have been repeating this now for a number of quarters customer activity is there and a couple of orders were won during the quarter but we don't see any general trend shift here also special vehicles met the somewhat weaker market situation where demand being negatively affected by geopolitical uncertainty and higher oil price that we had during the quarter. Total net sales decreased with 3%. Again, this is primarily due to the sawmill volumes. And these effects will, of course, remain until this market situation improves. moving on to business area process where the overarching market situation was i would say stable in the quarter demand demand was good in marine segment solid order intake related to regulatory demands and shift to more green fuels also energy and special vehicles had a positive development stable in mechanical industry weak in medical technology towards tough comps and also forestry and process industry was on the weaker side and here we again see that activities are good there are a lot of discussions on products but customers are still holding off on investment decisions and products are also continuing to being a bit postponed. All in all, a rather challenging start for process with 2% increase in sales, but this is entirely driven by contributions from acquisitions. Earnings and margins were down to the lower business volumes, but adjusted for revaluations of consideration we actually saw a slight improvement on the margins also for process in this quarter last but not least safety which had a very positive development in the quarter a good business development and solid order intake the market remained strong within traffic safety and the energy electronics and the engineering manufacturing industry experience a positive trend in the quarter regarding data centers we saw a bit flattening out on high levels with within safety during the quarter and here we see a little shift towards more local product procurement in data centers and this will seemingly give potential for several companies in the group moving forward No clear signs, however, I would say in the construction sector, it's an important sector for safety. So the companies exposed to building installation continue to meet overall weak demand. but overall sales increased by 10 percent approximately half coming from acquisitions positive effect on earnings and margins also fueled by both product mix that was improved and the previously implemented cost measures in a couple of companies that we've been talking about earlier last year well to sum up this picture i would say a very solid quarter positive market situation high customer activity on group level variations still between different segments customers and geographies and it is clear that the geopolitical uncertainty still adds to the kind of hesitant approach in investing among customers in a number of segments. With that said, I give the word to you, Malin, for a few more details.
Speaker 1
Thank you, Niklas. You have mentioned a lot of important matters already. I will dig down in some of them. As you heard, our EBITDA grew and the profit margin improved compared to last year. The EBITDA margin increased by one percentage points adjusted for re-evaluations of earn-outs. And we had just another quarter with a record high margin. We had good contributions from acquisitions, but the development was also attributable to an improved product mix. Good pricing power and the fact that restructuring measures taken in businesses with persistently lower market conditions are starting to have a clear impact now. We can see that the trend line of total cost in relation to sales still has a good development. Regarding other operating incomes and expenses re-evaluations of earnouts were more or less in line with last year while currency effect from re-evaluation of balance sheet items had substantially less negative effect on other income and expenses than last year. Our cash flow from operating activities strengthened compared to the same quarter last year by stronger margins and efficient working capital. Cash conversion was stable at a satisfactory level. Inventory levels increased somewhat during the quarter due to acquisitions and the usual summer buffering, but also due to price increases and supply chain disruptions. All in all, inventory levels are still at healthy levels in relation to sales and order backlog, and profitable working capital remained at 81 percent sequentially. Our financial position remained very strong during the quarter and our gearing and leverage decreased compared to last year even though our net debt has increased. We have a very satisfactory headroom in our financing structure which strengthened further during the quarter through the rising of new debt.
While we do not have any specific debt targets we believe our strong balance sheet provides significant capacity to fund future acquisitions and organic growth investments and with that said i hand over back to you niklas for more information about acquisitions i believe yes thank you marlin and as you can see in the picture we have had a strong first six months of this calendar year so a lot of very good companies coming into the group we completed two more acquisitions during the quarter two dutch companies one stock holding supplying customized outdoor enclosures and nihus engineering selling patented system solutions for road and rail construction machinery so we are proud to welcome them both to the group together they add about 250 million sec in turnover with creative margins given our increased footprint internationally as you can see in the picture it's a lot of acquisitions outside of the nordics we can really see that we have a growing awareness of ad tech in in a lot of new markets and we continue to fill our pipeline with high performing companies that are well spread across both niches and geographies and business areas so this combined with the strong balance sheet as morning just went through this gives us a lot of firepower and i really expect to keep a high acquisition pace going forward so the acquisition market looks very promising, I would say. And to wrap up this, a very good start to the fiscal year. High customer activities quite across the board. And we can see that despite, again, the geopolitical uncertainty and the very tough comps in energy and industry, we grew top line and we especially grew earnings with 11 and even better on earnings per share and strengthen the cash flow and balance sheet remains very strong so given our agility and strong positions in attractive niches we have a positive view of of the continuance of this financial year tilted towards the second half as we have been indicating before so with that said
over to q a 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 opo tani from goldman sachs please go ahead hi good morning christopher sorry good morning nicolas good morning christopher and good morning marlon um two questions on my end morning morning um two questions for my end maybe just one on margin and then one on industry um i suppose margins have been quite strong for a few years on quarters now but particularly strong in the last few quarters so do you just give us some thoughts on how you see this level and coming quarters and any um sort of thoughts on what's
driving margins higher yeah it's like you said we have had a good really good development on mardines of course they can vary a bit quarter over quarter if we look at the group as such I mean we we see that the kind of rolling 12 margin is relevant with a continuous ambition to gradually increase the margin. Then it can vary a bit, of course, between the different business areas. Automation is coming from a lower level, and as we've been indicating in early quarters, We have foreseen that automation should come back on the level there are now, while on the other hand, we can see that, for instance, industry having the kind of tough comps on sommelier industry will most likely, as it looks right now, rather maybe decrease a little bit. but it's all in all we think it's the rolling 12 margin is is uh relevant going forward again with with as always an ambition to to increase the margins and then as i also indicated in electrification a very strong margin this quarter which is partly boosted not very significantly but a little bit due to a very strong performance uh from acquisitions this quarter uh and especially rum in germany has a little seasonality effect uh with the strong q1 and and a bit weaker uh q2 due to that they closed down production and so forth for for a couple of weeks but uh all in all we think yeah yeah we are satisfied with with the modern levels great thanks very much and just um one more on industry um i think you've you've
sort of telegraphed that sort of headwind and forestry has existed for a few quarters now is there anything new in terms of special vehicles or um or the end markets there uh sorry on special vehicles we yes within industry just with it the other end markets may be driving sort of weaker organic earth near term is it just forestry or sort of special workers and other stuff as well within industry no i mean in in general i would say uh we see a positive development on on most niche segments uh in in industry the sawmill uh headwind is of course the big issue uh for industry
this quarter we saw a little bit weaker uh uh order intake from from some segments in special vehicles and that is due to uh disruptions in supply chain and also higher oil oil price that has given a little bit of a hesitation but we still see special vehicles having a good market situation so i would say also electronic production mechanical industry we have a good development there so i would say it really runs down to the sawmill the sawmill market great thanks very much
thanks for getting my questions thank you the next question comes from max bako from seb please go Go ahead to operator and hi Niklas and Malin my first question yeah hi the first question also relating to the industry segment basically a follow up as you mentioned yourself the margin down 1.3 percentage points here in the quaker or 1.4 adjusting for for earnouts So is that for magnitude to assume also going ahead or else equal, or is it anything else to it?
Yes. So there might be, again, it's always very difficult to guide here because it depends on many different variables. But we said going into this year that as long as the sommel market is hampered, this will have an effect on the margins. I think there is probably, as of now, rather maybe some additional slight negative potential on the margin the coming quarters. I would not expect any dramatic change, but from this level, it's maybe a little bit more there.
Okay, understood. And then on the same topic, which also addressed during the presentation, automation and safety segments, both saw very nice profitability improvements here in the quarter, which was something we discussed last quarter as well. and still quite quite stable on a sequential basis the margin then compared with q4 would you say that these levels are reasonable to to expect going ahead or or is there any seasonality in these two segments that should be considered no i would not say any specific seasonality as you can see from early years
we see some effect of course from the summer period but apart from that on the margin side i would say that automation is on on the right track meaning that automation should have a slight better margin than rolling 12 while in safety i would say rolling 12 is is probably an relevant number also going ahead.
Okay, very clear. And then the final one, just to clarify it. I mean, you highlight here in the quarter a well-filled order book, a positive book to build, and also that the market situation has strengthened during the quarter. And then, of course, we have the specific dynamics in each respective segment. But to me, it sounds like that you at least expect organic sales growth to gradually improve in the coming quarters versus the basically 0% that we have seen during the last two quarters. Is that a correct interpretation?
Yeah, I mean, only looking at our order intake in the quarter and the order book, again, considering tilted towards the second half, and of course the all uncertainties that might have different effects, but our expectations is that organic growth should gradually improve. but again, tilted towards the second half.
Very clear. That was all from me. Thank you very much. Thank you.
Operator
The next question comes from Karl Bokvist from ABG Sundahl Collier. Please go ahead.
Thank you, good morning. Automation here, we've talked about it, but just when thinking about the margins now, and you've been talking about the cost savings initiatives, et cetera, from this about the 14% level is there more that can be realized from your own initiatives or is it now from this level more about getting a bit of organic growth back and that you get leverage on on volumes and so on to which in turn could drive profit uh yes good morning yeah i would say that as of now uh it's it's more uh relating to to top line growth and that that will generate
incremental margins, potential incremental margin improvements. So the cost initiatives, again, as of now, I would say are already in the numbers.
Even when we take the earn-out value re-evaluations into account, it's at 20% and this slight negative impact. But just the other parts here, do you come in other areas of industry that could support or raise margins?
Or is it more about to to your point earlier about kind of rolling 12 with a slight negative impact from sawmills that's how we should think about it yeah i mean it's um always in in in in a group like ad tech and also in industry there are a number of companies that should should have that should increase the margins but if you look at industry as a whole i would say that But my comment before is it's not that I really see at this point that we have any other segments or markets that would kind of balance up that effect from sawmill. So rather a slight decrease until sawmill market comes back.
The question is on just looking into your strategy and industry, when just looking at the organic growth that we last year, it seems like both had quite good quarters. So would it be just fair to assume or take that into account when assessing the year-over-year development?
Yeah, I think it's quite clear. If you look on the second quarter last year and my comments now, where industry has had a very strong effect from some sawmill projects in the second quarter last year, and primarily from that side. and also energy having a strong quarter, and as I said, really strong product inflow now in energy, but those products are more, I would say, tilted towards the third and fourth quarters. So I think your assumption is probably correct.
Great, and then the follow-up would be because Because then from Q3, it looks like Q2 where you still have this challenge year over year and then from Q2, things look more normalized.
I mean from Q3, yes, that's, that's, yes.
Operator
Thank you. The next question comes from Gustav Berneblad from Nordea. Please go ahead.
It's Gustav here from Nordea. I thought maybe just to build here. Just to build on Karl's question on energy, it sounds like you are incrementally more positive here in terms of orders where you phrased it very strong.
Can you just elaborate a bit more on this and maybe just recap to the previous discussion we had here in Q4 where you sort of highlighted permitting constraints and a bit of a bottleneck and so forth? and so forth yeah good morning so what we have always said here is that it we will not see a linear development uh even if the underlying demand is is very very strong uh on the markets where we are uh it will be variations quarter by quarter so the fact that we had a little slower project inflow due to all of these restraints that we usually talk about in in the last uh maybe one two quarters uh we now see a a very strong comeback so to say um uh but but i think we have to look at this market in in a more longer perspective and and just realize that it could be variations on a quarterly basis. And this permit situation, I would say, is still there. It can still be delays due to appeals and all of these things.
But again, the kind of outlook at this point looks very promising. what was that very clear uh no no that that was good uh just just a follow-up on that because it feels like you you commented on you know as you say a decent market still and despite that i mean you still comment on volumes picking up first in q3 and q4 is it sort of should we assume that it's longer lead times on these projects as well and that we should expect it to be more you tilted towards 2027 that the order should take here in in Q1 or no I think my point is that
as it looks as of now and and we elaborate on on the order book it it we should see effects from this in in the third and fourth quarter oh perfect and then just is it possible to comment anything specific on a specific number on the book to bill here in the quarter? Yeah as you know we don't report figures like concrete on order intake but it's if I say it's clearly above one.
That's very clear thank you.
And also maybe I could add it is a sequential improvement a slight sequential improvement on book-to-build.
Oh, that's very clear. Thank you, Niklas. Thank you. That was all for me.
Operator
As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. The next question comes from Johan Longquist Sundian from DNB Carnegie. Please go ahead.
Hi, Niklas and Moline. Hi. Thank you for taking my questions. and i actually just have one follow-up question to do all good questions all are doing asked it's on the safety segment of the comment on the data center exposure where you mentioned that you're seeing a trend for more kind of local procurements and it could create big opportunities for more other companies can you please elaborate a little bit what that really means how many companies can be involved and how can that kind of segment or that exposure change for you in the comments a year or so yeah i mean we have had um looking back primarily a couple of companies in the uk
uh with a very very strong uh situation on data centers what what we have seen as i said it has flattened out a little bit on on that side and that is because we we can see a shift towards procurement being more uh on on a general european basis for for a few players towards more uh local procurement uh so what we can see now and and it's very difficult even if i even if i wanted to i couldn't say an exact kind of potential here but but it's quite clear that i would say it's it's a number of companies uh that are indicating that they are are in discussions on projects and it's basically on all in all nordic markets um uh so so that's kind of the shift i talk about If it flattens out a bit on the more kind of bigger procurement project, it's now more tilted over to local procurement. So we see a positive potential here, but I couldn't elaborate on any figures here.
Well, if I may have a follow-up there, when you say more companies, are you still only referring to companies within the safety segment or are there many companies in other segments Yeah, it's actually also in, I would say, both energy, electrification, so it's actually a bit broad-based here. interesting and and another question as well on a different topic is the project postponement that we talked about a bit you say that they still persist and the kind of change throughout about the second quarter of indication of change behavior on that sense?
No, not really. It's still kind of the same thing. I've been talking about this kind of confidence in investment, and I think the kind of ongoing disturbance that we see over and over in not in in our kind of for at the company but more the geopolitical situation and this is i would say particularly affecting more very high energy consuming uh production like chemical industry and so forth here we can see that there there is a lot of projects we have a good order book and a lot of discussions but we still see these hesitations. So I would say no real change here. And what about lead times?
Say if the client would decide to go ahead tomorrow, would it be possible for you to deliver or would it be normal for you to deliver for the client during the fall or is it something for 1st of 27?
No, I would say that a number of these projects have been, you know, planned for quite a long time. So we could most likely start to deliver quite instantly. I mean, during the fall, it of course depends on the different product, but to quite large extent, we could start supplying during fall.
Yeah. Thanks for the color on those two topics. I'm happy that I can get back in line. Thanks a lot. Thank you.
Operator
There are no more phone questions at this time. So I hand the conference back to the speakers for any written questions or closing comments.
So thank you all for good questions. We can conclude that we don't have any written questions either. so with that said we wish you all a great week and eventually a good summer thank you very much thank you all
