Hello everybody and welcome to Stiptec's presentation for the first quarter. I am Anders Mattsson, CEO of Stiptec, and I will be presenting here together with our CFO, Bengt Lejström, today. A short intro to the group, as usual. Stiptec acquired, developed, and created a long-term home for niche companies within attractive infrastructure segments. Today, we consist of 32 companies in the group, and we operate in a decentralized structure, and each company is responsible for the day-to-day operation. But from last year, we have also added more guidance and support in what we would like to prioritize strategically from the group level. We divide the group into four business areas. Each segment has a clear and structure underlying growth trends for the future. On the rolling 12, StipTek as a group has 4.5 billion SEC in revenues, 964 million SEC in adjusted EVDA, and an adjusted EVDA margin of 21.3%. And these are the numbers for the core operation, excluding the companies that are being divested. To start with, I would like to give you some highlights to the quarter as well. On a strategic level, we have had a good progress. We've been able to divest nine companies in the quarter, and now we have only one more to go. This one is targeted to be done during quarter two. Thanks to a good cash flow position, we decided to repurchase our preference share in the quarter for a total value of 184 million. Financially, we are satisfied with a stable organic sales growth of 7% and an organic profit growth of 4% in the quarter, showing a good demand for our products and services. We still experience a strong currency headwinds of minus 7%. Both in energy electrification and in safety and security, the demands have been strong with plus 15% sales growth, excluding currency. The cash conversion in a quarter was poor, primarily due to timing effects. We had high sales in March, which has increased the accounts of payable quite a lot. But rolling 12, we are still at a good level above 80%. our priorities going forward to support our companies in growing smart and sustainable we need from the past that we need to be careful with our working capital and capex requirements when we are growing with the companies we have a good pipeline in place and the focus is to convert the opportunities into signed deals and we have a good cash position but we will continue to be selective and disciplined with the coming M&As. I would like to follow up as well a little bit more on our strategic work we initiated last year. The first one is around portfolio management. I already mentioned the progress with our divestment, nine companies sold in the quarter. We achieved an enterprise value of full-year EBIT times six for these companies, which is in line with our expectations. These companies were sold to different takers. We sold four companies to an industrial group similar to us. We sold three companies in a cluster to a private equity owner, and we supported two MBOs. the nine companies resulted in a one-off cash contribution of 258 million we also had a capital loss of 84 million due to higher book values compared to what was realized and it's important to remember that we had opposite situation in q4 where we actually had a capital gain of roughly 60 million the last company that we are divesting is planned to be divested in quarter two. We also continue to be more prudent on which companies to allocate capex to based on our updated framework, which we divide the companies into different group based on the capex need. We have a segment that we call the strengthen bucket and capex should be allocated to fix a specific problem before we do anything else. We have the harvest companies. We should be restrictive with capex here and it should mainly be for maintenance purposes. and we have the accelerate one where we invest to reach growth opportunities and this is working good in practice for us now as a group and we are at the run rate of three percent of revenue revenue in capex which is in line where we should be we have another important strategic pillar as well and that is what we call proactive ownership we decided last year to increase focus on return capital employed and all our companies in the group have a target that they should reach this is a long-term shift for us in focus and it's something we are implementing carefully our financial target is to reach about 15 percent in return on capital employed in this quarter we reach 12.8 percent which is an increase from last year in the same quarter of 12.5 percent but in this quarter we know it was negatively affected by the capital loss of 84 million from the divestment. If we look at the return of capital employed for our operational unit itself it's stable level around 63 percent and the majority of the companies are performing well. Then we're coming into the financial development. When I'm presenting the numbers we focus on the core portfolio which is our remaining portfolio the companies we have sold in the quarter contributed roughly with 100 million in revenues and 5 million in adjusted ebd and they will not be part of the group from quarter two as we know so the core portfolio good net sales development in the quarter as a result of strong demand overall for the group seven percent organic net sales growth only one percent growth from acquisition as we didn't acquire that much last year the currency effect negative seven percent is still substantial in the quarter from next quarter we foresee the currency headwinds to ease in the comparable numbers in the quarter we had a strong development in energy electrification and safety security specifically with above 15 net sales growth excluding currency and it was a strong demand from several companies in these business areas it's also positive to see four percent net sales growth in supply chain and transportation excluding currency which is indicating that our largest business area is also back to growth we don't have any significant changes in our geographical distribution of sales UK, still our largest market, proprietary products, is at the same amount as previously with 67% of the total sales. Coming into adjusted EBITDA numbers. In the quarter, adjusted EBITDA came in at 241 million SEC. Organic growth was solid at plus 4% excluding currency. here again of course we had a large negative effect of the currency minus seven percent on the profit as well strong adjusted evda development from energy electrification and safety and security driven by volume growth but also a favorable mix between the companies the margin of 20.8 percent in the quarter is a slightly decrease from last year but that's primarily reason is the weaker margin in water and bioeconomy in the quarter. If we look to the right, adjusted EBITDA margin development per business area. Supply chain and transportation had a flat margin development around 17 percent. We still have some delays in the factory expansion in the U.S. from our Finnish company Hiltip. We have also initiated pricing projects in two larger units as we see big potential for the future. In energy electrification, EBITDA was up to 29% in margin. Our company phase three have a very strong momentum and the high margins are affecting the business area positively. Water and bioeconomy, EBITDA was down to 21%. We have a number of companies that have been too lean operationally and organizationally, and we've been needed to take some actions to that safety and security EBITDA up to 34 percent strong momentum from several companies and high proportion of software sales is affecting those margin as well so with that said I'm heading over to Bengt thank you Anders and then let's look a bit closer on our cash flow and cash conversion looking at the upper graph there you see the free cash flow that is all the cash flow from operations and the capex spending and amortization
on leasing that has developed on a 12-month basis per share the orange line and then the black one is the earnings per share also on a 12-month basis and as you can see both of these kpis they decreased a bit from year-end in Q4, but still higher than last year. And the decline comes to the free cash flow because of the build-up of working capital, and the earnings per share was affected then by the capital losses for these divestments. That was, of course, a temporarily one-off effect on the earnings. and looking on the cash flow in more detail you see the chart on the bottom there where it's quarter by quarter how the cash conversion has developed and in the middle of the dotted line is down on the last 12-month basis which has been pretty stable within the range that we aim to be between the 70 and 90 percent on 12-month basis but going up and down because of the season and other things. In this quarter, we saw a buildup of working capital on a few different items. We saw an inventory buildup, both for the season itself. Some companies that have their main sales during summer and autumn, they build capacity in their inventories now with finished goods, but also we invested in some raw materials in some companies to avoid future price increases or the risk of increased prices, at least because of the situation around the world. So that was a decision. We also saw an increase in accounts receivables and other type of short-term claims. and that mainly because of a lot of the sales were taking place in the later part of the quarter orders coming in at the beginning of the quarter orders that were a bit delayed from last year but coming in this quarter being delivered late later part of this quarter and that meant a build up of accounts receivables and then we also had some revenue recognition in larger projects that took place during the quarter which also then is build up of in the working capital for example deliveries of of trains in our italian company who deals with grinding of rails and the trains for grinding so that was more temporary you could say effect during this quarter but all in all looking at the 12 month basis for the cash flow it's very stable as you can see from the chart if we then look at another kpi the leverage and the leverage has continued to decrease as you can see in the chart on the left hand side we were up above three 3.3 almost 3.4 last year but took a decision really to to get it down under three here during the autumn and we have succeeded in that and we stayed well below although we did the redemption or preference shares here in March so 2.8 then as a leverage all in all debt earn out provisions and leasing and everything if we exclude the provisions for our future on our payments the leverage what we call the financial net debt leverage is 2.09 also a good stable development downwards the capital and return capital employed under Statschipon already it was a decline from last year q4 due to the capital losses also it's a one-off effect so that one will bounce back and looking at the operations themselves as you can see in the curve in the middle there going from 61 percent 23 up to almost 64 percent now it's very stable across the operations very good return on the capital employed out in the units and the difference between these two KPIs is of course all the goodwill and other required material assets And the top line there at 82% on the 12 month basis in the quarter is the return on our working capital, which is also a measurement of the efficiency in the companies which we think develops very good. So that was just a brief dive into some of the KPIs and then back to Anders again and with the business areas.
Yes, thank you, Beng. So starting with the supply chain and transportation, our largest business area had a stable performance in the quarter, net sales growth of 4% and adjusted EBITDA growth of 1%, excluding the currency effects. It was a strong performance from our Danish company within truck detachments after a much slower last year from this company. The result is negatively affected by two businesses, primarily, our company within Winter Road Maintenance Hilltip. As we have said in last quarter as well, we have invested in an improved factory and organization in the U.S. to be able to serve the North American market locally. The cost for this action is still high relative to the sales we achieve, but the situation will be improved during the year as the order book looks stronger and we now have a stronger momentum in getting the products out from the factory. Our company with import automation, Certus, still have challenges when turning orders into sales, which is affecting the business area in quarter one as well. but overall we are optimistic for the full year as orders are good and several companies in the business area are performing strong in the business area we're also glad to add a new acquisition rail safety system it was actually in last week they came into the group it's a company based in the netherlands revenue around 6.6 million euro and with a good profitability The company develops and supplies patented magnetic safety barrier systems used when around railroad maintenance work. So instead, as you can see on the pictures there, so instead of digging and interfering with a foundation under the railway, this is a smart and efficient system that is based on the magnetic, placing them on the sites, as you can see. The company have a strong position in the European market, serving railway infrastructure like Deutsche Bahn is a typical customer and can also be contractors around the maintenance work. It has a strong link with our Italian company Mekno, who is doing rail grinding equipment and they serve the same customers. So we look forward to continue developing the company as part of the STIPTIC group. Then we are coming into energy and electrification. Energy and electrification had a very strong quarter, high growth numbers, both for our sales and adjusted EBITDA. It's a strong demand and development for several business areas or business units in general. And we prosper from strong competitive products and solutions. we had a specific strong development within following applications it was a cold winter with strong sales for our company heat work offering heating solution for frozen ground for all kind of work that is needed during those time periods energy efficiency and upgrades in supermarket segment for cooling applications our company rdm had strong and are in a strong momentum and many upgrades improvement still drives driving from the energy efficiency perspective and we also have electrification in the UK with Rolex performing at a good level from a margin perspective our latest acquisition in the business area phase three is supporting the margin uplift, and it's supposed to continue that way as well. Then, coming into water and bioeconomy, the business area had financially a weak development. Net sales growth is minus 1% currency adjusted, which is, of course, not good, but still indicating that the challenges are more on the cost side. On a positive side, returns are at the high level above 100% return of captain employed within the business area. We have negative effects from a few business units that is undergoing a strategic update. In general, as I already mentioned, we have been quite lean operationally in some of the companies. In the chemical cluster, for example, we have invested to adhere to updated environmental requirements in three of the business units. We have also three new MDs currently onboarding, that means double cost and also some efficiencies at the moment. We have also our Italian company invested in additional production capacity in our sludge treatment company and that will take off later in the year with improved volumes so all in all it's not a short-term fix but with higher volumes the margins will start to recover during the year then we're coming into safety and security safety security had a very strong quarter with high growth numbers both for sales and adjusted db day we see strong demand and development in several application areas the security for data center we have mentioned it now the company eagle have had strong development and continue so clean air in hospital for gas evacuation have had a very strong last six months and in a very good momentum and secure communication as we know is on top of many agendas and this company as well within our group is performing good the improved profitability is largely thanks to a better product mix and it also been a higher proportion of software sales compared to previous year then we are coming in to M&A from an M&A perspective we are on track to increase our M&A activity for the year. We have a good pipeline and we have good discussions ongoing. We didn't close any deal in Q1 but Dutch rail safety company RSS it was closed in April. Our current cash position is strong but we are aware of it and it's important to continue to be selective and disciplined but we look forward to ramping up number of deals in the year. And then on a final note to summarize the quarter today we had a stable development in quarter one although we have some companies that we are working on improving strong development from energy electrification and safety security that we foresee to continue overall we have a continued positive outlook we have a good order book for the coming months for several companies in the group and of course the strategic initiatives it has been a very good momentum and they are almost completed and we look forward to close the latest acquisition in Q2 if everything goes according to plan and we are having good discussions ongoing and we are looking forward to more activity within our M&A work. So that was all from us, me and Bengt, in the presentation, and we open up for questions.
Operator
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 Anton Ingves from Nordia.
Please go ahead. yes hi and good morning starting off here within the the energy and electrification you stated that some of the units here perform very well and how large is the effect here on the margin improvement from from this single unit so to speak and can you give any hint on the the organic growth here in the the segment for the quarter on on let's i can start with the organic growth so we we know we have we haven't done much um mna except for for this one company in in the
business area but usually we don't guide on specific organic growth in the business areas we look at the total when we talk about organic total growth um but it's it's a it's a larger larger entity and it's having a good good development and margin but more specifically on the organic we don't go into actually Bengt I don't know if you have anything on the on the on the contribution on the margin side no it's only one well they're talking about the organic also it's only one month that was not organic for this acquired company and the phase three that we
acquired last year that's so that was a very little so almost everything of the development is of course organic and when it comes to the margin development again it's this new company that has a high margin that of course then improves the whole business area but also some of the other units had a good development so so overall a good good quarter very good quarter for the business area okay perfect and then then on the ramp up here of deliveries in supply chain towards the end of the quarter is this effect expected to continue here into
q2 with a better momentum for the the entire quarter and also the the same topic you said that you saw a stable order intake in the area can you give any more specific numbers to put that into perspective?
From the order intake side, it's been a strong order order intake from last year, quarter four in the business area. So it was primarily GH that came in and had high much higher order book coming into the year. And yeah, the effect was that it was delivered quite a lot in March, not stable January, February, March, but it is still a very strong order book. So yes, that momentum let's say of delivering on a strong order book it's for many companies in the business area so yeah that that's positive from from that perspective and we feel comfortable that it's it's the growth will continue them for the business area and then one final here from me if I may you you mentioned here there's some price increases within supply chain are they sort of implemented now and can you be a bit more specific on the effect from this it's it's actually no it's not anything that is implemented we have seen a big opportunity to work with prices more efficiently so we're actually driving in a pricing project not only within this business area we have targeting four companies to start with and two companies are within supply chain and transportation so it's a it's we use an external support as well for a framework for price increases and how to work with that long term and this has been now starting up during q1 so no no effect from that right now. And that's more of a long term effect that we will see working, let's say, more proficient with pricing going forward.
Perfect. Very clear. All for me. Thanks.
Operator
The next question comes from Max Bako from SEB. Please go ahead.
Yes. Good morning, Anders and Beng. Thank you for taking the questions. Perhaps starting with water and bioeconomy, that specific segment, which you mentioned here during the presentation had a bit more challenging water. But you mentioned also that with volumes you expect profitability to improve during the coming quarters. Do you expect to be able to match the profitability that we saw during 2025 for Q2 to Q4?
Is that possible in your view? so i think from a volume perspective yes it's our italian company they invested in a new production facility they they have two one they are adding a third one so they're building up small production facilities let's say closer to the customers so we are taking the cost for the investment but volumes need to come in to be able and to to to get the benefit from from that investment and that we foresee coming during the the year definitely um on on the margin side in general as as i said we we have felt that we have been a little bit too lean in some of the companies higher requirements coming into the chemical cluster as well so these actions that we need to take is not that we are fixing something and then the margin is going to come back this is to be a little bit more that we are adding costs to be more proficient and long-term focus for these companies so it will be challenging to come back to those quite high numbers uh part of last year in in the business area okay understood uh and then the final one basically you also mentioned on on the topic of cash flow and networking capital that you took some inventory
a buildup here during the quarter to mitigate potential supply chain disruptions but I think Benk you also mentioned that it was to to hedge for potential increases in raw materials and so on and so forth. Have you seen any disruptions yet or is it more of a precautious measure?
It's more of to be precautious and take some opportunities to do efficient procurement here so Okay.
Yes. Understood. That was all from me at the moment. So I'll jump back in the queue.
Operator
The next question comes from Stefan Knutson from RedEye. Please go ahead.
Morning, Anders and Bengt. Thank you for taking my questions. First up, very impressive development within both energy and electrification and safety and security. Do you see this momentum as a structure a long-term driver or was there any one-time effects that we should be careful to extrapolate?
I think from energy electrification we had a strong winter seasonal effect then from heatwork the company producing equipment and solutions for frozen grounds yes they had a very strong winter let's say January or February sales but other than that no it's a general trend with electrification with the energy savings um that is taking place so it's actually a broad momentum in these companies uh we of course would like to add more companies to the business area as well because we see the trends um there for for these companies at the moment and safety security very much similar i must say um it's it's a broad general good momentum um and we have niche products niche services strong products and and solutions uh that we foresee foresee definitely to continue perfect and secondly uh given the the current geopolitical situation do you expect any any meaningful impact in q2 onwards and if so in what business business area do you foresee elevated risk for for any disruption we have had some some companies with um delays order from um middle east uh we are not exposed too much but uh definitely uh we have seen some hesitant uh from that region of course um but uh no in general i think what banks also mentioned that we have taken in some more sorry we started to purchase a little bit more to hinder potential increases in oil prices and transportation costs etc but other than that we are not that exposed at the moment to to see any big obstacles due to that very clear and then finally on the accounts receivable build up
Do you expect this to recover in the near term or will this persist for some time as you see it currently?
No, I mean it was more a, call it a timing effect on where the quarter ends in relationship to invoicing and so on. So cash flow should be more normalized here going further. But I think it could be good to look at the more 12-month basis numbers, because it can have quite some swing from one quarter to the other, depending on when invoicing happens or revenue recognition happens.
Very clear. That was all for me. Thank you.
Operator
The next question comes from Carl Korshedden from DNB Carnegie. Please go ahead.
Yeah, good day, Anders and Bengt. Just a question from my side on demand overall. we have seen now an upwards trending organic trajectory here now for three consecutive quarters and just curious to hear a little bit more when you talk about you or when you talk to your current businesses and the orders they are seeing would you expect this upwards trending i guess organic trajectory here to continue with the next couple of quarters or is there anything here in in terms of comps or similar we should we should keep in mind no i i think it's um it's a positive momentum in in several of the the business areas and and the companies um
it is uh i think it's important for us to to see this now the good momentum and to work discipline with it uh of course the working capital and the capex and to make sure that we are doing the right thing and to take of course the opportunity to grow with with the market development so in short it's no it's a good momentum that we foresee to continue but of course looking down at water and bioeconomy we are having some challenges with some of the companies there as well so that's that we saw in quarter one it was affecting the total but definitely that our mindset is that we will manage we will work with these companies and overall it's a good momentum
them in the entire business that's clear and if it's fair to say that you have now I guess recouped all of these orders we have talked about over the last couple of quarters where you've been talking about postponements I guess you mentioned that not all of them have been converted to sales maybe in this quarter in particular but do you feel like you have received all the orders at least by now yeah i think definitely the situation primarily in supply chain and transportation last year where they were wanting to place the order but they were hesitant because of uncertainties yes these orders are now placed with us we have the orders
let's say um it's a little bit maybe as i said in certus the port automation company that the larger courts could be a little bit hesitant to let's say what's coming late in the year but no it's nothing that we really count on at the moment so that the delays in placing order is is over let's say then from that perspective yeah i think so that's clear and yeah it it wouldn't be possible to i guess break out the sort of uh remaining order backlog from those larger larger projects and orders that we have been talking about that wasn't delivered now in in uh q1 going into q2 no it's it's um no it's not really possible actually it's it's still let's say the the bigger retail companies in the uk that's where we talk about the big orders coming from um they are saying that now this year we need we place the order for these demand exactly when it's going to come when we're going to deliver the the vans etc it's not it's not clear but um but the order is placed so to say with us at least yeah that's clear uh and on the on the cash flows you already answered a little bit about the i guess the the accounts receivables situation but if we talk a little bit about the inventory build up you mentioned here could we expect also that
to i guess convert into into cash flows now already in q2 or or do you see that as more i guess structural for a couple of quarters now and given the situation with supply chains and so on now we think that's more was more now but yeah it's still also in q2 some of the seasonal companies continue to build the finished goods or semi-finished goods for deliveries during second have especially company like hilltip with their snow snow salt spreaders and snow removal equipment they sell most of their equipment during late summer and autumn so still some of that but that's kind of a normal seasonality on our cash flow so shouldn't be any unusual things yeah okay that's clear uh yeah thanks that was all from my side i'll get back in line as a reminder if you wish to ask a question, please dial pound key five on your telephone keypad.
Operator
The next question comes from Simon Johnson from ABG Sundal Collier. Please go ahead.
Hello, guys. That seemed to drive growth. And as a general theme, can you maybe share a bit more on that momentum here and continue to be momentum, do you think?
Or was it more isolated to just here in this quarter because i don't remember yeah okay now it's um it's primarily within safety security a company producing um security gates uh for the data center industry uh they are based in the uk and they have good um customer relationship with contractors in ireland ireland is the hub for it so they when they expand with the data facilities they are pre-written so to say in in many of these projects building up globally actually with their strong product so no it's not in general for many companies is more specific this company within safety security that is driving or having a good momentum thanks to that but we we see that to continue but for us it's not really a problem we are having almost a full audiobook what we can produce actually from this company and we are we are looking into different options to expand or how to deal with it but we are very cautious on will this trend continue so we will be careful in in balancing that of course as well but the demand from this company is good for many different applications but they definitely data center is driving at the moment the growth.
To see that you are coming a bit more forward leaning here and you also mentioned the strong M&A pipeline and that you expect a ramp up but if you can talk a little bit more about the timing of and the magnitude of the ramp up in acquisition pace.
There's just one acquisition so far this year and when you say ramp do you expect pace already sometime this year or is it more throughout this year and then into test maybe the year where you are at a good momentum okay how should we think about that i know yeah we have definitely plans for um closing in q2 then um that's what we prefer to do um one more um it's it's yeah it's already uh end of april um but then adding let's say definitely then q3 q4 more companies we have the capacity as as we have said for for high volume m&a growth of course this year but yes as you said the complete ramp up will be 2027 but if we are coming in between four to six acquisitions this year that would be something that i foresee good for us how does that pace yeah i think i think it's it's definitely that we would like to be below three that's our long-term target um in the leverage um so yes we need to be careful about that how how we ramp up um the m a over the year um definitely we have that in mind uh for sure There are no more questions at this time, so I hand the conference back to the speakers for any written questions or closing comments.
And we have one question in the chat, the feed, but I think we have answered that one It was regarding orders in the supply chain area coming in Q1 and being delivered now or in Q2. but i think we have answered that already so no other questions okay but if it's no more question then um thank you all for listening in and and good questions um it was um yeah good good discussions here today and i hope to see you next quarter as well if not before
