Welcome to Sdiptech Q2 report 2023. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answer session, participants are able to ask questions by dialing star five on their telephone keypad. Now, I will hand the conference over to the speaker, CEO Jakob Holm, and CFO, Bengt Lejdström. Please go ahead. Thank you very much, hello, and welcome, everybody. Presentation of the report for the second quarter. My name is Jakob Holm, and as always, Bengt Lejdström, our CFO, is with me to present the outcome. The agenda is, as always, we first walk through the highlights of the second quarter, then Bengt will take us through the more details regarding the financial development. Then we will, it says what else here, but we will then have a look at the outlook for the future. That's actually the third point, nothing else. Okay, just a short introduction, as always, Sdiptech, we are active in a number of segments within the infrastructure sector, where the key drivers for growth are very strong and long-lasting, aging infrastructure assets, increasing consumption of water, energy, transportation, and so forth, and also increasing regulations driven by a change to more sustainable and safe societies. Overall, strong drivers of growth within our sectors. SEK 4.1 billion in net sales over the last 12 months, strong profit, strong operating profit margin. Also, we also would like to mention that all of our businesses acquired since 2017, in one way or another, contribute to the UN Sustainable Development Goals. Our overall goal in terms of shareholder value is to increase profits every year, with a CAGR of 41% since 2017. It's a combination of acquired growth, but also organic growth, which we have delivered all the years over the past 3 years, except last year. We're back now on track on organic growth. Our business model is to acquire and develop companies within the infrastructure sector, with high margin positions. I think you all know that. That's really our focus because that's what we believe provides the most sustainable long-term growth, profitable growth, in the long run. Moving over to the highlights for the second quarter. Demand continues to be strong, 38% increase in net sales, demand is more reflected than in the organic growth, which was 15%, excluding currency. That is actually the same organic growth also had in the first quarter. The organic growth has really been 15% throughout the first and second quarter of this year, demonstrating a solid growth. That is really related to the customers that we have are typically operators of assets, the demand of our customers doesn't really change with economic conditions. The investments are there all the time and so forth. From that perspective, demand is very solid. Our EV charging unit, Rolec, has delivered according to plan, is developing well. The new technology platform is working well. The new products on the platform have since January been produced. Everything's working according to plan. The new production, the manufacturing is moved then from China to U.K., also, as you know. Everything's working well. Nothing, nothing, you know, special to mention anymore regarding the EV charging unit, so everything's good there. Moving over to profits, also 15% organic growth, which really means that the from comparable units, the profitability is really the same as it was last year. That is thanks to that the high costs that we have had related to purchase prices or increasing personnel costs and so forth. As we've always said that we will do, we have also been able to pass that on to customers. That's just comforting to also show that in the numbers. Organically, profitability unchanged, but we still have the margin expansion, which is then related to the acquisitions coming into the group with a higher profitability. Now in the quarter, 19.7% on the operating profit level, and it has really been increasing for many, many years. That trend continues. Looking at the cash flow, that was weaker than usual, 33%. It should be normally at around 80%, and the reason for that, Bengt Lejdström will develop that a bit more further, but it's really related to strong increase in sales then driving up the levels of receivables at the end of the quarter. That's. Really, the reason why we have a weaker cash flow is also related to sales. Although we, of course, want to be at the 80% that we normally have, we also would like to say that the reason why the cash flow is weak is related to strong growth, which is actually a positive thing. The fourth point that we would like to mention is that we have, as you know, goals, and one of them is to reduce our carbon dioxide emissions by 50% until 2026. It's the Scope 1 and Scope 2, and also the emissions is then also compared to the turnover. Since we are growing so fast with acquisitions, we need to cut that by half. We measure this in a comprehensive way on a quarterly basis, and we met the goal for last year, and we're also happy to say that we are in line to meet the goals also for this year. That's very comforting, and we could see that we have a very good in the group to really drive this change in the best possible way. That's that's very optimistic and positive. One acquisition, not in the quarter, it was actually just after the quarter in the beginning of July, Kemi-tech, a Danish company, specialized in chemical treatment of water contaminations. Typically, what you could find in steam boilers or cooling system, district heating, and so forth, and with different kinds of contaminations that are developed in the water, it actually hampers the efficiency of the systems. With the treatment, really, it's important to improve the efficiency, and it's a good business case for our customers. Kemi-tech is able to really present good business case to each customer on how things can be improved on the bottom line. It's a very strong proposition. It's very interesting also to see that this is like a sister company to Sdiptech, existing company, Water Treatment Products, which is active on the U.K. market. This is very much a acquisition where, you know, the companies can really help each other, add to each other. They're active on different geographies, but the offering and the customers and so forth are similar, so they're really sharing the same type of challenges. This is really interesting to see how we can develop this together. Contributing in a very good way to three development targets, and we will include, the Kemi-tech is included in the Resource Efficiency business area as of July 2023. Finally, from my side, just summarizing the situation regarding acquisitions, acquired SEK 36 million, so forth, so far this year, and the pipeline is solid. Our financial position is good, is strong, so we are planning to meet the target, SEK 120-150 for this year. We're not expecting to exceed it, but we're planning to be within the range, SEK 120-150. We have the pipeline, and we have the financial capacity to also deliver on that. Everything's normal from that perspective. Okay, handing over to Bengt. Thank you, Jakob. Having a more deeper look at the numbers, here you see the development in more detail of our sales and our EBITA* margin. The compound annual growth since 2017 it was now 38% in the quarter compared to last year. As Jakob said, 15% of that was organic, excluding currency effects. We have had some currency effects now because of the weaker Swedish krona, as you can see on the right-hand side of the slide, the percentage of revenues coming in outside Sweden is actually about 80% of the total group revenue. Of course, that has some effect, but in the number for organic growth, we exclude that effect, of course. It's about 5% rough numbers. We're happy to see that the contribution was broad from most business units, both from acquired ones and also for the comparable units, with a good, strong order intake overall. We see as an outlook, we don't really see a big change of that. Jakob will come back to the outlook as such. Good to see that we're delivering well across the group. I mean, it has its causes, so to say, with this stable demand and solid we have these societal functions in our companies and contributing to the sustainable, efficient, and safe society. That's really our vision and our strategy to acquire and operate those kind of companies. Also the geographic spread, you can for you, those of you who have been following us for some time, that the share from U.K. is decreasing in relative terms. That's because other countries have been added through acquisitions. We have acquired two companies in Italy, two in Denmark, and two in Norway, and we also have one in Finland since previous years, and other strong geographies are the U.S. and Norway, and Netherlands as well, been added. Some of these companies also have some substantial export revenues, so that is also increasing overall the numbers, not domestic sales. Having a look then on the profit development, it has been 41%, as was mentioned, in average since 2017. Now, in the quarter, resulting in a strong margin of 19.7%, EBITDA strong margin in the quarter, and 19.4% than in the last 12 months. Also, as with the sales, it was across the line, a good quarter. Most companies contributed to this growth, some of course, more than some others, and some of the bigger units performed very well. That's, of course, very comforting to see. Going further into the different business areas, let's have a look on Resource Efficiency. There we had an increase of almost 20% in sales, and also, there, a contribution from most business units. Some of our smaller business units had some challenges with some few other things, they actually had a bit less profit margin than previous years. All in all, the EBITDA margin for the whole business area decreased a bit, but that number only corresponds to SEK 4 million, actually, in Swedish of when you look at the EBITDA margins, that's not any real big numbers. All in all, the EBITDA for the business area increased with 13%, up to SEK 82 million in the quarter. The numbers you see to the right here is 12 months figures. So, the margin is still absolutely decent for the business area of 21.2%, looking at the last 12 months. As was mentioned, Kemi-tech, yeah, it was signed last quarter, but it was completed early this quarter, so it will be in the numbers as of July. We have also mentioned the EV charging unit, Rolec, in many quarters now, and they performed according to plan, with a stable and solid development as expected. That's of course, also very comforting to see that they are on track. Looking at the other business area, Special Infrastructure Solutions, had a very good development. Sales increased with 60%, and since they increased our margin, not the least because of some of the units with very good profit margins, typically, increased our sales. We had a strong increase in the margins quarter by quarter. Now on a last twelve months basis, we're up to 20.8%, and in the quarter, 21.3%. All of that then summing up to an EBITDA profit increase of 63%. As I said, it's across the line for most business units performing very well. We also have some acquisitions counted in here in this business area as non-comparable units, the ones from last four, for example, and some parts of the quarter for companies acquired during Q2 last year. All in all, a very good development, and we're happy to see that it also looks stable for the near future. Turning to some additional metrics, these numbers is always a bit complicated, perhaps, but we first of all, have our cash conversion figures, cash flow from our operations, and we had, as Jakob was mentioning, not as strong as we would wish in the quarter, 33%, compared to 80% last year. That is very much coming then from the increased sales we had in the quarter, but it also coming from expected sales in the coming quarters, in some of our companies need to procure, different goods and materials to put on stock, be of course, before deliveries, and much of that is for committed customer orders as well. A building up of stock, not so much, however, but still, but most of all, an increase in accounts receivables from invoicing to our customers because of the increased sales. We also have some companies that are selling projects, which over time accumulates to quite big numbers, and using the percentage of completion method of the, we need to provide for them a similar way as for account receivables, until we can actually invoice them and get the cash in. They had also had a good development in the quarter. That's, of course, also building cash flow. Of course, there could be many reasons for the cash flow looking as it looks, but we, of course, then now working together with our business units to bring this down again on the normal levels, around 8%. As you can see, for the last 12 months, we had one year ago, it was 85% in the last 12 months, now we're at 60%, roughly. Looking at the earnings per share, we had in the quarter, 3.22. In comparison with last year, that was only 1 other increase, but you should keep in mind that last year had a very.. an effect coming from these accounting standards, and that we needed to increase our interest rates, the discount interest rates for contingent considerations debt, which meant that that debt actually decreased, and that was an income of SEK 38 million last quarter, a tax-free income. If we would exclude that very extraordinary income, you can see, as it's said, saying to the right, that we actually increased the earnings per share with 50% now. Over the last 12 months, we have a little bit more than SEK 12 per share, compared with SEK 8.50 last year. Of course, almost a 50% increase in those numbers. That is developing very well, we believe. To the right, the upper right, we have our debt leverage. We have our net financial debt, that's the debt we owe to credit institutions, compared with the EBITDA. Since we did not pay for any acquisition in the quarter, these numbers have been decreasing since quarter one this year, and when it was about at SEK 1.8, I think, and now it's SEK 1.76. Slightly higher than last year, but we have done a number of acquisitions since last year. This is also where we have our external goal of being at or below SEK 2.5. If we include the conditional debt for the earn-outs that we have agreed with the sellers of companies, and in addition, adding some other debt, not owed to credit institutions, but other parties, then we are running at SEK 3.4 in the total net debt. As was mentioned in the report, if profits would stay at the levels they are today, for that would disappear, and that's actually the same number as six months ago. You could perhaps consider that a rule of thumb, more or less, that typically 40% of that debt is not payable if profits stay the way they are right now. That's of course, a very good thing about this debt, which is important part of our financing, that if companies don't grow, as expected, that debt is decreased quite substantially. Of course, we hope and we like to pay up that debt in the future because that means that our profits will increase even further. Right, so an outlook. Right. Thank you, Bengt. Finally, just looking at the future, we see there's no obvious signs of weakening demand. Order books are solid. Same thing goes units, and it's really going back then to that the customers are typically operators of infrastructure assets. The demand is not related to economic activity. From that perspective, things look stable, solid, and also governments around E.U., U.K., predominantly, put in additional capital to develop infrastructure. What we can see that really in a positive way in related to energy efficiency, water purification, traffic planning, traffic control, security solutions, also the EV charging a lot. There are many areas that also are getting extra support now in a good way. It looks promising for the future, also as it is now. The profitability, we see no reason why the margin expansion shouldn't continue. Comparable units are stable in profitability. Our costs are in good control, continue to contribute positively. That's really what we focus on when it comes to acquisitions. I think we've already said that the acquisitions pipeline and the target for the year, we are aiming for that, and everything's normal from an acquisitional perspective. All in all, a very strong report, strong quarter, and also a positive outlook for the future. By that, we will hand over for any questions. If you wish to ask a question, please dial star five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial star five again on your telephone keypad. The next question comes from Victor Hansen from Nordea. Please go ahead. Thank you, operator. Hi, Jakob and Bengt. A couple of questions from my end. First, a question on cash flow going forward. You built quite a bit working capital now in Q2 and in previous quarters, also in your existing units. It's not just M&A related, as you know, of course. Would you say that there is a potential to release a significant amount of working capital here in the short to medium term? Yeah, of course, that is to be seen, but eventually, of course, it will stabilize, so we're not just increasing the number of outstanding invoices just because of increased sales. We have had a very, for us, a big increase in sales the last quarters, in different units. It's not coming just from one unit, so that's good to see. It's quite, more or less, straightforward mathematical with the number of increased turnover compared with the increased, but also for, as we mentioned, for some other units having these longer projects. Eventually, we expect a new work for that will even out, and we will be back to the normal levels, not the least, when it comes also to inventory levels, since that has been building up for the future. Yeah. Okay. You think that maybe your inventory to sales levels, LTM, is about 16%, I believe, which is quite high. Do you want it to stabilize around that level, or could it potentially be some downside to that in relation to sales number? The working capital all in all, or of course, we were working for it to reduce, and it should be reduced as well as we're reaching a more normalized, so to say, level. [I get [crosstalk] [audio distortion] Okay, that's clear. Thanks. Thanks, Mate. Then, on CapEx for the rest of the year, is there a lot remaining or have we seen most of it? I know, for instance, the Hilltip is expanding its capacity, both in Finland and the U.S. Other than that, are there any major ongoing CapEx programs? No, nothing unusual, so to say. Typically, we are about 4%. Last year, it was a bit more than 6% of turnover, but normal numbers for our as of now, considering that we have changed our product mix to more proprietary products, is to be around 4%- 4.5% per turnover on a yearly basis. Yeah. Great. Great. Could you tell us more about how you see, how you steer your companies and local management in the right direction in terms of capital efficiency and cash flows? That would be very interesting to hear more about. Every company has its targets, not only regarding profit development and profit margins, but also on return on capital employed. That is, of course, then to be able to have a reasonable mix between expansion and all the working, added working capital that expansion requires, at least in the short term, with this buildup of inventories and sales. To also try to reach the return requirements by bringing down the working capital. That's an important part of the capital. They all have targets for this, so they have a, let's say, incentive in their own pockets to have these at decent levels. That's the carrots, sticks, so to say. Of course, we also follow them up closely and monitor and discuss with them how could they then reduce their working capital from in their daily operations. We work very close to the companies for that as well. Perfect. Just a final question from my side. Your products represent about 60% of sales currently. I'm wondering, is there a magic number here or what, or on what you are aiming for, or what are your thoughts there? We don't have a specific percentage as a target for us. A company is interesting for us if they have their proprietary products for sale, but then also adding service offerings, could be software offerings combined with their products to monitor their products, and also then installing the products. We like that because that gets some customer stickiness. What we don't like so much is contribution business, really. Of course, in some business units, still, we have service and installation of other parties products, but that's becoming a smaller and smaller part. The major part of all our installation and service work is on our own products. Actually, we're not aiming for 90% or 80% or 85% of own products, because that would mean we don't have that much of additional offerings around our own products. If the 60-20-20 split, which we have today when it comes to own products, service and installation, and that may, of course, change from quarter to quarter and year to year, and perhaps a little bit even more with the own products, but we will have a good mix of the three of them. Yeah, that makes sense. Thanks a lot. The next question comes from Karl Bokvist, from ABG Sundal Collier. Please go ahead. Thank you. Good afternoon. My first one is just on the transport refrigeration business. Nice to see it's good recovery. I was just wondering here if you could see some pent-up effects here on top of, let's say, a stable or growing market, driving growth for that business during the second half? The company you're referring to, the GAH Refrigeration, for the last mile transport, cooling solutions. A pretty tough year last year when their customers didn't get their vehicles. There is still a backlog for all their customers to receive their vehicles. There is also a huge need for replacing this existing fleet. to the overall economy, how much of the services of these companies, our customers, is demanded, but we also have a replacement demand, and also not the least, a more, to have more sustainable fleets. GAH has an offering of cooling units and equipment for EV, for electrical vans, which are more or less the only one offering in an efficient way. also their customers are replacing, assisting, perhaps diesel fuel-driven vehicles to electrical vehicles, and then they, of course, need new cooling units for those vehicles. They have many different drivers, as with all our companies, coming from sustainable and efficient ambitions from their customers. We don't really see a weakening demand in the, in the near future because of any overall situation. Yeah. Understood. Then on the comment you make there about some lower profit margins in some of the smaller units within Resource, are there any particular factors here, since you mentioned that price increases have caught up with cost? Should we expect these to remain in the coming quarters? Well, some one-off costs, some inventory write-downs, and some other one-off costs taking in those. I mean, in the smaller units, the sales can vary more, in relative terms, which means also that your profit margins goes up and down. As I said, it represents SEK 4 million of profit, all in all, which is not that much. We expect that to be back normal business soon enough. Understood. On the EV charging business or Rolec, for the second half of last year and the also the full year, you separated the gross growth components due to a fairly significant divergence between the two. Now you say that Rolec developed in a stable manner. What does that mean? Could you help us with some figures here? Yeah, for they had a organic profit growth, Rolec, in this quarter. In Q1, they were flat versus last year, which was above expectations. This quarter, they had an organic profit growth. It was with single digits. It was actually a little bit below the overall group achievement, but still very solid. As you said, last year, Q3, Q4, we explicitly mentioned, or rather, the difference, if we would remove that company. I guess in Q3, Q4, we will, to be fair, not only separate them when things are not going as expected. But they have a organic profit growth, and, yeah, we see a good, stable outlook for them as well. Okay, good. That's helpful. My line was a bit poor there, so sorry. Did you say we should think about it in a single-digit profit growth this quarter? Did I interpret you correctly or was there anything else? No, in Q2, it was that, yeah. All right, good. Just for staying with Rolec as my final question, if you say that it's delivering according to plan, and previously this has had margins above group, shouldn't this be quite supportive for Resource Efficiency's margins during the second half? Yeah, they have above group average, for sure. We say typically around 25%, sometimes more, even though it's not as high as previous year, but it's still very high. Yeah, doing the math as you did, they should contribute pretty well. All right. Thank you. That's all for me. The next question comes from Niklas Sävås, from Redeye. Please go ahead. Hello, Jakob and Bengt. Hello. I was just thinking, a good problem you have currently is the strong organic growth that we see. I mean, the tempo in terms of acquisitions have gone down, and you signaled that in connection with the Q4 report. I'm just thinking now, considering that you build up quite a lot of working capital and that hampers the cash position, I mean, do you really need to ramp up the acquisition rate much more in the second half? I mean, I know that you have your goal, but how is your reasoning there between organic growth and acquisition growth? I think maybe investors would be happy to have a total growth of the level that we see in this quarter. Well, we have our set strategy and set plan to acquire according to our financial goals. That is based on our financial capacity. It's based on the work that we do every day to build our pipeline and work over year after year after year after year. That we see no reason, you know, to change that this year. Everything is working well for Sdiptech. The cash flow, we will fix that. It's related to positive growth, so there's no issues really, and we cannot see the reason why we should, you know, take a pause in the acquisition. We would just continue as normal. That's what we've- You know, that's our strategy, it's our promise to everyone investing in Sdiptech, and we will deliver on that. At the same time, I guess, I mean, you won't push acquisition just to make acquisitions. It's lumpy- That's correct. If some acquisitions are delayed, that's not a big issue, as I see it, at least. That's right. That's right. We will not exceed our financial goals. We've been clear about that. We will stay within them, and all our financial goals are calibrated. If we are within our acquisitional goals, then we will not need to add any additional equity, either. That's also something that we want to be clear about. Yeah. Makes a lot of sense. You mentioned that you made one acquisition in the end of the quarter of Kemi-tech, consolidated in July then. You mentioned the similarities between water treatment products. I'm just thinking in terms of the markets that Kemi-tech is active in, is it mainly Denmark, or do they export as well? No, it's mainly domestic. Water Treatment Products is domestic in the U.K., and Kemi-tech, domestic in Denmark. But it's really, you know, they can really exchange experiences related to their recipes, if they sold their R&D to develop new products, their libraries of recipes. Yeah, this is really interesting, actually, to be interesting to follow the into development there. Do you see any ways of expanding it, or is this market typically local? It is typically local, domestic, yes, national. That's also something that normally creates good barrier, but it also, of course, it helps you when you're on the inside of the market, but also makes it more difficult to expand. This is typically what we like. We like, you know, very well protected niche markets. Perfect. Can you say anything about the sales level of the company and what multiple you paid and how you structured the deal, or do we need to wait until Q3? Yeah, you would need to wait. We don't rather disclose those numbers ahead of time, and it's only if it's a very big acquisition. All multiples and the and normal profit margins. We would only mention if it would be something exceptional in either way. Okay, perfect. We stay with the estimates that we do. Okay, have a great summer. Thank you so much. Thank you. Yep. There are no more questions at this time, I hand the conference back to the speakers for any written questions and closing comments. Yeah, I could perhaps mention we got a question here on the chat, but I think we have answered that already. It was relating to existing growth rates and, Rolec than year-on-year rates going into Q3, but I think we have answered that already, at least on what we can say. Yeah. All right. By that, we thank everyone for listening in and wish everyone a great summer going forward. Thank you.