Sdiptech

Press release
9 February 2024, 08:00

Sdiptech AB (publ) publishes Year-End Report 2022
The report is available on the company's website: www.sdiptech.se

STRONG GROWTH, LOWER DEBT AND RECOVERY OF CASH CONVERSION

FOURTH QUARTER 2023

• Net sales increased by 35% to SEK 1,368.4 million (1,017.5). In total for the Group, organic sales growth was 20%, excluding currency effects.
  
  
• EBITA, increased by 27% to SEK 250.2 million (196.9).
  
  
• Adjusted EBITA increased by 29% to SEK 252.6 million (195.6), corresponding to an adjusted EBITA margin of 18.5% (19.2). Organic adjusted EBITA growth for the Group was 9%, excl. currency effects.
  
  
• Profit before tax for the Group amounted to SEK 138.4 (132.9) million and profit after tax amounted to SEK 91.6 million (107.0), of which SEK 91.4 million (106.8) was attributable to the Parent Company’s shareholders.
  
  
• Cash flow from operating activities amounted to SEK 197.4 million (201.4), corresponding to a cash conversion of 86% (99).
  
• Earnings per ordinary share (average number), less minority interests and dividends on preference shares, amounted to SEK 2.31 (2.81). After dilution, earnings per ordinary share amounted to SEK 2.31 (2.80).

JANUARY - DECEMBER 2023

• Net sales increased by 37% to SEK 4,818.3 million (3,505.2). In total for the Group, organic sales growth was 18%, excl. currency effects.
  
  
• EBITA, increased by 32% to SEK 963.0 million (728.6).
  
  
• Adjusted EBITA increased by 37% to SEK 921.6 million (671.1), corresponding to an adjusted EBITA margin of 19.1% (19.1). Organic adjusted EBITA growth for the Group was 13%, excl. currency effects.
  
  
• Profit before tax for the Group amounted to SEK 611.5 (536.8) million and profit after tax after tax amounted to SEK 445.6 million (428.1), of which SEK 444.2 million (427.1) was attributable to the Parent Company’s shareholders.
  
  
• Cash flow from operating activities amounted to SEK 618.5 million (564.6), corresponding to a cash conversion of 67% (80).
  
• Earnings per ordinary share (average number), less minority interests and dividends on preference shares, amounted to SEK 11.33 (11.53). After dilution, earnings per ordinary share amounted to SEK 11.33 (11.48).

• During the period the acquisition of HeatWork AS in Norway, as well as Kemi-tech ApS in Denmark, were completed.
  
  

SIGNIFICANT EVENTS AFTER THE END OF THE REPORTING PERIOD

• In January 2024 Sdiptech acquired all shares in JR Industries Ltd in the United Kingdom.
  
  

DIVIDEND

• The Board of Directors proposes that the Annual General Meeting resolves on a dividend to the preference shareholders in accordance with the articles of association. The Board of Directors further proposes, in line with the dividend policy, that no dividend be paid on ordinary shares of Class A or Class B.
  
  

COMMENTS BY THE CEO

Despite the uncertainties in the world, rising inflation and higher interest rates, Sdiptech has shown strong resilience in 2023. The stable demand and strong market positions of our units have generated continued steady growth. Regardless of a slower pace of acquisitions, Sdiptech has been able to maintain a profit increase of 37 percent, of which 13 percent was organic excl. currency effects.

THIS YEAR'S OVERVIEW
The year 2023 was characterized by continuously strong demand from our customers in almost all business units, which led to organic sales growth of 18 percent excl. currency effects. In addition, acquisitions made a further contribution, with a total increase in sales of 37 percent. Our adjusted EBITA, previously called EBITA*, also increased by 37 percent, of which 13 percent was organic excl. currency effects. We have had good cost control and are pleased to be able to deliver double-digit organic profit growth. In addition, our adjusted EBITA margin was stable at 19.1 percent (19.1). Excluding Rolec, the Group's unit for electric vehicle chargers, which had a weak second half of 2022, we also delivered organic sales and profit growth of 17 and 11 percent for the full year, respectively, excl. currency effects. This illustrates the good demand and growth that the entire Group has been able to show 2023.

The cash conversion during the year was 67 percent, which is below our normal levels, but still an improvement compared to the beginning of the year. We are working hard to manage accounts receivables, which were a result of the strong sales growth, and to optimize our inventories. This has led to a cash conversion of 90 percent for the last two quarters.

Return on capital employed (ROCE) is an important key performance indicator as it demonstrates the profitability and capital efficiency of our companies. Our average ROCE on the operating units was 65 percent. However, as acquisitions lead to an increased share of goodwill and intangible assets on the balance sheet, the key ratio is lower at Group level, which was 13.0 percent in 2023 compared to 12.2 percent in 2022.

Strong growth, good cash conversion and a slower pace of acquisitions have resulted in a lower debt/equity ratio. To facilitate comparability, we have also updated the definitions of our key ratios regarding net debt to be based on the liability at the balance sheet date. Our financial net debt, including lease liabilities, in relation to adjusted EBITDA amounted to 2.02 (2.35), and the total net debt/equity ratio, including provisions for future earn-out payments, was 3.07 (3.89). Again, we remind you that reserves provided for earn-out debts are based on future profits that exceed today's levels. Thus, if profits do not increase as expected, part of the debt will not be paid off. To put this into perspective, this means that if profits remain at this year's levels, the reserved liability for earn-outs will be reduced by about 30-40 percent.

QUARTER SUMMARY
The market situation remained positive for most of our business units in the fourth quarter, with total sales growth of 35 percent, of which 20 percent was organic excl. currency effects. Excluding Rolec, organic sales growth was 18 percent. Adjusted EBITA increased by 29 percent during the period, with acquired units having the greatest impact. Organically, profit increased by 9 percent, excl. currency effects, and 5 percent excluding Rolec. The difference between organic sales and profit growth is mainly due to the fact that a few of our high-margin companies have had more cautious growth compared to some of those with lower margins. In addition, two of the Group's units with exposure to new construction have found it more difficult to maintain good profitability.

Profit before tax increased to SEK 138.4 million (132.9), despite higher interest rates and a currency loss towards the end of the year. However, the Group's earnings per share were affected by the fact that we had more shares on average during the quarter than last year, and that profit for the year to a large extent was generated in countries where the tax rate has been raised or is higher than the Group's previous average.

NORDIC QUALITY ACQUISITIONS
During the year, we completed two acquisitions. The new units are Norwegian HeatWork and Danish Kemi-tech, both known for their high quality and innovative solutions. The acquisitions not only represent continued establishment in the Nordic region, but also contribute valuable technical expertise that opens new doors for growth in the Resource Efficiency business area.

An important feature of our business model is the ability to accelerate and slow down the pace of acquisitions depending on the prevailing market situation. During the second half of the year, we assessed that a lower rate of acquisitions is the most value-creating for our shareholders. This does not in any way mean that we have slowed down the acquisition activities. We are in dialogue with high-quality companies with attractive market positions on a daily basis. At the beginning of 2024, we therefore had the pleasure of welcoming JR Industries, a leading niche manufacturer in the UK of roller shutter doors for commercial vehicles and a company that Sdiptech has been in dialogue with since 2019.

OUTLOOK
We are optimistic about the new year, where our stable infrastructure customers continue to demand our solutions. At the same time, we have higher interest expenses and tax items than before, which affects our profit after tax. With the current macroeconomic situation, we will continue to have a slower pace of acquisitions, but our acquisition dialogues are ongoing, and we are ready to accelerate when the time is right. In summary, we can conclude that we have good conditions for continued growth, both organically and through acquisitions.

Finally, I would like to extend a big thank you to all our dedicated employees for your commitment. As a new CEO, I look forward to leading the company together with you towards growth. I would also like to take this opportunity to thank all shareholders for their continued confidence.

Bengt Lejdström
President and CEO

For additional information, please contact:
Bengt Lejdström, CEO, +46 702 74 22 00, bengt.lejdstrom@sdiptech.com
My Lundberg, Head of Sustainability & IR, +46 703 61 18 10, my.lundberg@sdiptech.com

Sdiptech’s common shares of series B are traded on Nasdaq Stockholm under the short name SDIP B with ISIN code SE0003756758. Sdiptech’s preferred shares are traded under the short name SDIP PREF with ISIN code SE0006758348. Further information is available on the company's website: www.sdiptech.se

Sdiptech is a technology group that acquires and develops market-leading niche operations that contribute to creating more sustainable, efficient and safe societies. Sdiptech has approximately SEK 4,800 million in sales and is based in Stockholm.

Sdiptech AB (publ) is required to disclose this information pursuant to EU Market Use Regulation 596/2014. The information was provided by the above contact persons for publication 9 February 2024, at 08:00 CET.

Attachment

• Sdiptech Year End report 2023