Vestum

Highlights of the period January – March 2023

• Net sales amounted to SEK 1,400 (1,067) million
• EBITA amounted to SEK 105 (75) million, corresponding to an EBITA margin of 7.5% (7.0%)
• EBITA per share before and after dilution amounted to SEK 0.28 (0.21)
• Operating profit (EBIT) amounted to SEK 23 (11) million
• Cash flow from operating activities amounted to SEK 105 (121) million
• Operating cash flow amounted to SEK 143 (217) million, corresponding to a cash conversion of 86% (187%)

Summarising comments by CEO Conny Ryk
Vestum delivered high growth and stable profitability during the first quarter. Net sales for the quarter amounted to SEK 1,400 million and EBITA amounted to SEK 105 million, corresponding to an EBITA margin of 7.5%. The quarter showed stable organic growth of 4.1%. The total net sales growth for the quarter, including acquisitions, amounted to 31% and the total EBITA growth was 40%.
 
After the end of the quarter, Vestum announced the divestment of a company portfolio of 20 smaller businesses with low profitability within the Water segment. In connection with the divestment, Vestum intends to redeem the secured bond of NOK 950 million issued by Vestum's group company Lakers Group AB (publ). The bond has an interest rate of NIBOR plus 550 basis points. The divestment means that Vestum's profitability and cash flow will improve, net debt will decrease, the capital structure will become more efficient and resource efficiency will increase. For instance, Vestum's rolling 12-month EBITA margin has increased from 9.8% per the fourth quarter of 2022 to 10.7% per the first quarter of 2023. In connection with the divestment, certain cost savings will be implemented within Group functions which are expected to have ongoing positive impacts on profitability during the year. The transaction is expected to be completed during the second quarter of 2023.
 
Within the Water segment, the remaining portfolio consists of highly profitable product companies focused on water pumps, water filters, pump equipment and accessories for the water and wastewater industry. The operations are located in Sweden, Norway, Denmark and the UK, and have well-developed structural capital enabling add-on acquisitions. The rolling 12-month net sales and EBITA for the remaining Water segment per the first quarter of 2023 amounted to SEK 657 million and SEK 131 million, respectively, corresponding to an EBITA margin of 19.9%. The operations are considered non-cyclical to economic downturns and are well positioned to support the civic society in mitigating the effects from climate change, such as the extreme weather in the UK during the first quarter of 2023 where Vestum has market-leading operations within rental of water pumping stations to transport water in the event of floods or droughts.
 
The first quarter's EBITA of SEK 105 million, corresponding to growth of 40% compared to the same period last year, was driven by acquisitions as well as solid demand and profitability in the Services and Water segments, where both segments generated higher profitability than the corresponding quarter last year. One-off effects, including revaluation of contingent consideration and transaction costs, positively impacted profits by SEK 9 million. The EBITA margin within the Services segment amounted to 8.0%, and 17.4% within the Water segment. In the Infrastructure segment, which is the segment with the largest seasonality effects, the EBITA margin amounted to 5.4%, which is somewhat below expectations.
 
Operating cash flow amounted to SEK 143 million, which corresponds to a cash conversion of 86%. The amount of tied-up capital increased by SEK 7 million and was at higher levels than expected, partly driven by lower accounts payable and higher levels of inventory. Accounts receivable decreased in line with expectations. We are maintaining an internal focus on optimising tied-up capital where we are continually seeing gradual improvements, but are humbled by the fact that it will take some time before we start to see material effects.
 
During 2023, we intend to reduce the operations in North America that are conducted under the WeSC brand and thereby improve profitability and cash flow, with the unchanged aim of no longer having ownership of WeSC after the end of 2023.
 
We remain humble about the state of the economy, but can see that demand within civic infrastructure is stable, while we also see that we have the ability to improve the Group's cash flow, not least driven by a more efficient capital structure and higher margins as a result of the divestment that was announced after the end of quarter. We therefore look forward to the remainder of 2023.
 
The Interim Report is available on Vestum’s website: https://www.vestum.se/en/ir/financial-reports/