Vestum

Highlights of the period April – June 2024

• Net sales amounted to SEK 1,373 (1,534) million
• Adjusted EBITA amounted to SEK 133 (178) million, corresponding to an adjusted EBITA margin of 9.7% (11.6%)
• EBITA amounted to SEK 136 (172) million, corresponding to an EBITA margin of 9.9% (11.2%)
• EBITA per share before dilution amounted to SEK 0.36 (0.46)
• Operating profit (EBIT) amounted to SEK 60 (96) million
• Cash flow from operating activities amounted to SEK 27 (78) million
• Operating cash flow amounted to SEK 118 (174) million, corresponding to a cash conversion of 62% (77%)

Highlights of the period January – June 2024

• Net sales amounted to SEK 2,613 (2,811) million
• Adjusted EBITA amounted to SEK 233 (297) million, corresponding to an adjusted EBITA margin of 8.9% (10.5%)
• EBITA amounted to SEK 222 (299) million, corresponding to an EBITA margin of 8.5% (10.6%)
• EBITA per share before dilution amounted to SEK 0.59 (0.80)
• Operating profit (EBIT) amounted to SEK 70 (148) million
• Cash flow from operating activities amounted to SEK 223 (210) million
• Operating cash flow amounted to SEK 328 (339) million, corresponding to a cash conversion of 100% (83%)

Summarising comments by CEO Simon Göthberg
The second quarter has been characterised by a continued challenging market environment with lower volumes and profitability compared to the previous year. Organic growth amounted to -9%, but despite lower revenue we managed to reduce the financial net debt including contingent considerations by SEK 53 million to SEK 2,129 million. It is exciting that we are back in the acquisition market through the acquisition of PDAS, a UK market leader in wastewater pumping stations. The acquisition strengthens our already strong position in water infrastructure in the structurally growing UK market, while the Water segment approaches SEK 1 billion in revenue on a rolling 12-month basis. The acquisition was completed after the end of the quarter and will be consolidated into Vestum in the third quarter.
 
The Water segment continues to develop strongly, although we face tough reference figures as April-May 2023 was marked by extreme drought in the Nordics, which drove up volumes and profitability. Extreme weather was absent this quarter, but thanks to strong demand in the UK, the EBITA margin was strengthened from 22.2% to 23.7%. The segment is expected to develop steadily going forward.
 
In the Services segment, the weak property market has continued to negatively impact the segment’s volumes and profitability, where primarily the product companies, which constitute 25% of the segment, have driven the weaker development. The segment’s EBITA margin amounted to 6.9% compared to 9.2% in the previous year. The product companies are more positive about the coming quarters, while the installation companies are relatively neutral with an expected return to growth in the latter part of the second half of the year.
The Infrastructure segment offers specialised work in selected parts of the infrastructure where the investment need is significant. Generally, the segment is positioned later in the economic cycle than Services and Water, and some companies face tough reference figures. Overall, this means that volumes have decreased for the first time since the economic downturn, which has also negatively impacted profitability. The segment generates an EBITA margin of 9.1% compared to 11.8% in the previous year. Like the first quarter, we have won several fine projects, and although the segment’s weaker development in the quarter is expected to spill over into the second half of the year, we remain confident that the significant need for infrastructure investments will lead to stable growth going forward.
 
The improved capital structure, achieved in connection with the strategic review, has allowed us to lower the group’s capital cost and enabled acquisitions. This led to our first acquisition in two years, which was completed after the end of the quarter within the Water segment. The acquired company, PDAS, is an excellent add-on acquisition to Vestum’s largest company, Pump Supplies. There are concrete synergies on both the revenue and cost side, and through the acquisition, we demonstrate our strategy to grow the Water segment, both through high organic growth and acquisitions. The ambition is for Water to become Vestum’s largest segment over time.
 
We financed the acquisition through our own cash and existing credit facilities, rather than issuing shares as in previous acquisitions. The financial net debt excluding contingent considerations in relation to EBITDA amounts to 2.7x in the second quarter, which is above our financial target of 2.5x. We expect leverage to remain at a level above our financial target for the rest of 2024, but we believe that from a capital allocation perspective, it is right to invest in growth within the rapidly growing Water segment.
 
During the quarter, we have seen a generally positive trend shift in how our businesses view their future prospects. Vestum’s main end-markets are driven by investments in construction and infrastructure, as well as climate change. These investments hit early in the economic cycle, which means that Vestum is affected before other sectors, but it also means that we return to growth earlier. At the same time, a part of Vestum is relatively independent of economic fluctuations as climate change and investments in water infrastructure are driving factors, which is reflected in the improved EBITA margin in the Water segment during the quarter.
 
We are humble about the short-term market development and expect a continued challenging market during the current quarter, but at the same time, our businesses are more optimistic about their market outlook now than earlier during the year.
 
The Interim Report is available on Vestum’s website: https://www.vestum.se/en/ir/financial-reports/