Vestum

Highlights of the period July - September 2022

• Net sales amounted to SEK 1,797 (292) million
• EBITA amounted to SEK 203 (27) million, corresponding to an EBITA margin of 11.3% (9.4%)
• EBITA per share before and after dilution amounted to SEK 0.55 (0.11)
• Operating profit (EBIT) amounted to SEK 124 (15) million
• Cash flow from operating activities amounted to SEK 35 (-20) million
• Operating cash flow amounted to SEK 132 (-21) million, corresponding to a cash conversion of 50% (-44%)

Summarising comments by CEO Conny Ryk
Vestum continued to deliver stable growth and profitability in the third quarter. Net sales for the quarter amounted to SEK 1,797 million (SEK 292 million) and EBITA amounted to SEK 203 million (SEK 27 million), corresponding to an EBITA margin of 11.3%. The increase in net sales in the third quarter amounted to SEK 1,505 million and was driven by acquired net sales, but the quarter also showed strong organic growth of 30%, corresponding to 6% of the total increase in net sales. The organic growth was primarily driven by the Infrastructure segment, and especially our operations within the railway and public transport industries. Vestum currently has a broad offering of services within railway, where we have acquired several niche companies with leading market positions and where continued solid demand is expected. The previously announced process of moving our listing to Nasdaq Stockholm has entered its final phase.

The third quarter’s EBITA of SEK 203 million was primarily driven by stable demand and profitability within all three segments, but also by non-recurring effects including the revaluation of contingent considerations and costs for moving the listing, which positively affected the result by a total of SEK 18 million. So far this year, the process of moving the listing has affected the result negatively by SEK 4 million. Within the Infrastructure segment, volumes and earnings remain at solid levels and are basically identical to those for the second quarter, which means that the Infrastructure segment represents a bit more than 50% of the Group’s net sales and earnings with an EBITA margin of 11.1%. Within the Water and Services segments, the EBITA margin amounted to 12.1% and 10.1%, respectively. We are experiencing continued disruptions on the cost side due to high inflation and supply chain challenges, which have affected profitability to some extent. At the same time, we can see the strength of our decentralised business model where our local presence and extensive industry experience of our business leaders help contribute positively in the challenging environment we are still in.

Operating cash flow amounted to SEK 132 million, which represents a cash conversion rate of 50%. The level of tied-up working capital was relatively high during the quarter. Many of our businesses, which are entrepreneur-led companies, did not prioritise working capital optimisation before being owned by Vestum. Therefore, this is a clear area where there is potential for improvement, and we see solid opportunities to free up working capital over time and increase the Group’s cash flow generation. Seasonally, the second, third and fourth quarters are relatively stable when it comes to volume, while the first quarter is the weakest. This generally means that cash flow is at its strongest during the first quarter. Net debt in relation to pro-forma EBITDA amounted to 2.8x at the end of the quarter, which is in line with the second quarter.

We believe that our exposure to water infrastructure and other civic infrastructure, with solid investment demand regardless of the economic cycle, and our presence in six countries create conditions for continued stability. Coupled with our industry experience and decentralised business model, I am convinced that it is in these market conditions and tougher environment that we will prove ourselves as industry specialists. We now look forward to taking our next step as a Group and become listed on the main list of Nasdaq Stockholm.

The interim report is available on Vestum’s website: https://www.vestum.se/en/ir/financial-reports/