Vestum

Highlights of the period July – September 2023
·        Net sales amounted to SEK 1,666 (1,601) million
·        Adjusted EBITA amounted to SEK 161 (171) million, corresponding to an adjusted EBITA margin of 9.7% (10.7%)
·        EBITA amounted to SEK 161 (189) million, corresponding to an EBITA margin of 9.7% (11.8%)
·        EBITA per share before and after dilution amounted to SEK 0.43 (0.51)
·        Operating profit (EBIT) amounted to SEK 78 (110) million
·        Cash flow from operating activities amounted to SEK 279 (31) million
·        Operating cash flow amounted to SEK 315 (109) million, corresponding to a cash conversion of 140% (44%)

Summarising comments by CEO Simon Göthberg
Vestum generated stable net sales and profitability in the third quarter, along with improved cash flow. Operating cash flow improved by SEK 206 million compared to the same period last year, which means that the Group's cash conversion on a rolling 12-month basis increased sequentially between the second and third quarter from 77% to 103%. The rolling 12-month operating cash flow totals SEK 899 million. Net sales for the quarter amounted to SEK 1,666 million and EBITA amounted to SEK 161 million, corresponding to an EBITA margin of 9.7%. The quarter showed organic growth of 1%.

Demand for our products and services has generally been solid, with a total net sales growth of 4%, of which 1% organic. Profitability has been stable with an EBITA of SEK 161 million, compared to SEK 189 million in the same period last year. The comparative quarter was positively impacted by adjustment items of SEK 18 million driven by the revaluation of contingent considerations.

The Infrastructure segment generated stable volumes while the margin weakened compared to the same period last year. As in the second quarter, certain parts of the segment carried out some individual projects with lower result. However, the segment increased its EBITA margin sequentially between the second and third quarter from 8.3% to 9.4%. Within the Services segment, volumes decreased slightly but we successfully improved the EBITA margin compared to the same period last year to 10.3%. The demand for our services is partly driven by a strong underlying need for investments in energy efficiency improvements, but we also note that some operations are affected by the challenging macro environment. Within the Water segment, the need for our water products has been strong, not least in the UK. The water infrastructure sector in the UK is underinvested, which creates good conditions for continued positive development. Demand and profitability were at solid levels with an organic sales growth of 5.8%, while the EBITA margin amounted to a strong 18.8%.

Approximately 40% of Vestum's rolling 12-month EBITA is generated by market-leading product companies in growing niches within civic infrastructure. These businesses often have nationwide customer networks with the potential to sell their products internationally, which creates good growth opportunities. Strong market positions lead to pricing power, which leads to high margins. We continuously work to increase cross-selling between our product companies, while our services companies can increase the product market exposure. This leads to positive synergies.

Operating cash flow amounted to SEK 315 million, corresponding to cash conversion of 140%. We are beginning to see the effects of our efforts to improve the levels of tied-up working capital, which is mainly visible in the change in operating receivables. Financial net debt in relation to EBITDA decreased from 2.9x to 2.8x. Vestum's net debt, including contingent considerations, decreased by SEK 209 million during the quarter, of which interest-bearing net debt of SEK 122 million and contingent considerations of SEK 87 million.

The strategic review that we initiated in the previous quarter is ongoing. The aim is to evaluate opportunities to increase shareholder value. As part of this, we have previously communicated that strategic divestments may be an option. Desirable effects include a stronger balance sheet and a stronger operational and financial profile of the remaining Group. Ultimately, it is about improving margins, strengthening cash flow and reducing operational risks.

The increased uncertainty around the economy remains, and the upcoming quarters are difficult to assess. At the same time, we can state that the infrastructure in our main markets is underinvested and outdated, while growing urban areas are characterised by capacity shortages and the green transition. This, combined with continuously increasing demands from clients regarding quality, sustainability and digitalisation will create great growth opportunities over time for Vestum, which maintains a high degree of specialisation.

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