Vestum

Highlights of the period July – September 2024

• Net sales amounted to SEK 1,275 (1,392) million
• EBITA amounted to SEK 160 (158) million, corresponding to an EBITA margin of 12.5% (11.4%)
• Adjusted EBITA amounted to SEK 147 (158) million, corresponding to an adjusted EBITA margin of 11.5% (11.4%)
• EBITA per share before dilution amounted to SEK 0.42 (0.42)
• Operating profit (EBIT) amounted to SEK 83 (81) million
• Cash flow from operating activities amounted to SEK 138 (205) million
• Operating cash flow amounted to SEK 200 (251) million, corresponding to a cash conversion of 93% (118%)

Highlights of the period January – September 2024

• Net sales amounted to SEK 3,887 (4,203) million
• EBITA amounted to SEK 382 (458) million, corresponding to an EBITA margin of 9.8% (10.9%)
• Adjusted EBITA amounted to SEK 380 (455) million, corresponding to an adjusted EBITA margin of 9.8% (10.8%)
• EBITA per share before dilution amounted to SEK 1.02 (1.22)
• Operating profit (EBIT) amounted to SEK 153 (229) million
• Cash flow from operating activities amounted to SEK 360 (415) million
• Operating cash flow amounted to SEK 528 (590) million, corresponding to a cash conversion of 97% (95%)

Summarising comments by CEO Simon Göthberg
In the third quarter, profitability is improved while cash flows are stable. The solid profitability is primarily driven by our product companies, representing 50% of the quarter's EBITA. The product companies hold market-leading positions, with price leadership and high margins, and we have a clear strategic direction to further increase the share of product companies in Vestum. Although market conditions are still challenging, indicated by the organic sales growth of -10,7%, most signs suggest that the worst is behind us, though recovery may take some time.
 
The Water segment has developed strongly with sales growth of 43%, driven by both acquisitions and organic growth. Almost all markets performed well, with the UK showing the highest growth. The acquisition of PDAS, completed in August, is performing in line with expectation and continues to improve profitability due to the scalability of its subscription business. The segment’s profitability has been at solid levels with an EBITA margin of 17.7%.
 
In the Services segment, the challenging property market has negatively impacted the segment’s volumes and profitability. Sales declined in the quarter, but at the lowest rate since the beginning of the year. The segment's EBITA margin increased sequentially from the second quarter to 7.2%, but dropped from 11.1% in the previous year. Demand for the segment's products and services has generally increased post-summer but even as the recovery has started, it may take time for this to be reflected in the figures.
 
The Infrastructure segment successfully increased its EBITA margin in the quarter from 11.7% to 13.1%, despite a decrease in sales. The strong profitability was mainly driven by the segment's product companies with improved margins due to a stronger market and favourable product mix. The product companies contributed 30% of the results in the quarter, compared to 23% last year. However, certain parts of the segment are still facing a challenging market, as seen in the volume decline in both the second and third quarters.
 
Cash flow remained stable during the quarter, with an operating cash flow of SEK 200 million and a cash conversion of 93%. Free cash flow amounted to SEK 87 million for the quarter and SEK 379 million over the last twelve months. Free cash flow in relation to adjusted EBITA remains at solid levels of 60% for the quarter. Net debt increased slightly due to the acquisition, amounting to SEK 2.1 billion or 2.8x EBITDA.
 
During the quarter, we completed the acquisition of UK-based PDAS, a market leader in intelligent monitoring systems for water pumping stations, further strengthening our position in the UK water infrastructure market. Our acquisition strategy is focused on market-leading product companies with structural growth and high profitability, as well as expanding the Water segment through both add-on acquisitions and new platform companies. Vestum's existing product companies, which have contributed 50% of Group EBITA over the last twelve months, generate an EBITA margin above 15% and an EBITA in relation to average net working capital (E/NWC) of 67%.
 
From a capital allocation perspective, we are balanced between reducing leverage and pursuing acquisitions.
 
We are humble about the short-term market development and remain focused on ensuring solid profitability and stable cash flows. However, we expect a return to volume growth in 2025 as market outlook continues to improve. This has led us to initiate growth-oriented activities in several areas of the business, such as add-on acquisitions and geographical expansion.
 
The Interim Report is available on Vestum’s website: https://www.vestum.se/en/ir/financial-reports/