Vestum

Highlights of the period October – December 2023
·         Net sales amounted to SEK 1,559 (1 509) million
·         Adjusted EBITA amounted to SEK 167 (168) million, corresponding to an adjusted EBITA margin of 10.7% (11.1%)
·         EBITA amounted to SEK 165 (169) million, corresponding to an EBITA margin of 10.6% (11.2%)
·         Operating profit (EBIT) amounted to SEK 89 (95) million
·         Cash flow from operating activities amounted to SEK 209 (159) million
·         Operating cash flow amounted to SEK 228 (251) million, corresponding to a cash conversion of 105% (116%)

Highlights of the period January – December 2023
·         Net sales amounted to SEK 5,762 (5,162) million
·         Adjusted EBITA amounted to SEK 622 (587) million, corresponding to an adjusted EBITA margin of 10.8% (11.4%)
·         EBITA amounted to SEK 623 (591) million, corresponding to an EBITA margin of 10.8% (11.5%)
·         Operating profit (EBIT) amounted to SEK 318 (314) million
·         Cash flow from operating activities amounted to SEK 634 (397) million
·         Operating cash flow amounted to SEK 824 (685) million, corresponding to a cash conversion of 98% (89%)

Summarising comments by CEO Simon Göthberg
Vestum generated net sales of SEK 5,762 million in the full year 2023, representing growth of 12%, of which 4% organic. EBITA amounted to SEK 623 million, corresponding to an EBITA margin of 10.8%. The year ended with a strong fourth quarter where we generated stable net sales and profitability along with reduced debt. Net sales for the quarter amounted to SEK 1,559 million with an EBITA of SEK 165 million, corresponding to an EBITA margin of 10.6%. The quarter generated organic growth of 1%.
 
Operating cash flow amounted to SEK 228 million, which corresponds to a cash conversion of 105%. Efforts to improve our level of tied-up capital has continued in a positive direction with working capital being freed up, mainly through changes in operating receivables. Vestum's financial net debt decreased by SEK 328 million during the fourth quarter to SEK 2.1 billion, driven by cash flow generation, divestments and cost efficiency improvements. Net financial debt in relation to EBITDA decreased between the third and fourth quarter from 2.8x to 2.5x, which is within our financial target of maximum 2.5x.
 
We have continued the process of streamlining our structure during the quarter through divestments to increase the degree of specialisation, and we are a stronger Group after the divestments. We are implementing a shift that is reducing our operational risks and strengthening our financial profile. The reduced operational risks can be seen in the balance sheet where the item for contract assets has decreased from SEK 318 million to SEK 134 million between the third and fourth quarter, or from 4.8% as a share of rolling 12-month net sales to 2.3%. At the same time, the EBITA margin has improved and organic growth opportunities have increased. Our market-leading product companies continue to produce an increased share of profits and made up 44% of the Group's EBITA in the full year 2023. These businesses are characterised by scalable business models, strong market positions with price leadership and high margins. When making acquisitions going forward, we will increase our focus on market-leading product companies with high profitability within civic infrastructure.
 
The strategic review is expected to be completed by the end of the first quarter of 2024. In connection to this, we will clarify how we will refinance upcoming bond maturities of SEK 900 million, which have a maturity in October 2024. We are confident that the refinancing can lead to a more efficient capital structure and improved free cash flow generation.
 
In terms of capital allocation, we have focused on reducing debt in 2023 to strengthen our cash flow and create the conditions for streamlining our capital structure. The Group's total interest-bearing liabilities including earn-out debt decreased by SEK 1.1 billion, or 29%, in 2023. This is partly driven by a strong free cash flow, defined as cash flow from operating activities, purchase and sale of tangible and intangible fixed assets, and amortisation of leasing debt. During the full year 2023, Vestum generated free cash flow of SEK 421 million and free cash flow per share during the period amounted to SEK 1.12, corresponding to a growth of 70% compared to the full year 2022.
 
As we have previously communicated, the market situation remains difficult to assess and concerns about the economy remain. However, we can see that our decentralised business model is standing strong, with operational decisions being made in each operating unit while cash flows are centralised to optimise the Group's capital allocation. The infrastructure in our main markets is outdated and underinvested, not least within the water and energy sectors where we have strong market positions. We have resumed the process of evaluating acquisition candidates and expect to be able to carry out acquisitions within selected growth markets during the first half of 2024. We have previously set up focus groups within sustainability and digitalisation and we are aiming to take further steps in these areas during the current year. In summary, we approach the new year with assurance.
 
The Year End Report is available on Vestum’s website: https://www.vestum.se/en/ir/financial-reports/