Sdiptech Aktie

Welcome to Sdiptech Q4 2025 report presentation. [Operator Instructions] Now I will hand the conference over to CEO, Anders Mattson; and CFO, Bengt Lejdstrom. Please go ahead.

Hello, everybody. Welcome to Sdiptech's presentation for the fourth quarter. I'm Anders Mattson, CEO of Sdiptech, and I will be presenting here today together with our CFO, Bengt Lejdstrom.

A short intro to Sdiptech for any new listener on the call today. Sdiptech acquire, develop and create a long-term home in attractive infrastructure segments. Today, we consist of 31 companies in the group.

And we operate in a decentralized structure and each company is responsible for the day-to-day operations. We divide the group into 4 business areas. And each business area has a clear structural underlying growth trend that we see for the future.

For the full year 2025, Sdiptech as a group has SEK 4.5 billion in revenues and SEK 968 million in adjusted EBITA and an adjusted EBITA margin of 21.5%. And these are numbers for our core operation and excluding companies that are currently being divested.

To start with, I would like to give you some highlights to the quarter. On a strategic level, we have made clear progress during the quarter with our divestments.

Today, we have signed 8 out of the 11 companies for completion. The short- and long-term targets for return on capital employed is being implemented for each business unit. And we have done one acquisition in the quarter, which ties nicely into our growing cold-chain cluster.

Financially, we are satisfied at a sales growth of 6% in the quarter, showing a good demand for our products and services in the market.

I also would like to highlight the strong cash conversion of 134% in the quarter, primarily coming from reduction in working capital levels. Supply chain has [Technical Difficulty], but outlook for 2026 looks strong.

Priorities going forward. Many of our companies have a strong return on capital employed, but we have a number of companies we can improve going forward. To be able to reach our growth target, we need to acquire in a high pace, which is for 2026.

And we have several companies in the group with good momentum and we need to ensure that we are growing smart. And by smart, I mean being prudent with working capital and CapEx to facilitate that growth going forward.

I also would like to follow up on the implementation of our 4 key strategic pillars that we presented on our Capital Markets Day during Q4 last year. The first one is around portfolio management.

I already mentioned the progress of our divestment of the 11 companies have been signed for divestment with new owners. We have achieved an enterprise value of full year 2025 EBIT 6x for these companies, which then is in line with our expectations of the value.

We have also been more prudent on which companies to allocate CapEx to due to discussions for 2026 and that's also according to our updated framework on how to look at CapEx investment going forward.

Second pillar, as we call proactive ownership. We have defined a short- and a long-term target for each company according to the DuPont framework. We have some outliers in the group we need to focus on, but the majority of our companies have a great return on capital employed number as a base.

Think we'll go through that a little bit later, but on average, 62% for the year. We have also aligned incentives towards capital efficiency in bonus plan for 2026.

The third pillar is about disciplined and return-focused M&A. One example of an action here is that we have implemented a cash flow parameter in all earn-out discussions that we have in early stages for the LOIs with each and every potential acquisition.

We have also [ intensifying ] throughout our existing companies. This is not a short-term fix. And this is something that's going to be very important for us going forward to be able to increase hit rate and also efficiency in our sourcing.

The fourth pillar is our latest acquisition, STORR was linked to our cold-chain cluster, which is now 4 companies connected. And just for an example, the commercial due diligence was very efficient and straightforward as we already had a lot of information about the market and actually even the company in the group.

So in summary, glad to report a strong momentum in implementing our key strategic initiatives. However, we all know that it's not just a short fix. And we look forward to a long-term mindset shift as well for us as a group.

Then we are coming into the financial development in the quarter. We are satisfied with the net sales development in the quarter, plus 3% in total and 6% organic sales growth indicate a strong demand for our products and services in the market. The currency effect of negative 8% of course and is primarily due to our exposure to the sterling.

In the quarter, we had a stable development, sorry, for 3 out of 4 business areas. We were expecting more sales from Supply Chain & Transportation as we have in the year, we have invested in some of the business units.

For the full year, we achieved 6% sales growth and 3% organic growth. The year started weak, but improved during the second half of the year and reached a solid growth number for the year, a trend that we foresee continue in 2026 as well.

No significant change in our geographic distribution of sales with U.K. is our largest market. Proprietary Products is at the same amount as previously with 65% -- sorry, 67% of total sales.

If we then go to adjusted EBITA. In the quarter, adjusted EBITA came in at SEK 255 million. Organic growth was flat and a large negative effect from the currency of minus 7%.

The flat organic growth is primarily a result of a weak quarter in the business area of Supply Chain & Transportation with 3 large companies that have invested for future growth. I will come back to that.

I will give you some highlights per business area later as well. The margin of 22.4% in the quarter is strong, even lower compared to last year.

For the full year, adjusted EBITA increased by 3% to SEK 968 million. This is an organic decline of 1% and mainly due to the weak first half of the year. The full year margin of 21.5% is in line going forward as a group.

We expect our adjusted EBITA margin to be between 21% and 21.5%. We need to ensure sustainable growth and we need -- and also new acquisition with potentially lower margins coming in and being part of the mix.

So with that said, I will now hand over to Bengt and he will continue with a more financial update.

Thank you, Anders. And I will start then with some numbers for the full group. What you just described, Anders, was for our core operations.

But looking then on the profit levels for the full group, as you can see on the left-hand side, for the full year this year and a couple of years back, we have had a strong average growth of 24%, even though it was then slowing off in '25, where it only increased 1% compared to last year.

Of that 1% was an organic decline of 4% and another negative effect from the strong Swedish currency, especially against the British pound sterling with a minus 3% currency effect on the full year.

And then for noncomparable growth, that is the companies here or the ones effect from the one we divested was plus 8%. So all in all, quite good. But of course, as Anders also said, the first half of the year was a bit sluggish. And for the quarter, for the full group, the quarter EBITA was an organic plus/minus 0.

Looking then on the return on the capital employed. As you can see on the right-hand side, we have a chart showing on one hand, the actual capital employed, which has been reduced a little bit from last year. The improvement then from 12.6% to 13.5% is mainly because of an increased EBITA for the group.

Looking at -- and of course, the 13.5% is much lower than the return on capital employed in our operations, where the average for our core operations, that is excluding the goodwill and material assets that we book in connection with the acquisitions continue to be strong around the 60%.

We also showed the number from another popular KPI, the profit over working capital that some peers focus a lot on. We focus more on the return on capital employed. But anyhow, it has been quite steady around the 80% for a number of years, which is, of course, an important KPI as well and a sign of how we manage and get profit out of our working capital.

Looking then at the cash and cash conversion. You can look on -- to the left-hand bottom, you see the cash flow generation Anders mentioned as well. It's very strong for the last quarter, exceptionally strong, I would say, perhaps at 134%, but that was mainly due to reduced inventories and also getting the money in from our customers.

And we have had that focus for some time now. And of course, the activities continue to improve this even further going on, even though perhaps the cash flow generation will not be at that level consistently. And I see in the chart, a yellow marked area where we have our ambitions between 70% to 90% over the different quarters, stay there in the cash flow generation and conversion.

Another important KPI is then the free cash flow. That is then not only the cash flow from our operations, but also reducing with the leasing part and any CapEx that we do in the quarter. And for the last 12 months, that free cash flow per share have been almost SEK 17 per share, up from almost SEK 13 a year ago.

In that chart, you also see the earnings per share, which is somewhat lower. It's around SEK 12 per share if we exclude goodwill write-downs that we did during Q3 2025. And that is lower. And that is based on that we do some accounting when it comes to IFRS rules in connection with our acquisitions.

So for example, we need to book noncash interest rates, discount rates for our provisions for contingent considerations and that hurts with about SEK 1.50 per share. So that explains to some part the gap between the free cash flow and the actual net earnings per share. But all in all, we are satisfied with the quarter from a cash flow perspective and we'll continue to work on that.

Then looking at the balance sheet from a leverage perspective, one of our financial targets are now to have our total net debt leverage, the total net debt compared with the EBITDA to be below 3.

And for the quarter, measured then, of course, on a 12-month basis, it was then below. It was 2.84. And you see the trend on the left-hand side of this slide.

We also have another KPI for our debt and that's what we call the financial net debt, which is all debt but excluding the provisions for earnouts. And that one did also decrease to 2.12.

And the main reason for this is that the net debt was reduced because of cash flow coming in both from the operations and from, for example, the divestment of one of the companies that we closed them last year.

These earnout provisions is always tricky to understand fully the impact on the leverage and so on. But you see on the right-hand side that our provisions booked as a debt has decreased over the years as a share of the total net debt.

So coming from almost half or even more than half of all the debt is now 25% of the net debt. And that's a number we expect to decrease as each and every acquisition become a smaller part of the total picture.

And during this quarter, we did some write-downs of these provisions. And that means that the actual model works that if some companies under earnout are performing a little bit less than expected, then we don't expect to pay out the earnouts that we have booked.

So we released some of that debt and that makes an income. But that's not including in our adjusted EBITA numbers. It's one-offs. And we have detailed those in the reports towards the end, if you want to dig into that in more detail.

Right. So I hand over back to Anders for the business areas.

Yes. Thank you, Bengt. So we have updated the presentation and a little bit more in detail each business area now.

Starting with Supply Chain & Transportation, our largest business area. We had a poor performance, a relative poor performance in the quarter, an organic decline in adjusted EBITA of roughly 9%.

And the result is mainly in units. Our company within transport refrigeration, GAH, they actually came out of a 4-year earnout. And we have increased investment to ensure a stable operation going forward.

On top of this, 2 larger customers have throughout the year been being postponing the orders, unfortunately, postponed further into '26 as well.

The other company, our company within winter road maintenance, Hilltip, have invested in an improved factory and organization in the U.S. to be able to serve the North American market locally.

And the cost for this as is 2025. But we are convinced that this is the right thing to do as shipping in containers from Finland with finished goods is not a long-term solution for a market where we see great potential for our products for the future.

And our company within port automation [indiscernible] large port projects to be postponed during the year and we were awaiting that to happen in Q4. And those global bigger projects, we feel it's the global uncertainty that is affecting these kind of major decisions for the larger ports in this.

However, the challenges that we have in the business area are not long term as we see it. And we have a positive outlook for 2026 for the business area as a group.

Within the business area, we are also happy to announce the acquisition of STORR late in the quarter. That is a company based in the Netherlands and fits well, as I already said, into our cold-chain cluster. STORR provides partition walls for refrigerated transportation. They have a product with a very high precision, which is needed to be able to separate frozen food from chilled food, for example.

And the business model is interesting because the end customer, they usually don't know exactly how they would like to fit the lorry when they buy the bigger lorry. So STORR can actually come in and tailor flexible solutions depending on the needs, which also then can change over the lifetime for the lorry operator. So we look forward to continue to develop this company as part of the Sdiptech going forward.

Then we're coming into Energy and Electrification, which had a very strong quarter. Net sales, SEK 281 million and adjusted EBITA of SEK 73 million. That's an organic sales growth of 14% and roughly the same adjusted EBITA growth -- organic growth as well. And also on top of that, a strong acquisition coming in, in Q1 and delivering a very strong result for the year.

ForEx you can see of 49% is below the average in the group. And we have a few companies where we see improvement potential here, and that is primarily around inventory management.

The demand is strong for several business units in this business area. I just would like to highlight one company that has a very strong new power, Swedish-based company from [ Alingsor ].

They offer equipment for measuring and monitoring power quality in the networks. And as we know, when renewable energy sources grow and also the network is growing itself, power quality becomes even more important to protect critical applications in a production environment or it could actually be in a hospital, for example.

And even though we had a great 2025, we see the demand is still there and we see that's going to continue for the future.

On other notice for this business area, we have the new leader, the new Head of the Business Area started in January. And it feels great to have recruited somebody that is actually based in the U.K. for such an important segment for us where the majority of our companies is in the U.K.

If we then move to Water & Bioeconomy, they delivered a solid result in Q4, which is positive after a relative weak development in Q1 to Q3. Net sales at SEK 241 million and adjusted EBITA at SEK 56 million. Organic sales growth, 9% and adjusted EBITA growth of roughly 5%.

In the business area, we see that we have

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and in 2025, we decided to make a number of leadership changes to the local businesses. We have the right products. The market is there. So we have said that we need to focus on more or bringing in more commercial-oriented leadership in some of the units. And we believe this will have a positive impact for the long-term development of the portfolio.

Then, we go to the last business area, Safety & Security. They had a development in line with last year and kept up a high margin of 29%. Organic sales growth of 1% and organic adjusted EBITA growth of 2%.

For the full year, Eagle Automation had a very strong year. I mentioned it the last quarter as well, but Eagle, they provide high security gates, bolards and rockers. And Eagle's products are certified to withstand vehicle attacks, which is then a specific certification needed.

End customer segments are data center and airports, for example. And the strong development has led to further needs for expanding their assembly facility in the U.K. And just to tie back to our framework around where to allocate CapEx, this is a good example of where it makes sense to increase CapEx to expand the operations to get that market share that is out there for us to gain further.

Then, we're moving into M&A. In the quarter, as we said, we finalized the latest acquisition of STORR. And total acquired growth landed at SEK 50 million in 2025. For the full year, we have been more selective, which has helped us to decrease the leverage as a group as well. And this is something we have been able to achieve to steadily increasing our ambition in 2026 for M&A.

And as part of our updated strategic initiatives, we will be strict on our valuation principles and prioritize cash flow or IRR for each investment we're going into.

Then I already mentioned is that we would like to intensify the local sourcing throughout our existing companies as well. So with that said, we are looking forward to more acquisitions in 2026.

Yes. And just to give you a summary of the quarter, what we presented here today. We have had a solid financial result in fourth quarter with many KPIs in the right direction. Most of the business units developed a stable result in Q4, except from a few businesses in Supply Chain & Transportation, but improvement for 2026.

We have had a selective M&A agenda in 2025 with -- but that's going to be a strong focus now 2026 going forward. The strategic initiatives, we are happy that we have made good progress with those.

And I'm also

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a very strong management team in place now going into 2026 as well. And the outlook remains positive for us as a group. So that was all from the presentation here today.

I think we can open up then for Q&A part.

[Operator Instructions] The next question comes from Max Bacco from SEB.

Well done in the quarter. A couple of questions from my side, if that's all right. Perhaps starting then with the supply chain and -- Supply Chain segment. You mentioned, Anders, during the presentation that sales both in the quarter, but I guess, for 2025 as a whole has been impacted by some delays in project sales.

But you mentioned on the slide as well on the outlook that you have seen some early signs of improvement here in 2026. So basically curious to hear more if you have already seen customers returning to those kind of orders already by now.

Yes. It's -- we have had a lot of discussions with GAH. GAH is then, of course, one of our important companies in that segment. And exactly what you said there. They were pushing out orders and they wanted to place them in 2026 instead.

So order intake for early signals is looking good for the first half of the year. They are securing those orders.

It's a major decision for many of these customers as they're planning to renew a total fleet, a big, let's say, retail customer in the U.K. And yes, so from that perspective, we have received some good orders for GAH.

Certus is still a little bit of a hesitation of the customers. We have not lost the projects, but major ports see issues or, let's say, hesitant to place those orders. And -- but I can also say that we are not just sitting there, of course, waiting for those bigger orders.

We are having a lot of medium and smaller orders coming in all the time. So I think that's also a way of mitigating just sitting and waiting for big orders, try to be active and develop new potential customers as well then.

Okay, good. Sounds promising for 2026 or perhaps the latter parts. And then turning to the Energy and Electrification segment, very nice profitability here for the full year, some 26.4%, I think.

And I guess, to some extent, supported by the acquisitions that have been done as of lately. Do you see this, say, 26%, is that a sustainable level for that specific segment?

Maybe, Bengt, you can answer that one.

And we can perhaps look at that slide since we're talking about the different business areas so we know what we're talking about. Energy and Electrification, as you see, it has had a developmental margins going up and down together with the acquisitions.

We made a acquisition early '25 with Phase 3 coming in and doing these connectors for temporary connections with electricity, Phase 3 and IV working close together in many projects. But as you see, it has been quite steady around 25%, 26% EBIT margin, the different business units going a bit up and down. But I would say that it could be fair to expect around that level going forward, yes.

Okay. Perfect. And then a question on the opposite side for the Water & Bioeconomy segment, some 24% margin here 2025, which is, of course, a nice level, but a bit below historical levels. And I guess that has been the segment the most impacted by the salary inflation in the U.K. and so on and so forth.

Do you -- with the price increases and actions that have been taken in the segment and I guess some effect is still to be seen, do you see a potential to get back to those 25%, 26% profitability perhaps in 1 or 2 years?

I think from -- we have been trying to challenge a little bit in the past that we cannot change existing contracts there. We're trying to be a little bit more proactive with those kind of contracts. And there are some flexibility to step in and maybe make adjustments during the way we have seen some example of that. But still, it's hurting us, as you are saying.

But I think it's going to be a challenge to come back up there. We're trying. It's depending on a little bit also with inflation in salaries going into now 2026 with so many, let's say, people business [Technical Difficulty].

But we are working hard with all the different business units here to steadily increase. We're going to work with pricing as far as possible to mitigate staying down at, let's say, lower levels then.

Okay. Understood. And then 2 final ones, quite short ones. With the additional 7 divestments signed here after Q4, so 8 in total then including KSS, how much of other operations are remaining in terms of sales and EBITA? If you look at the 2025 level, I guess, is the best.

Yes. We reported for '25, I think, a little bit more than SEK 50 million for the company. Our run rate is rather around the SEK 65 million for all of these.

And that's at least what we base our negotiations on. And so the ones we have divested are the major ones. We have 3 more, but they are a bit smaller.

So I would say that perhaps they represent around 20% of that profit going further. So it's another SEK 10 million, SEK 15 million perhaps then that we looking at divesting.

Okay. Perfect. And then the final one. You mentioned it during the presentation, very nice cash flow here in the quarter, but also for the full year. Both supported by net working capital, but also CapEx levels coming down quite notably for the full year.

Do you see more to do on, I guess, both net working capital, but also, I mean, the CapEx level relative to sales that we saw 2025, is that a good indication of where you intend to be going ahead as well?

I think we have said that we will aim for not above 3% of sales in CapEx. And we will definitely if we can be below that in a specific year, that can be good.

But I think we -- as a example I gave you here with Eagle, we need to support with CapEx to be able to drive that further growth in some of the business areas as well. So yes, some years can be lower. But I think we need to be up there towards the 3% to be able to have a sustainable growth going forward.

On the working capital side, yes, I think we have more to do there. As I mentioned in the Energy and Electrification segment, the return on capital employed there around -- well, I think it was 49% is definitely more room to work on the inventory side there, just an example. So that's part of our incentive models as well for 2026 to try to bring that further down.

The next question comes from Simon Jonsson from ABG Sundal Collier.

So I guess I just have maybe a few follow-ups on the cash flow. I think you made it clear that what you're looking for into this year in terms of CapEx and improving the working capital further.

But maybe if you can just elaborate a bit more on what you have been doing more recently, specifically for the units to improve the working capital. I understand that it would be part of the incentive programs or bonus programs for units going forward here.

But what more specifically have you done recently because we can see in the last 2 quarters or so that there has been a clear improvement in the trend? So yes, just wondering more specifically what you have been successful with here in recent quarters.

I think from a CapEx perspective is definitely now coming into 2026 as well, we have been more prudent and selective where we would like to spend the money and for what reason. We mentioned on the Capital Markets Day, the framework with companies that are in a strengthened position.

We need to make sure that you fix whatever you need to fix before we can accelerate growing the companies and also that we are being selective saying that for us, this is a harvest position. Let's try to harvest as much as possible and investing more prudent. So that framework, I think, has been quite good implemented with the company now coming into 2026.

On the working capital perspective, we have started -- we have always talked about it. But we have intensified the discussion with the companies during the autumn that we need to improve working capital and showed an example of how other companies in the group have done or how they have performed. So I think that

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low-hanging fruit that we are seeing.

Now we need to stepping into a more structured work to -- as we do it, we're looking at the DuPont framework. We see you have these kind of inventory levels. We believe you can move further down 5%. That will take you here and making sure that we are aligned on what kind of actions specifically you can do.

So I would say, low-hanging fruit initially and now the real work starts to really go through each and every company to make sure we are optimizing it.

All right. Makes sense. Do you know already like how the bonus incentives will look like in terms of cash flow specifically? Will it be overall cash flow or focus on working capital? How much will that impact bonuses?

Will it be different metrics or more sort of cohesive metric like return on capital for units or something like that?

It's going to be, let's say, a mix. So we have some companies that we feel needs to grow more. So we have revenue targets for that. We have EBIT target as usually as our most important one or with, let's say

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we have, it could be then return on capital employed or it can be working capital as a percent of revenue.

That's depending on how we see what the focus should be for the companies. But we tailor that depending on how we see the need for it.

And we can also say that this company should then have 70% of the incentive based on the, let's say, the capital efficiency part and only 30% on EBIT part. So that's part of our, let's say, proactive model to see what we would like to incentivize from our perspective.

All right. Very good job here recently on the cash flow side, specifically.

The next question comes from Carl Korsheden from DNB Carnegie.

Just -- yes, a couple of questions from my side. If just start off with a follow-up question on one of the first questions then regarding the postponed sort of deliveries in the Supply Chain & Transportation area. Is it possible to quantify that anyhow in terms of magnitude?

How much do you feel you have been promised that has been postponed to the future? And how much of that could we expect will land in Q1 versus Q2?

No, we have actually not quantified that. It's more that some specific orders we were talking about for a long time over the year. And yes, so it's been more about we as an organization preparing to deliver those.

And we cannot actually say how much of that is actually now happening exactly in January and February. But as I said, I think 2026 looks positive. It's not only because we believe we're going to get those bigger orders. It's also in the general that we are in a good momentum with not only these 3 units in the Supply Chain & Transportation segment.

Yes. That's clear. And just -- I mean, on your Capital Markets Day, you talked a little bit about -- yes, you obviously had this new financial targets of growing 15%. And then you said that 2026 might be sort of call it slightly more of a transition year again that you will hopefully do some delevering and also complement with some additional M&A.

Now it seems like your financial position has come down a little bit quicker than expected and you have seen very strong cash flows here in the quarter. Would you [ reinitiate ] sort of that view still? Or are you expecting you can do a little bit more M&A now in 2026 compared to your previous assessment?

No, I would say it's important for us to work with, let's say, our plans that we have put in place. It's still quite -- as we said it as well, it's a lot that needs to be gained from the M&A perspective.

So no, we are not adjusting that based on the good cash flow right now. But organic needs to show now coming into Q1, Q2 to be able to continue with that M&A growth. So it's still a lot of things to do actually to be able to accelerate the M&A to be within our financial target metrics.

The next question comes from Linus Alentun from Nordea.

Congratulations on the report. Just some quick questions here from me. If we continue here on the ROCE from the past question here, it improved to 13.5% from 12.6%.

I mean with the divestments and your focus on disciplined M&A, what's the realistic time frame here to reach the 15% target here? Is this a '26 or '27 target? I guess when the divestments are not in the balance sheet, the ROCE will have some upside as well?

Yes, that's correct. We simulated that during the fall and said perhaps 1%, 1.5% of ROCE will improve after the divestments. Still, it's a pretty complex to make a very solid forecast.

But we have said that this will take perhaps a year or 2 to reach that 15%. It depends a bit also on how the M&As are lining up during the different quarters since we get the balance sheet first and the profits later.

But I still would say that it's not early this year, perhaps around early next year or late this year, depending on how our expectation is really to go into next year for this.

All right. All right. And just continued on the supply chain orders here. You said that they are in a good momentum. Is this something that has kicked in like now in January, like or at the end of last quarter? Can you see a significant improvement here? Or how should we see this?

Yes. But I'm not talking about only about those 3 business units we mentioned had those problems. It's -- overall, it's a good momentum. Our e-l-m, our company producing attachment as well coming into -- from a very good second half of the year coming into this year and we see the same activity.

JR producing different kind of doors as well to the transportation sector, having a great year and also continue to do that.

And Hilltip, we talked about the U.S. facility in Europe. They are having a good development. They are expanding their product assortment and making bigger salt spreading equipment, not only to the pickup trucks, also to the tractor and to the bigger segment, the van segment.

So -- and Certus is having -- they are growing their service level agreement base with every order they are taking. So I think from that perspective, those -- the mix of the companies and the good development there, that's what I -- when I see talking about the good momentum in this area.

Okay. That's clear. And just a question here when we look at Q1. How has the weather conditions been here so far for the winter-dependent companies like Hilltip and HeatWork? Are you seeing the weather here is more favorable compared to last year?

We've been talking a lot about that. And it's actually that what we see is that the season -- the winter season is getting shorter. So in the past, it could have been that they bought something and then they see early or December

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early January, they need an equipment to be able to go through the entire winter.

The trend is that they do not have that kind of second wave in the winter because what they bought should be enough for the winter. But now Hilltip actually said with the condition that we have had in full Europe, it's better than last year in that kind of salt spreading equipment.

And I think also HeatWork, another company dependent on the -- especially the temperature has also had a good start because of the cold climate, especially in the Nordic countries. So a little bit of positive effect because the winter is -- the feeling is it's going to be a longer period right now at least.

There are no more questions at this time. So I hand the conference back to the speakers for any written questions and closing comments.

Yes. And we have one written question so far regarding share buybacks. And the question is if we have ever considered share buybacks instead of M&A as our stock is trading at the current low levels.

And as always, through all the years, we have always been prioritizing to acquire companies and believe that in the long run, that gives the shareholders a better return. So there is no discussions going on, on that theme. That's the simple answer on that.

Yes. And I think that was the only written question. So Anders --

Yes.

-- any final remarks?

Yes. No, I think it's good. The message we would like to send is that, yes, we are continue to do or work with our strategic priorities. We are not done, for sure not.

We are working on it. We're implementing it. And it's also going to be a long-term mindset shift with this everything we talked about, the capital efficiency and everything around that. That's important to have for us for the long term.

But again, we are happy with a solid quarter ending 2025 and now we are definitely looking forward to 2026. It's going to be exciting for the group to enter into this new year as well.

So with that, I think, thank you, everybody, for listening and good questions as well.

Thank you.

Good afternoon, and a big welcome to all of you here in Wallenbergsalen, and also a big welcome to you who are watching online. And as you know, this is Sdiptech's Capital Markets Day 2025. I'm Linda Nyberg, and I will be your host today.

So I'm really looking forward to this because last time I was hosting a Capital Markets Day for Sdiptech, was 2021. And for those of you who remember, that was during the pandemic. So I do not have the pleasure to meet all of you in-person. So I think this is great to see so many of you here as well, present.

We're going to jump straight into today's agenda, and I hope it comes here that I'm doing the right thing now. And here also, you have the speakers, of course, of today, and we will start with the CEO, Sdiptech's CEO, and there will be an update on the business strategy, of course, and also to just look at the new financial targets that was announced earlier today. Maybe some of you have seen that already.

And after Anders, we will go into deeper in the business, and we will listen to the 4 business areas and the heads of those. And we will continue with, as you can see, also Michael L -- Michael Lund, sorry, from ELM. ELM in Swedish, which is one of the business units. And we will talk about their journey and also the partnership with Sdiptech and how the development -- the long-term development is supported because of that partnership.

We will also shift focus later, and we will listen about -- listen to the Head of M&A, Peter Helsing, who will also then, of course, talk about the acquisitions. And we will see the new framework and what the future looks like with the M&A perspective.

But first of all, we're going to get the financial overview from the CEO, but I have to say something because we're in Wallenbergsalen, and that's the air hostess information. So you know what I'm going to say now. We have 2 exits in the back. And for those of you who are not aware of that, there's a powdering room, as we say, in English. And you've probably seen it just by the stairs when you enter the room.

And there's a meeting point we're in Sweden. So in case of emergency, God forbidden, we will meet at 7:11, that's everybody knows where that is, right, the closest. And we're not going to meet Sarah, sorry for the joke.

So anyhow, I think now, Anders Mattson, are you ready, the CEO of Sdiptech, Give him a warm hand.

Okay. Now we can hear better. Perfect. Yes, I also would like to take the opportunity to welcome you to our Capital Markets Day. Great to see all of you here and also the one on the webcast. And thank you all for taking the time to listen to us today.

I am then Anders Mattson, CEO of Sdiptech since June this year. I started my -- I came into Sdiptech in 2018, so I've been here over 7 years now, and I've gained a lot of experience working with some fantastic companies and also some very interesting entrepreneurs over the years. And today, I'm very glad to be leading Sdiptech now for the future.

I would like to start to present my management team that you will meet later today. You will be listening to the heads of the business area, the forum. Daniel Unge, Roger Wood, Amanda Berninger and Sarah Strom. And later, you will also then listen to our Head of M&A, Peter Helsing, and our CFO, Bengt Lejdstrom.

We have 2 people today that will not be on stage, and that's our Head of IR and Communications. That's My Lundberg. She's on parental leave. And then we also have Peter Stegersjo, Head of Strategy and Corporate Development. He's the one responsible for all the divestment at the moment, and he will not present here today. But I'm glad to demonstrate a very strong team that now we'll be leading Sdiptech together with me for the coming years.

So let me begin with a brief overview of Sdiptech as a foundation for today's presentation. Sdiptech acquire, develop and create a long-term home for niche companies within attractive infrastructure segments. Today, we consist of 30 companies in the group and divided in the 4 business areas: Supply Chain, Transportation, Energy & Electrification, Water & Bioeconomy and Safety & Security.

And the numbers you can see here on the slide, they are excluding central cost and goodwill to show the operational performance of our entities. I just would like to highlight 2 KPIs. That's the margin. The average adjusted EBITA margin of 23.6% and also the return on capital employed, the average of 46%. These KPIs demonstrate that we have a very strong group of companies in the group and also that we have some strong initiatives that we are positioned within. And you will hear more about the different business areas later today from the heads of the business areas.

U.K. is our biggest market with roughly 50% of the sale, remaining 50% is distributed among other European countries and 5% into the U.S. We operate in a decentralized model, and it's very important that the day-to-day mandate responsibilities is with the local companies.

Our market, we have a modern view of looking and defining an infrastructure that goes beyond the classic definition or roads, tunnels and utilities. Our selected infrastructure segments are broad enough to enable a lot of M&A opportunities for the future, but they also create a focus for us as a group. And the -- but the most important aspect of our segment is that we see clear structural growth trends for the future.

We know that European transportation, water and energy systems are old, and they require a lot of upgrades, digital upgrade as well, replacement and modernization. We also have a growing population, especially around urban areas, and that's demanding that we need to expand all of these systems as well.

And finally, we have stricter regulations and also sustainability demands, so we need to invest to meet up to those requirements. And all of these megatrends that we see creating a very good platform for us going into the future.

Before I talk about areas, we would like to improve that we have talked a lot about in our strategic now planning over the last couple of months, I would like to show you or discuss a little bit about our strong foundation.

We have a strong track record of EBITA growth. We've been growing CAGR 26% since 2019. We are positioned well with our current portfolio within the attractive infrastructure segments, I just mentioned. Since 2018, we have acquired a very strong group of companies that will be the basis for our organic growth going in now to the future.

And our internal M&A capabilities is strong. We have built up over many years, a strong pipeline that we constantly execute on at the moment. And our decentralized model is in place. It's working, and we have very strong leaders in several of our business units out there.

Also on a more soft aspect, many entrepreneurs say that Sdiptech demonstrate a trust and belief that they really like the companies that would like to do something good with the companies. And I think that's very important because we know it's more than just financial metrics, when you're going to acquire family businesses that need to be sold or need to, but will be sold.

So having described our strong foundation, we still have a number of challenges that we have addressed. We have had several companies in our portfolio that has not met up to our investment criteria, the investment criteria or proprietary products, EBIT margin above 15% and exposure to noncyclical end markets. We have also had a volatile growth for many years, which has led to challenges to drive sustainable and long-term organic growth with the core portfolio.

We have focused on a little bit too much, we believe, on growing the EBITA and not on total return. A decentralized model doesn't mean that you cannot be active and support your companies out there. We feel that we have been a little bit too hands-off with many of the companies in the group. And we also have had a negative organic EBITA development over the last 1.5 years, and that's, of course, something we would like to address.

So what are we doing then? What -- how we have addressed this? We have assessed our portfolio, and we have decided to divest 11 companies from the group. This is an ongoing process. And actually, as of yesterday, we have signed 1 of the 11 to be sold within the near term.

We have also strengthened our business area organization. We felt ourselves; we wanted more expertise and experience. So we have recruited new people and we are also recruiting on more in the U.K. that's to come. And during the autumn, we have also created a strategic review together with the management team to clarify how we're going to ensure the long-term growth for the companies and also increase the focus on return on capital employed going forward.

So based on the strategic work, we have defined new financial targets for the group. Firstly, we have moved away from a separate M&A and organic growth target, and now we are targeting a total growth instead. The target is to achieve 15% growth per year until 2030, which will result in a doubling of the EBITA over the 5-year period.

Secondly, we have decided to increase our focus on return on capital employed. And we're targeting to reach about 15%. To be able to improve the return on capital employed, we need to improve the focus on cash flow in our current portfolio, but we also need to be very disciplined in the future M&A opportunities.

On leverage, we also have a new updated leverage target and the target is to be below 3% in total net debt divided by EBITA, and we have stepped away from a separate or a financial external net debt target.

In summary, we believe the new target give us the right focus and there are balance between growth and return on capital employed, and also keeping a healthy balance sheet in place for the long-term.

To reach the new financial targets, we have defined 4 strategic pillars to focus on. And they are enhanced portfolio management, proactive ownership, disciplined and return-focused M&A and also cluster strategy to accelerate both the organic and also the M&A growth. I will go through now the different pillars, so you will understand a little bit more about the content.

The first pillar is about portfolio management. We have decided not to treat all the companies the same in the portfolio, and we need to become more prudent on how we invest and where we invest for the future. First step has already been taken, and that was to assess the strategic fit of the companies, and we decided to divest 11 companies from the group. Again, to repeat, it's companies without proprietary products, EBIT margin around 10% and also exposure -- high exposure to cyclical end markets.

Secondly, we have defined companies that strengthen, accelerate and harvest. So if the external market conditions are good, but we do not have the right products in place, so we do not have a great leadership team in place. We need to fix that. So we need to invest smart to change that position, and we should not focus on anything else. This position we call strengthen. If the external market conditions are good, and we also have the right products and the right services in place, and a great management team, we should dare to invest for growth, and this we call accelerate.

And the last one, if the market conditions are not so good, it's a lower growth projection, but we have strong products and strong management team in place. We don't need to invest. We should try to harvest this position instead. So if you see to the right, you can see that the majority of our companies, they are in the accelerate quadrant. So by this framework, we will be able to prioritize investment towards these companies going forward.

Next one is to become more of a proactive owner. Proactive for us means that we would like to guide and take more active decision with our companies. We will implement return on capital employed. That's a key metric to work with other companies. And to do that, we're going to implement a strategic framework, the classic DuPont analysis. So if you want to grow your return, you can work on your EBIT margin perspective, but you can, equally important, work on your capital efficiency side to increase total return. We will also -- which is very important, we will also tie incentives towards return on capital employed instead of just, for example, grow your EBIT every year.

And we do not see that this more active approach interfere with our decentralized model. Actually, instead, I think this will guide the local leaders to make better decision day-to-day, and they will also be aligned with our target as a group. And if any support is needed to accelerate any development, we are there to support and come with active initiatives as well. That could be about pricing opportunities. We cannot require each and every MD out there know exactly how you are excellent in your pricing. We can come there and support. We can support with add-on acquisition. And of course, we can also support with from a working capital perspective, how can you improve your safety stock, for example? We don't do it all the time, but selected initiative where it makes sense.

The other very important growth driver for us is the M&A. Peter will talk more about our approach to M&A, but I would like to highlight some specific areas, which is very important for us. Our M&A capabilities are strong. We have a central team in place that are supporting the business areas, each business area, but also the geographies. With improved experience and expertise from our business areas, we believe we can strengthen this position together with the central team.

Second one is that we have to be disciplined in our evaluation to improve our return on capital employed, as I already mentioned. And we have shift focus to only look at EBITA multiples to look more for returns, and we're looking for IRR returns on each and every acquisition. The target is to reach 20% IRR for every acquisition we will do.

And we also need to open up new geographies to support our M&A growth. We can do that by central initiatives like we talked about entering Germany centrally, but we could also do it from an individual company perspective. We get a great opportunity to move into a new geography. Don't hesitate, do that if it makes sense.

And the last pillar is clusters. Cluster is a connected group of companies that benefit from supporting each other. It has nothing to do with 4 synergies from us as owner. With a more coherent portfolio, we see clear evidence of collaboration opportunities in the group. Collaboration usually comes from the customer or customers -- the companies themselves. It could be about opening up doors to customers, could be talking about great suppliers. We actually have examples where they can cooperate in R&D activities as well.

And the benefit from cluster thinking is clear even from an M&A perspective. If we know the markets, we know the player in the market, it is more easily for us to identify those great targets that we would like to acquire. And it's another strong benefit as well, and that is about sector expertise. So if we know about the sector, we will most probably become a better owner. We also can come with an attractive offer to some of the companies. You can join our group. We have this cluster. This is what we bring to the table as well. And in the future, if we grow a cluster big enough, we can easily then, let's say, create a subsegment within one of the business areas. And you will hear example from this from our business areas as well later today.

So the journey to achieve our financial target will include a number of milestones under the way. For 2025, we have now defined our strategy going forward. And we have also -- we will also enter now with a core portfolio after the divestment will be done. Next year, we will enter with a healthy balance sheet in 2026. We have a new team in place, and we will start to ramp up our growth. And that's also for the M&A growth, of course.

From 2027, we will be forming a full potential as we call it. And to be able to double the company in 5 years, we need to increase the growth from '27 to 2030 to be abling to reach those 15% over 5 years.

Just to summarize our financial targets again. Our target is to grow adjusted EBITA by 15% per year. The organic growth will come from our strong attractive segments that's going to grow more than GDP in Europe, which we all know is going to be -- or the forecast is going to be quite moderate for next year. Our proactive ownership model is going to generate more organic growth. And then on top of that, we have our M&A growth. That's going to be critical to reach the 15%.

We will improve our return on capital employed to above 15%, and we need to focusing more on the capital efficiency and to be disciplined in our M&As. And our leverage should come down below 3%.

So some last word from me, key takeaways from this introduction here today. Sdiptech has a strong position within our key infrastructure segments, and we see clear trends that these segments is going to grow for a long time. We have a strong core portfolio. You will be hearing some examples of that today, but that's the portfolio we're going to drive forward organically.

Our growth agenda will be built on proactive ownership and also disciplined M&A, focusing on IRR for each and every acquisition going forward. Financial targets, focusing on the total growth target, improving the return on capital employed and have the total leverage below 3.

So that was all from my presentation.

Well, thank you, Anders. It's a big hand. Thank you. We actually -- I have questions for a journalist, but you know in the chart, for those of you online, there's a chat function. So you can get your questions in there, and they can ask you later.

But I'll start with the question now. And guys, if you have a question by the end of the day, save them. But you talked about a decentralized model. And then you also mentioned that we're going to be more hands on. Can you explain that a little bit further? What do you mean by that?

Yes. I think the essence in a decentralized model is that you have strong local leaders that not only there, but they believe that they -- or they have the mandate, and they believe they make the right decisions every day. That's extremely important that they have that belief, and they dare to do that.

We think from an owner perspective that we can be much more clear on the strategic or financial targets for the year. Each company know where we would like to develop the company from an owner perspective. And that, for us, doesn't interfere with the decentralized model. And then sometimes I also mentioned it before, and specific selective initiatives like pricing, we definitely can support the companies to accelerate some of the development that we see from our perspective.

I know there'll be more questions on this. So thanks for now. Thank you. Warm hand on this. And as we said, for those of you here, you actually have microphones, as you can see, next to the chairs. Have you seen that? If you've been in Wallenbergsalen before? So it's excellent for the Q&A by the end of the session.

Now we're going to go through the 4 business areas, but we have one who's going to start. So Sarah, you will be first, but we later have also Roger Wood, Amanda Berninger, of course, and Daniel Unge. But Sarah, please stage is yours.

Thank you, Linda. You can hear me, yes? Yes, it works. Good afternoon, everyone. My name is Sarah. I'm Head of Business Area Water & Bioeconomy. I've been with Sdiptech, just over 3 years, and I've spent most of that time with the companies in this segment. And I will give you an update of the segment, how it looks, also the landscape and how we see the market drivers. And at the end, I will give an example of 1 of the 4 strategic pillars, and as was referring to about clusters.

So this is the water and bioeconomy area as it looks today. It focuses on technologies and systems within water, waste and bio-based solutions. We are currently 9 companies in the area spread over 5 countries. The companies in the group of water and bioeconomy, they are a mix of products, services and aftermarket offerings, and they generated an average EBITA margin of 25%. The returns are in general good, achieving 110% return on capital employed.

And this is an area I'm very passionate about, not only because it holds business opportunities, but also because water is an essential part of life and our society. And it's well known, the growing -- the demand for water is growing, and it's expected that by 2030, the available resources in water will exceed the demand by 40%. And this is driven by private consumption, agriculture, but of course, new industries and existing ones like the semiconductor manufacturing, data centers, power generation and pharmaceuticals. All of those businesses rely on high-quality water supply.

And at the same time, water has become a scarce resource. Only 27% of the surface water in Europe is achieving a good chemical status. And this is actually a reduction from 33% a few years earlier. Pollution, climate change and aging infrastructure generating leakages up to 50% are all areas affecting the amount of fresh water available. So there is a need for investments, and these investments are also driven by regulatory measures in the European Union.

Water has been high on the European agenda for a long time. And this year, this has reinforced even more with the launch of a new water resilience strategy. This strategy has 2 components: one being to reinforce existing laws and regulations. And the other part is to drive investments and stimulate both private and public investments in the area.

And on the right-hand side, you see an example of an urban water cycle. And we see that the companies in the Water & Bioeconomy segment is well positioned in this area from collection, distribution to treatment and used, all the way to wastewater treatment and discharge and recycling.

And I will give two examples of what the companies within this area is currently doing. One is the group of 4 companies to the right-hand side, offering chemicals and products in the water treatment area. It's Pure Water Scandinavia, WTP in the U.K. WaterTech of Sweden and Kemi-Tech in Denmark. They offer solutions for water treatment to primarily hospitals and industries. And this market is driven by the need for to protect the equipment and also reduce the amount of water.

Another interesting area is the area of data and analytics. And in this area, we have one of the newest acquisitions we have done, and that is Wintex in Denmark. They are offering high-quality soil sampling equipment for the agriculture industry. And this is a growing area as agriculture is seen as one of the drivers for an increased pollution affecting the water cycle.

And we are, of course, looking after more companies in this area, and Europe is a good area to look. It's seen as the industry leader -- the leader in water management with 40% of the patents being placed in Europe. And the area in Europe consists of about 80,000 companies. And hopefully, a few of them will be part of the Water & Bioeconomy segment going forward.

I will also give an example on how we work with the companies when they are in the group. And I will refer to the fourth pillar that Anders was talking about being part of one of our strategic areas going forward. And in the Water & Bioeconomy area this is in particular important because many of the companies in this area are quite local. Sludge is treated locally and waste and water management is also based on local -- yes, local solutions.

So we see there is a great value in adding those companies together, share best practice and collaborate in areas like R&D, sourcing and pricing. And 2 of the companies in this cluster has taken this collaboration even further. That's WaterTech of Sweden and Kemi-Tech in Denmark. 12 of the products currently being sold by WaterTech of Sweden in Sweden is being produced in Kemi-Tech in Denmark. And this has resulted in a cost improvement by 5% in production and administration.

And this collaboration is expected to grow even further in 2026 and to see opportunities in both markets. And the water treatment cluster is also a particular interesting cluster to look for more acquisition targets. And we have a list of approximately 10 companies that we're currently looking at complementing this cluster going forward.

Another example has emerged in the wastewater treatment area, where we have Auger specialized in water mains and drainage solutions, and TOPAS, manufacturing water treatment solutions in Sweden. They are currently exploring an opportunity in the U.K. where there is a need to update aging infrastructure, also driven by regulatory demands. So they are currently looking at places, see if the Swedish products can be applicable on the U.K. market and is expected to make a pilot in 2026.

So working in clusters for us is not only an opportunity to improve profitability and strengthen the local market positions, but it's also an opportunity to find new companies and develop the area going forward.

So to summarize the Water & Bioeconomy area, we see this as an attractive segment based on the urgent need for water and wastewater solutions going forward. In 2025, we have been focusing on establishing clusters and collaboration and strengthen the business areas -- business units we have in the area, with local expertise and strengthen local market positions. And going forward, there will be an increased focus on M&A and to find new niche companies that are adding to the water -- urban water cycles and solve the challenge of water.

And by that, thank you for listening to this area, and welcome Roger Wood, who will present another interesting area for the future, energy and electrification.

Thank you, Sarah. Good afternoon, everyone. I'm Roger Wood. I'm Sdiptech's feet on the ground in the U.K., having joined 3.5 years ago as U.K. M&A Director and currently acting as Head of Energy & Electrification.

So Energy & Electrification is technologies, products for efficient generation, transmission and consumption of energy. The business area contains 6 niche high-margin companies together comprising about 1/4 of group revenue and profit. In recent years, the business area has been characterized by some variation in individual company performance, which has limited overall segment growth to around 3%, however, has continued to deliver robust and significant margins.

The outlook for the business area is particularly positive. All of the businesses are operating in high-growth segments and there's significant international growth opportunities. And as talked earlier about the high-level macro drivers for infrastructure sector as a whole, as a number of these particularly at play in energy and electrification, underpinning the long-term attractiveness of the sector.

We've got the ongoing upgrade to high-voltage infrastructure linked to the transition to green energy sources. This is obviously a function of climate change, but the rate of change is driven by government legislation. This transition brings some challenges, but also opportunities. The greener sources of energy are geographically dispersed and intrinsically intermittent in nature. This means lower scheduling accuracy and increasing demand for energy storage systems, load balancing tools and infrastructure for cross-border energy transmission.

We've got rapidly increasing consumption in energy, driven by the obvious data centers, electric vehicles, climate change, urbanization. You combine this increased consumption with the unstable geopolitical environment and the fact that gas still remains a significant proportion of power generation, this means high energy prices. Commercial behavior is very much driven by the desire to save money rather than react to government legislation. And this is resulting in significant demand for products that reduce energy costs, so products and solutions that deliver energy efficiency.

We focus more on the distribution and consumption end of the spectrum, as you'll see with where our portfolio sits, largely because this is the lower capital-intensive end of the market. And within distribution and consumption, we see some particular opportunities, energy management systems, sensors, storage, temporary power and of course, EV charging. All of these segments are forecast to grow significantly in the coming years. Within generation and transmission, we see some selective opportunities around power efficiency and quality.

I'd now like to talk in detail about one of the companies in the portfolio, Resource Data Management. This is a great example of the proactive portfolio engagement that Anders talked about through our shareholder transition strategy. We acquired RDM in 2022, has a global footprint, headquartered in the U.K., sales office in the U.S., manufacturing and sales in Asia and strong distribution in Australia and New Zealand.

RDM provides technology, products and software to control refrigeration, heating, ventilation and is fully integrated with building management systems. This product suite has enabled its customers or lots of its customers to save over 30% on its energy costs at the same time as maintaining regulatory compliance.

RDM has a strong presence in retail and fast-food sectors, hospitality and leisure, fuel retail, smart buildings and cold chain. Cold chain is particularly interesting. This is an area that we see significant potential for cross-business area collaboration and potential clustering.

So shareholder transition. When we acquired the business, there was a broad management structure, but as is typical of an entrepreneurial business, one shareholder, Managing Director, controlling all aspects of the business. The structure was fine for where the business was at that meant there was a number of bottlenecks for future growth. One example of this being the finance function was outsourced. This meant perfectly adequate financial reporting. However, in terms of actual financial data for day-to-day running of the business, that was a little bit more lacking.

Post acquisition, we introduced a more formal board structure. This meant more regular and broader commercial discussions and a greater focus on long-term strategy. The only was cognizant of the need to develop the business for the future, so is happy to work with us for the recruitment of an experienced MD, who is now in place. And he has been incentivized and empowered to drive the business forward for the future in the next 5 years.

So whilst the work is -- this recruitment now is ongoing with more functional expertise being brought into the business, heads of supply chain, technical and an in-house finance function. There's also an ongoing development of the sales structure with the help of an external consultant, and we're recruiting a new general manager for the U.S. market. So once the work is not complete, improvement in the organizational structure, combined with these expert functional heads is enabling the business to deliver efficiently on operational priorities.

I'd like to finish by summarizing how we see the Energy & Electrification segment going forward. A very positive outlook with increasing global energy demand and the fundamental shift in how energy is being produced and delivered, and also a clear focus on high-grade subsegments. There'll be more proactive engagement to focus on operational strategies that will deliver more stable performance and work towards more efficient working capital. A number of the businesses in the segment are facing significant international growth opportunities, and we'll look to support these with targeted investment.

And finally, through intelligent M&A, we'll look to identify products and technologies that we can add to our existing distribution channels and create some clustering around end customer needs and requirements. Very exciting times for the segment. Thank you for listening. I hope you found it interesting.

And now I'd like to hand you over to Amanda Berninger.

Thank you, Roger. My name is Amanda, and I Head the Safety & Security business area. I joined Sdiptech in 2022.

And in this business area, Safety & Security, we acquire high-quality companies that contribute to a more safe society. That can be both hardware as well as software products and services that somehow protects critical infrastructure, physical assets but also data, digital assets, and us, ourselves, the people and also the environment that we live in.

Today, we are 7 business units in this segment. All market leaders within their respective niches, we generate the majority of the sales outside the company's domestic markets, which is enabled by, for example, strong distribution networks. And this has resulted in double-digit growth, high margins, 30% EBIT margin, and a high return on capital employed of 155%.

So the current portfolio of the 7 companies that we have serve 4 key subsegments: cybersecurity, perimeter security, fire safety and clean air. These are all subsegments where we see a good underlying growth and where we think that we can find and attract more high-quality companies. In addition to that, there's also other adjacent safety and security areas that we will explore, but this is the main focus for us at the moment, these 4.

And Anders mentioned in the beginning that and how the modern definition of infrastructure ties really nicely to all our business areas. And that is true also for Safety & Security. What makes Safety & Security a bit special is that it spans across all the business areas. So when we see underlying growth in any of the verticals, that means that there are more assets to protect.

In addition, we live, unfortunately, in a geopolitically uncertain world economic instability, which has led to a sharp increase in threats, digital as well as physical. And as we see the threat level intensifying and escalating, we also see more regulatory compliance -- more regulatory control and loss. And there are a number of examples of recent acts that has been launched. That means or that as a result, we need more protective solutions.

And to give you a little bit more example of the type of companies we have in the group, in perimeter security, for example, we have a company that offers security gates and other type of structural bollards, blockers to mitigate vehicle intrusion outside, for example, a data center that holds a lot of high-value assets, of course, but also airports with a lot of assets and also people.

In fire safety, we have advanced solutions for detecting fire in metros, escalators, tunnel, complex buildings, and also specialty alarm systems to evacuate people in case of a fire.

The fourth segment, clean air, we have our newest acquisition, Dado Lab, which detects and measures emissions in the outside air that we breathe, and specifically fine particles. And fine particles is the most deadly type of air pollution. Out of the 8 million people per year that die from air pollution, 90% of those have been exposed to too much of fine particles.

We also have a couple of other companies in the Clean Air segment that focus on indoor clean air solutions. That is primarily to detect workers, for example, in a hospital or in a laboratory that can be exposed to too much of dangerous gases. And I thought I'd tell you a little bit more about one of these companies where we've done a great journey.

Temperature Electronics, TEL, is a U.K.-based company that's been around for 50 years. We acquired the company in 2022. They make air flow controls and monitors. They work really closely with the fume cupboard manufacturers to develop the airflow monitors to make sure that they meet the regulatory standards. And when you optimize the airflow inside the fume cupboard, you don't just make sure that the workers are always safe, of course, but also you can reduce a lot of energy consumption, up to 85% of the energy consumed can be saved. And that saves, of course, costs for the customers as well as it preserves our environment.

At TEL, we acquired them in 2022. And since then, we've done an impressive journey. We've grown the profits by 12% per year, while at the same time, increasing return on capital employed to above 200%. We've been able to do that by having a strong local leadership in place. We've applied our proactive ownership with clear targets and strategic support, but we have a really good team in place, a management team.

There are also a couple of other prerequisites that has enabled this journey. For example, we own the designs, the IP, and then we outsource everything that is not core. We've also been able to scale through strong distribution partners outside of the U.K. distributors that are -- we have good relationships with and that are loyal to our products. And thanks to the fact that we can save the customers a lot of money, we've also been able to apply a value-based selling approach. So a great example, again, of a company where we've applied our proactive ownership with strong decentralized leaders.

So looking ahead then, we, of course, need to continue the journey that we are on with TEL. We've just started that, but we also need to replicate this with other companies in the portfolio and in the group to continue to grow while maintaining capital efficiency. And in the Safety & Security segment, we have a couple of companies that have not just hardware offerings, but also attractive software offerings, recurring services and maintenance offerings where we can take the opportunity to explore and drive these type of high profit and the capital-efficient sales.

And lastly, we see a lot of good underlying growth in the -- for example, the 4 key subsegments that I mentioned, but also other adjacent segments. And there are a lot of interesting companies for us to acquire there.

So to summarize, we're a high-quality portfolio, high-quality companies, high profit, high cash conversion, and we have an interesting journey to continue with. We have just started, a lot of potential going forward. Thank you.

And with that, I hand over to Daniel.

Thank you, Amanda. So I'm Daniel Unge, I'm Head of Supply Chain and Transportation business area. And the business area, supply chain transportation consists of 8 companies, which, in total, has a revenue of SEK 2.1 billion and a combined EBITA of SEK 443 million. It is categorized by stable growth and also diversified exposure to several growing segments. The growth has been on EBITA level, 32% since the Q3 2023.

So if we look at the business area, we have 4 clear subsegments, the first one being the intra hub logistics, where we mean that we move products and goods within a factory or a warehouse. We have the hub-to-hub, which means moving in between hubs, so between a warehouse and the factory, for example. We also include maintenance of roads, for example, in that as well to facilitate easy transportation between the hubs. We have the Rail and Marine segment, where we mean moving goods using trains or ships and also, last but not least, the fourth segment last mile distribution.

They all have common market drivers, but still, they have unique special needs and also end customers as well. So if we look at the market drivers, the first one being quite clear, e-commerce and cold chain exposure or expansion -- sorry. We have the second driver being the regionalization of production, but also resilient supply chain. By that, we mean that factories moving back from the Far East, for example, and also not be independent so much, so building up supply chains in Europe, for example.

The last driver is regulatory demands, where especially in sustainability, where we have 0 emission cities coming in, for example, that shifts the behavior and how we transport goods within cities. These are all coming into play. If I just go back 1-second and mention the company GAH here in last-mile distribution. They are a company that are part of what both Sarah and my colleague Amanda and even Roger and Anders also mentioned, the clusters. So here, we have formed a cluster that we call the cold chain cluster. So this company is part of that.

What they do is that they supply refrigeration units to trucks that ships food to supermarkets and other warehouses, et cetera, within the cold chain. They have niche products, and they are a niche leader within the segment or cluster, and they also are really, really strong in the U.K. They have several blue-chip customers that has reoccurring contracts, also with service and aftermarket sales as well.

And the subsegment is experiencing, like I said before, but not in sustainability. They see regulatory demands coming in, in the temperature control. So it's getting more and more important to make sure and to be able to report and promise that you have kept the temperature through the entire cold chain. This has increased and is still increasing as an important factor.

And then we acquired GAH back in 2020, and it's been a fantastic journey. I was not here. I joined Sdiptech back in August, but most of the colleagues were here, especially you too, of course, you've been here the longest maybe in the room, but they've done a fantastic journey with this company. They initiated let's call it, value creation initiatives and selected a few that really would bring value to this company and also then to Sdiptech.

What they did was they put a strong management team in place, of course, together with that strong leadership and the proactive ownership of Sdiptech, they created something very good. So they worked on pricing as 1 lever where they, instead of maybe just raising prices every year, 2%, 3%, they looked at the data and use data-driven pricing to be able to have a diverse pricing strategy for them, which was really beneficial. And that led to great impact.

Secondly, they also worked on looking at the service and aftermarket. So as we buy and acquire product companies, usually, there is a service and aftermarket sales as well with these companies. And they managed to grow this by 30%.

Last but not least, with the help of Sdiptech, together with GAH, they also managed to enter new markets and also new segments. So new markets, we mean new countries like Canada, for example, they've entered during these years and other markets as well in Europe and outside of Europe.

The other example is that they also found new segments. And thanks to or due to COVID, I think you all know about vaccine transportation. They also require a strict cold chain transport as well. So the Pharmaceutical segment has grown tremendously from almost 0 up to 20% of the revenue today. And GAH is a fairly big company, one of the biggest one we have in the group. So it has a really good impact.

So GAH are also, of course, continuously looking at new markets and segments as well. So this is something that we shouldn't forget. We don't stop here. This is the beginning.

So going forward for the business area, we would like to enhance the value creation. You saw one example, there are, of course, more, but there is also more to do with all the business units that we have. Through our proactive ownership that Anders mentioned earlier, we can help the companies to grow even further.

We want to continue to invest in growth levers, specific growth levers to facilitate organic growth, but still maintain a capital-efficient approach. And thirdly, we would like to strengthen the market cluster formation and also focus our M&A activities in the most attractive niches.

Thank you very much.

Daniel, thank you very much. I can see the questions in the chart already actually. But one for me because I mean with your experience also from different areas, business areas and the models also you have experience of, what would you say would be the key areas now for you to improve given that?

I think that all companies are unique. So that, of course, has to be taken into account. But there are a couple of generic ones, so I mentioned maybe 2 of them, but pricing is definitely one that is very often overlooked and just automatically happens each year. So that's something where we can be smarter. I think also since we are acquiring product companies, it is important to have a look at also the aftermarket and service sales as these are margin contribution from that is really good as well. So those would be the top ones.

Thank you so much. Warm hand. Thank you. Thank you, Daniel. It's time now for me to present our next speaker. I think it's used to it, the people say, Michael L, Mr. Michael Lund, right. So welcome up Michael Lund from ELM, Managing Direct.

Thank you very much. So my name is Michael, and I work as CEO for the attachment company for forklift trucks. We are a manufacturing company with the base in Denmark.

So our company, since our foundation in 1967, we have aimed for perfection in whatever it comes to the way we produce, how we design or how we promote our solutions to our European customers. That have been a key part of the reason that we today have grown our team to 200 people, mainly based at our 2 different plants, 1 plant in Denmark and 1 plant in the eastern part of Slovakia.

Since 2022, we have been owned by Sdiptech. And today, we are part of the business area, Supply Chain & Transportation. As I said just before, the majority of our colleagues work from the 2 different plants that we do have. But in addition to that, we have an extended sales team based locally in all our key markets, able to support all our customers with local support.

In addition to that, we have, over the past decades, been working hard to establish a close collaboration with all the OEM partners within our -- in our industry, the manufacturers of forklift trucks. That is one of the key reasons that we have been able to grow our business and one of the key reasons that we believe that we will also, in the coming years, be able to grow our business.

Our products, what we do? Ever since the foundation of our company 56 years ago, our mission has remained the same, develop the perfect attachment to ensure an efficient and safe internal logistics and handling solution. Today, we have award a very broad range of different products to highlight a few of them, fork positioners that you use to move euro pallets, rotators in many different variations and in many different capacities. Clamps, many different variations and many different capacities for clamping, steel, paper, white good clamps, et cetera.

In addition, in the recent years, we have developed a new business area within our business, designing and producing customized solution. Together with the forklift truck dealer and together with the end customer, we design and manufacture an attachment that fits perfectly to their handling need to ensure and unlock opportunity for a safe and efficient handling solution.

Within the attachment business, there are 2 different types of attachments, hook-ons and integrated. The majority of our competitors have decided to focus on the hook-on attachments. Hook-on attachment is based on an ISO standardized framework. It unlocks the following advantages: high flexibility because it's standardized; fast delivery, because it's standardized; can be reused from one forklift truck model to another forklift truck model, because it's standardized.

However, we, at ELM, have decided to focus on the integrated attachment. Doing that, it gives us a more complicated internal value chain to master. We need to modify each and every single product that we produce to the specific forklift truck to the specific forklift truck mast.

We have decided to do that to unlock the following advantages: optimal visibility. I hope it's pretty clear, and this is real pictures. The more you can see, the faster you can operate. The more you can see, the more safe you can operate. So we are not just providing our customers with bended, painted, welded steel. We support them with improved efficiency and improved safety. In addition, the lifting capacity of the forklift truck will be increased. The turning radius will be lower, meaning that the racks in the warehouse can be closer together and there is a lower noise level.

Our standards. When you are a customer to ELM, we make very much focus on to make sure that all customers understand that, as I said before, we are not just a supplier of bended, welded and painted steel. We supply all our customers with best-in-class when it comes to safety, quality and sustainable production.

Safety. Safety have been key to us since forever. That's why for so long, it has been a critical part of our product development. With an ELM attachment, you will have the best visibility on the market and thereby safety.

Quality. We don't aim to be the cheapest. We aim to be the best. We build equipment that will last from the coldest part of Norway to the dustiest part of Saudi Arabia. Our products will have -- are designed with a significant higher safety margin compared to the minimum requirements of the CE marking.

Climate impact. Sustainability matters to us, and we know that it matters to many of our customers. Therefore, we have committed ourselves to measure our CO2 emissions and committed ourselves to reduce our CO2 emissions by 50% before the end of 2026 compared to the base year 2022.

Our financials. We aim to be the best, the best within our niche. We don't aim for growth. We aim for sustainable growth, growth within our niche. We believe that's why we can achieve a significant higher operating margin compared to all our competitors.

Before Sdiptech took over our company, we had, I would say, basic understanding of financial performance. We worked hard for a year. Between Christmas and New Year, we checked our bank accounts, we emptied our bank account and filled our pockets. After Sdiptech acquired our company, we got a more nuanced understanding of financial performance. Thanks to that, we believe that we now today perform at a better level. Based on this DuPont analyze, I will show you, our development.

In 2021, the year before Sdiptech took over, we had an EBIT margin around 10%, a capital turnover just above 2.5% and a ROCE just above 30%. In 2022, our EBIT margin increased to 13%, capital turnover close to 3% and a ROCE 35%. 2023, margins just below 20%, capital turnover just above 3%, ROCE almost 60%. 2024, EBIT margin above 20% capital turnover, a word that we didn't know were existing before 2022, almost at 3.3 and ROCE 74% -- 72% sorry.

Our ownership, we act independently, but of course, as a part of a group. Our success does not depend on our ownership nor on the performance from the other companies within the Sdiptech Group since we operate independently. But at the same time, we pay great attention to the group of companies that we now belong. We benefit from a stable long-term owner with a clear financial target and with valuable strategic inputs. The group's portfolio of companies offer us great opportunities for learning.

Our journey going ahead hand-in-hand with Sdiptech. We support the M&A team at Sdiptech, and we support the business areas. We actively seek for business -- for M&A activities when we do our daily operation. We are the boots on the ground for the M&A team at Sdiptech. Companies that would fit into ours or companies that would fit into the investment principles to Sdiptech are shared with the M&A team at Sdiptech.

Obviously, we have been able to improve our financial performance in recent years. Of course, we are very happy to share all our experience within our business area and actively take part to try to improve the financial performance for the other companies within the business area. This was my words, and I hope that you enjoyed a short lecture about attachments.

Thank you for your time.

Thanks, Michael. Technical for that from ELM. Actually, now it's time for the Head of M&A. So please welcome Peter Helsing, give him a warm hand. Stage is yours.

So good afternoon, all. Anders talked about some changes that we wanted to implement, and that is also very true for M&A. We want to leave behind a mindset of overly focusing on EBIT and EBIT growth and adopt a framework more holistic view on value creation and cash flow generation. It's also important to not overpay, of course, as it is for many compounders and not necessarily in terms of the multiples we pay, but more in relation to the cash flow we get.

I will take you through this updated framework for M&A today. But before that, I'm Peter Helsing, I'm the Head of M&A at Sdiptech. I joined the group in May. And before that, I was the Head of M&A at Essity.

So when we think about changing the framework, it's, of course, important to not jeopardize what we do well. And that is, of course, to buy great companies. Remember, more than 70% of our companies in the portfolio have a return on capital employed above 50%. So we have acquired fantastic companies over the years.

So looking at the framework again, the in-house value creation is super important. So that is one of the 3 pillars that we have when we think about M&A and value creation. And in-house sourcing, that is about finding great companies first. Secondly, it's about having a great home for entrepreneurs. So for us, it's super important to have a great package to bring to the table. It's not only about paying a good price. Thirdly, we need to be disciplined in terms of M&A execution. Anders talked about this, and it's very relevant, of course. And we need to be disciplined in many ways.

So one thing is, of course, to be very disciplined in the way we -- the number of acquisitions we do and how fast we can run. So we have the ability to run fast, but we can never run faster than the engine. And that is, of course, the organic cash flow generation. We also need to be disciplined in terms of the price we pay, of course, super important when you do acquisitions. And then finally, we also need to be disciplined when it comes to the quality of the businesses we acquire.

So what do we look for? Yes, we have the European footprint, of course. We have our core markets in U.K. and the Nordics and Italy, but we also see M&A as a tool to move into new markets. And we look at Germany, for instance, now, that could be a very promising area to enter.

We look for niche players in well-defined segments and also supported by the cluster thinking. We look for innovative players with high barriers of entry, and we look for companies in resilient markets with low cyclicality and underlying growth drivers. When it comes to the financials, we look for companies with an EBIT of between SEK 20 million to SEK 50 million. We look for companies with a proven track record, and we look for targets with a return on capital employed of above 50%.

Finally, it's very important with finding situations where the founders and the entrepreneurs want to stay on board and continue to create value together.

So how do we do when we source the deals? I mentioned this is very important, and this is about finding great companies first. We do this in many ways. First of all, we have in-house capabilities. We have a dedicated team looking at roughly 500 companies per week. We have a lot of collaboration throughout the group through the business areas, but also with the portfolio companies to try to find good targets out there. And this is further supported by the cluster thinking.

We have an in-house proactive outreach team. So this is everything from cold calling these companies, but also building long-term relationships. And we all have that hat on us when we think about the daily business. We think about businesses we can acquire and building these long-term relationships is, of course, key, not only for bilateral deals, but also for structured deals where the competition is higher, of course. And if you have a relationship already, you can get a head start.

So by working in this fashion over several years now, we have built up a fantastic asset in terms of a solid pipeline. And as you can see here, we have over 800 companies in this pipeline, and we are actively pursuing this. It's also well balanced between our segments, and it's also well balanced between our markets. And here, you can see also Germany there, which is a potential new market for us. We believe that Germany can be a good fit for us. I will come on to why, but it's a very attractive market in many ways. It's a huge market, and it's also the biggest market for family-owned businesses in Europe.

So how do we win the deal? For us, it's important to provide a great home for entrepreneurs. That is key. So we're not like many players out there. I shouldn't mention any names, but there are players out there taking over businesses, restructuring heavily, changing the management and then reselling the business after, say, 5 years. And we're not like an aggressive industrial player either integrating the businesses beyond recognition. So we offer something else.

So we're basically a long-term ownership. That's what we're in. We have a buy-and-hold philosophy. And by that, we can create a lot of continuity for the businesses we acquire. We value the brand and the culture of the companies we acquire, and we think that the local identity that has normally been so important to building up the company in the past that, that also will be beneficial in the future value creation.

We have our decentralized structure, of course, but we can get a lot of support for the businesses through the work with the business areas and the cluster thinking. And we provide also opportunities to collaborate between the different portfolio companies.

Finally, I talked about the importance of aligned incentives. Here, we have a toolbox that we can use. And one tool is, of course, to use earn-outs. And if they are structured well, they can be very efficient.

So looking at an example here, just to demonstrate how earn-outs can work for us. Going back to GAH that Daniel talked about before, we acquired in 2020, and it has been a very nice addition to the group.

So it's a busy slide, of course, but I will take you through it. So basically, the way we structured this deal, it was a SEK 26 million upfront payment and then a potential SEK 14 million in a full earn-out situation. At the bottom of the slide here, you can see 3 different cases. So first of all, bottom left, you have the business case from when we acquired the business in 2020. The mid-case there is the actual outcome. And then the last case, there is a fictive case based on where the company doesn't perform at all or running at a flat growth in profits.

So going through them one by one. Starting with the business case back in 2020, what we believe then was a profit growth of 7.5%. And with that, the purchase price was SEK 33 million in total, so SEK 26 million in day 1 payment and then another SEK 7 million in earn-out.

Here, we had, as I said, 7.5% in profit growth with a cash conversion of 90%, and that translated into an EBIT multiple of 7x for the first day and then a multiple of 5.2x year 4. And then, of course, the most important figure there is the internal rate of return, which was 24%. So very good returns.

Looking at the mid-section there, the outcome, very attractive. We actually paid out a full earn-out after 4 years. So instead of paying SEK 33 million for this business, we paid SEK 40 million. And this business also performed better in terms of cash flow generation. So the cash conversion went up from 90% to 110%. So then you can see that, of course, the day 1 multiple goes up from 7x to 8.5x. And the year 4 multiple there was still 5.2. So that's quite stable. And here, you can see that even though we paid a higher price, the return went up from 24% to 28%, so super attractive returns.

And then the final case there, I think it's important to have it in there because it demonstrates how we can protect from downside risk. So here in this example, we didn't pay any earn-out because the profit growth was only 0%. We still have 90% cash conversion in this example. So the multiples day 1 was 5.5. And of course, it stays at 5.5 then year 4. And this is what's important. You still get the return we require, which is the 20% return. So even though the business did not perform, we got the returns that we want.

Of course, when you look at all these 3 examples, you can see that the actual outcome was the most desired outcome. So even though we paid the highest multiple in that scenario, the return is the highest and the value creation is the highest, and that's what it's all about, of course.

So key takeaways. Looking forward now in terms of M&A, what we focus on is the great capabilities we have in the in-house sourcing. It's about finding great companies first. We offer a great home for entrepreneurs. It's about finding win-win solutions where we can create value together. And finally, being disciplined in terms of M&A execution. And this is about finding projects with an internal rate of return of about 20%. And in terms of leverage, always having a healthy balance sheet and the leverage below 3x EBITDA.

Thank you for listening.

Thank you, Peter, but we're not going to let you go. You mentioned it there. You just -- you came in May from Essity.

Yes.

And looking into the markets and your experience, I mean, working with the same thing. You mentioned the new markets. And I know this is not in the script. Sorry about this because I know you good. No, but I think Essity had when I was there, 72 markets operating on something like that. If you look into what you just -- if we look into what we just saw here, you were focusing a lot on Germany. Can you explain that a bit? And also why are new markets now important for Sdiptech at this -- where you are right now, why?

Yes. I think it's not straightforward in a way. I mean many compounders and other companies have struggled with Germany. But it's a huge market, a lot of family-owned businesses in Germany, so that's attractive for us. And then I think the model that we have, the model that I just described fits very well in Germany. But we're not only focusing on Germany. We can -- if we -- through our cluster thinking, if we find other opportunities in other markets, then we can move into other markets as well. So that's the way we reason at least.

I love the way you also said taking note there, super -- I've heard you saying that before through the year, super attractive...

What was that?

You said super attractive returns. I hear you also say...

Yes. yes. I can't do that.

Well, we're looking forward to that and more of those. Thank you so much. Thank you. Give him a warm hand.

And now we will talk to somebody you know, and he's been with the company for a while now. So let me introduce to Bengt Lejdstrom, our CFO.

Thank you, Linda. Good afternoon. I'm Bengt Lejdstrom, the CFO of Sdiptech. And ever since joining Sdiptech in August 2018, I think it has been a really exciting journey, and I look forward to continue with that together with all my bright colleagues here.

Before I start my presentation, I should apologize a bit since having the Capital Markets Day today. We realized that it was Thanksgiving yesterday, which means that some people interested may have a long sleep over today. But they can watch the full conference here on our web page later on as you can as well if you want to see some parts again. And as well, it's Black Friday today, right? So perhaps today is the last day you can buy Sdiptech share at a discount and let's see how it goes further.

Right. So my colleagues have given you some insights in our operations and the way of working with M&A. And I will try then to tie it back to what Anders mentioned about our targets by looking on some financial priorities. So I have divided the presentation then into the growth, the leverage, the returns and then also the financial as a foundation for all of this.

So let's start with the growth target. As Anders was mentioning, it's a total growth target. Previously, we had 2 organic growth and acquired growth. But now it's one consolidated target. But of course, still, it's very important with organic growth.

So when we say that this is crucial for our future and is that just talking or can we prove that we actually have it in our numbers and in our companies. This chart to the left, each dot here showing a company that has been part of the group since -- well, it's actually data ever since 2020, regardless if they have been part of the group since 2020 or not. But of course, relating to data availability and also since its CAGR on that left axis, it's also companies with a positive CAGR. We have 1 or 2. Every group has that, that temporarily has a negative organic growth, but we work to support them to get back on track. So these are some very good examples then.

And all in all, if you want to some statistics that for the core business units in 2023, we had a 14% organic growth, means excluding currency effects. And in 2024, it was 5%. So that's better numbers for the core business than compared with the total group.

And what you also can see from this chart is that companies that we have in our sweet spot to call it like that, they've once having a profit of around EUR 2 million to EUR 4 million EBIT have a very good growth as well. So we really do believe that we have great companies out there that can continue to deliver an organic growth, even though our target is a total group growth.

And for those of you who are worried that we will stop reporting on that, we will not. We will continue to report on organic growth, of course, both when it comes to sales and EBITA. So you can follow-up how things are doing. So we think we have a very solid foundation for that part of our total growth target.

The other part is then the acquired growth, and Peter has mentioned how we work with that and what's important with us -- for us with the returns. It comes some financial characteristics to these things when we talk specifically about the conditional debt or the earn-outs as we typically call them. It's an important part for us. It minimizes the risk if something doesn't turn out as expected, but it also gives the seller an opportunity to really earn some good money if things turn out very well.

So -- and I guess many of you understand the model. But just to give you an example then on the left here that if we value a company to, say, SEK 100 million, for example, day 1, we may agree then that we pay the entrepreneur 19. We keep 10 as a potential consideration in the future. If things turn out as expected as they are at the time of acquisition. Let's say, we expect this company will grow 3%, all right.

So as long as they meet that requirement and have a growth journey of at least 3%, we will pay those 10 eventually after the earn-out period is over. And if they didn't succeed, of course, they don't get that money. So that's the downside protection. Could be constructed in some different ways, but basically.

But of course, most entrepreneurs, they want something more than just this. They want to have the opportunity to earn more money, so they want an upside. And for us, we have decided to have a little bit longer earn-out periods than many of our colleagues. Typically, you have a 2-year perhaps earn-out, 3 years at the maximum. We very often work with 4- to 5-year earn-out periods.

And it has some advantages and some disadvantages, of course, as everything. The advantage being that we have the entrepreneur on our side and working and we get to know the company, we can have a succession in an orderly manner and so on. The downside is perhaps the same thing. We have the entrepreneur on board for 5 years, which means that some changes may take some longer time. And when the entrepreneur eventually leaves after 5 years, we may have a gap to close there when it comes to some investments or so. But we try to monitor this in a good way.

If things turn out well and the company has earning more money than expected, more than the 3%, in my example, then the additional -- well, in this case, up to SEK 25 million could be paid out. And we're really happy and glad to pay out earnouts because that means that everything has succeed in a very good way.

So to summarize, it's a good way for us to minimize the risk to have a downside protection and give the seller an opportunity to earn more money. And it's also, for us, a way of funding the actual deal instead of paying more upfront to say that, well, I will at least increase my business with 10%. So I want a higher multiple day 1 and we pay that, we can push that payment further ahead. So it's kind of a cash-free debt. We don't pay an interest on it. And so it's an important source of funding that we push that payment forward. But it has some implications for our books and bookkeeping, and I will come back to that. But all in all, we have investigated this model, and we will still continue to use earn-outs as an effective tool for us.

Then looking at the other target, leverage. Previously, we have had a target about financial leverage, excluding these earn-outs. But since we are very much an acquisitive company, acquiring companies all the time, why not have also debt associated with that process also in our target. So our target now, the 3x to be below 3x is an all-in debt leverage. So everything that's interest, we pay interest on or as with the earn-outs, as I say, we don't pay it, but we book it. So all interest-bearing debt is included in this one, whether they are earn-outs or leases or anything else.

To the left here, you see the development of our leverage over the years since '21 when this starting and what has affected the curve? Well, we have had a very aggressive M&A agenda sometimes. So you see here in the first 2 years, '21, '22, leverage going up. But then again, we acquired perhaps 30% of our total earnings in a year. We were at SEK 160-plus million per year in acquired profit. Of course, that strengthened the leverage. And we have also had some years with a bit slower organic growth, especially in '22 and '24, which then affects this curve as well.

And through the years, we have done a couple of new issues of shares in order to bring the leverage down a bit, 3x since I joined and, on this chart, it's twice in '21 and '22. And of course, that brings leverage down. But that is not our plan or the strategy for us now to keep the target. So I don't think that we will issue shares every now and then to make sure we stay below the 3. That's definitely not in the plan. We are going to manage this with our own cash flow and operations.

So as I said then, to drive the leverage a little further down, as you see, we are a little tiny above the 3.0, work with the organic growth, make sure the organic growth results in a good cash flow and then be selective, as Peter was saying, when we acquire new companies. That will make us really reach our target.

Of course, from time to time, if we make a bigger investment, a larger acquisition, temporarily, that can make the leverage go up a bit. That's because we take on the debt. We take on the conditional debt also day 1, but we haven't got the profit yet. So typically, part of this conditional debt, now it gets a bit theoretical, part of this conditional debt would not be paid out if profits stay where they are today because they require and assumes a higher profit in the future. So if everything just stays as it is, we can release some debt and the leverage go down then, of course.

One then important component of the leverage is the cash flow. Cash flow is important for us. It gives us flexibility to invest in different things. Here, you see the chart on the left here showing the free cash flow per share. That's the yellow line and compared with the earnings per share in the black line.

Two different KPIs based on two different -- very different things. Historically, they have been impacted both on higher interest rates, meaning higher interest costs, put more earnings into high tax countries, U.K. and Italy, for example, and also some periods of a bit slower organic growth.

The EPS curve, it doesn't really follow the free cash curve. And one reason for that is that, again, with these earn-outs, which we book as debt, we need to put the theoretical interest rate as well. And that hits the P&L. It's not tax deductible, of course, and so it goes all the way down and hurts the EPS. Currently, it's quite substantial then with SEK 6 per share.

So this is the historical development. But in the future, we will continue to improve the free cash flow per share. That's very important for us. And that gives us the strength to do acquisitions, but we, of course, have to be careful there. We will work to improve the working capital efficiency.

We mentioned the projects that we do from a central perspective and supporting our companies to help them to be more efficient with their working capital is, of course, one, make more inventory management, for example, and other types of initiatives. We will also be selective in our CapEx spending when companies want us to bring in some money for them to invest in something.

And that leads me over very soon to the next slide. But just to summarize the cash point then that we want to stay at a high cash conversion as we measure it between 70%, 90% of all the profits we make will be generating cash in the pockets. Currently, we're at 81%.

So talking then about the investments and spending the money, the free cash flow give us. The free cash flow, I should have mentioned, the KPI includes CapEx and paying leases, but the cash flow before the CapEx gives us some different opportunities.

You have already seen this chart now in some of the presentations, the DuPont. And here is our core business units, at least the ones acquired before 2024 and those -- and excluding those that have a negative capital employed, that is, of course, very good. If you have a negative capital employed, your return are -- yes, you cannot measure it. And we have a couple of them, thanks to a lot of prepayments, for example, from customers.

But most of our businesses have, of course, a capital employed. And here, you see the return on that. That's the lines. And it's a combination, as not least Michael Lund described, of EBITA margin and capital turnover.

And actually, our average, I think Anders you twisted the numbers around, it's 64%, not 46%. But -- so all in all, a weighted average of all our operating core business units have a 64% return on capital employed. And then you say, well, in your reports, you say 12%, 13%, how come? Well, on the group level, we had all the goodwill and immaterial assets that we need to book when we acquire something and that return on capital employed becomes much lower number then, of course. And that's a more slow-moving object. But that is our target is to bring that slow-moving object up to over 15% that may take a little time. Sorry, since it takes longer time, of course, to improve the KPI that has in it about SEK 8 billion of capital employed compared to supporting the companies that have a much lighter balance sheet. But doing that, we will, of course, improve the full group's return on capital employed.

So coming from a situation with a strong return, we then see how should we then spend the money our free cash flow has given us. And well, depending on then where the companies are in this picture, where should we put the money? Well, to start, the business unit needs to have a solid position to start with. So it's not in any turnaround situation. But if it's a solid return already, but could be better, cash flow steady to generate cash for the investment and of course, a clear business case to generate the profit, then we could discuss.

And then we could select for a company over here with a very high margin. Of course, it's get better outcome to work with the capital turnover because that gives an increase in the return. On the other hand, if it's a company with a very high capital turnover already, it's better to work to improve profits and profit margins to increase the returns. So it's a simple tool. And of course, we have been using this in our minds for a long time, but just wait to show it more explicitly.

So that was the targets. And then going to the financing then is a foundation to be able to deliver on the targets. And this is very illustrative model of our funding. We have a cash position today over here, about SEK 600 million in our pockets as of September and also then, of course, utilizing credit from our financing partners.

Then over this period that we will deliver on our targets. We will have cash flow coming in from operations. We have also unutilized funding headroom from our credit providers, all in all, giving us what we call a financial headroom that's quite extensive for this term. And then we spend the money on M&A, the main thing, but also selective CapEx and leases. So we think our -- when we say that these are our targets, it's to double our earnings in 5 years, keeping the leverage down and the return up. We have simulated and we have proven it in that it works also from our financing position. Again, then which means that we don't need to ask you for more money in an issue, we can manage this on our own.

So summarizing the financial perspective. Organic growth is key for all of our targets. So we will continue with that. Cash flow, of course, to get cash to utilize for acquisitions or the other selective investments, work with our M&A model, continue to enhance that one, but also be very selective and look on the IRRs as an important KPI for selecting which company to acquire. And then also in the foundation to have a solid financial capability going forward.

So thank you very much.

Thank you, Bengt. And we do have questions coming in, but we'll take them later. Thank you.

And now it's actually time for CEO, Anders, to come up and wrap summarize briefly what we have seen here today, all the presentations. And after that, I suggest we do have the Q&A.

Great. Thank you, Linda. Yes. So as Linda said, before some Q&A, I would like to summarize what you have been listening to here today.

The first one that you've heard about is Sdiptech has a strong position within our key infrastructure segments. We see clear growth driver for each of those segments. You also heard the business area talked about the underlying drivers.

A strong core portfolio of high-quality companies. You've been able to listen to some of the examples here today and also listening to Michael from ELM, talking about the company that we believe is one of the really core companies we have in the group.

The organic growth agenda will be built on our proactive ownership. We gave some examples and also the focus on return on capital employed. We have talked and given you some example of where we have strong focus on the return on capital employed, but that's not all the companies. We have more to do, just to give that clear for everybody, and that we want to apply the thinking that we have showed you here today as well.

Our M&A growth will be built on -- continue to build on our in-house sourcing capabilities to supporting the business area, but also to be focused and disciplined in the valuation in the coming years.

And finally, then, our financial targets. They will be focusing on, as Bengt also said then on the total growth, improved return on capital employed and a healthy balance sheet with a leverage below 3.

So that is the short conclusion, the summary here, and I think we can open up for questions.

Thank you. Thank you, Anders. Thank you for that summary of what we've just seen today.

We have a few questions coming in online, but because I think of courtesy, yes, thank you, Peter and Bengt to get up. Out of courtesy, if we have any questions in the room, you are here in Wallenbergsalen, so you should get the first questions while I get my questions here on the iPad, if we can get some technical support there.

Yes, please take the microphone next to your seat and it would be lovely if you want to present yourself as well, where you come from and your question. Thank you.

Nice. Max Bacco from SEB. So perhaps starting with, I mean, to my understanding, the key message here is one thing to do better and a more prudent and disciplined approach in terms of capital allocation, in terms of CapEx spending and net working capital management. And I thought it would be interesting to hear your view on how long does it take to fully implement that thinking throughout the group? And I guess, Bengt, your experience from your previous employer also could be interesting on that topic.

Yes, I think I can start a little bit and then you can take over then. But I think as Michael showed from ELM coming in with a focus in 2022, it can happen quite rapidly if you put in clear targets on what you would like to achieve on the capital side. So I think from that perspective, but -- yes, it needs to take a strategic period, 1-year, something like that before we can fully implement that. But we are not starting from scratch. All the business areas have had this in mind, and they have started to talk about it previous years and also now more in this year for the next year.

And to add, I mean, if we start with the Sdiptech journey when both Anders and I joined 7 years ago, we did that strategic rethinking and which have led up to the position we are today, and that takes time, as you realize, it's now 5 years or even more since then. So it takes some time to turn around the ship. But also experience from our previous employers in the business, also, for example, going from distribution to product-based businesses takes a number of years. But this is what we do now. It's more an update and gradual shift. It's not the total 180-degree turn.

Do you want to follow-up?

Yes. A separate question, a bit more short term. Anders, you mentioned in the beginning that the plan for 2026 was partly to start this transition, but also to return back to organic growth. And on the organic growth part, is it that you see that the market more broadly speaking, is recovering? Or is it more an effect of the initiatives that you have implemented throughout 2025. What's your -- what are you seeing there?

Yes. Just a comment on the 2026 for us as well. So the target of the 15% per year is going to be organic and M&A. So next year, we will come in with a lower M&A growth to start from. We need to start acquiring more for next year. So let's see what that can come in, in the year.

But from organic, I think it's both actually that we see now we have a lot of budget discussions with the companies for the next year. It looks better and looks more positive for many of the companies. But also, I think we have been more focused on where to push for growth and not. And we see clear opportunities in some of the companies that here we can focus a bit more on growing as well. So a combination, I would say.

We have to -- thank you. We have one more question from the room. Thank you, guys. And there's actually questions coming up here to you, Sarah as well. So if you want to step up, I see that questions coming in. So just so we're prepared. Yes, please go, next speaker.

There's a microphone on each seat. Unfortunately, so if you all want to -- just go.

A bit of a technical -- maybe a philosophical question because you have such a big U.K. exposure, which is quite different from many of the other compounders. I don't know what the profit is, but maybe half of your profit is from U.K. And I mean, it happens to be that the British pound is down like 11% in the last 12 months and share price is down 19%. So it could be coincidence, but there's a big correlation to the GDP. So what are you thinking in terms of geographical diversification? I mean, you obviously like U.K., but are there any like ideas on exposure to certain countries?

Well, I can start with the financial part of it, and it's very true, and we had last quarter, almost 5% negative currency effect, as you saw, half of it coming from U.K. and the 10% there means 5% on the group. Of course, we take -- consider that going forward with hedging and so on, but it will affect us also the Q4 and Q1 to a large extent since that's still very tough comparisons with last year.

But to your question about if we like U.K. more than others, it's -- we like U.K. because they have great opportunities for infrastructure business. We know even the U.K.-based investors ask us why are you so much in the U.K. But we are not in consumer business. We are not depending on that. Our companies more follow the need for upgrading and renovating and expanding the infrastructure. So they seen obviously a very good track record, and you have heard some of the colleagues mention a number of them. But it's not an over ambition in itself to become bigger in the U.K. No, it's to become bigger in the other geographies.

And just to add to that, I think, I mean, Roger, as you heard here, has been our M&A person in U.K., and we've been very successful. So it's been easy for us to continue to acquire and also leads coming into us more regularly, and we are becoming more of a well-known player. But definitely, Peter will try to focus as well equally in the other countries as well to make us more -- less dependent on U.K. definitely.

We will stay in the U.K., but you were from SEB, and you are from the last question we got from. Okay. Thank you. So we have a question now to Sarah and in Parenthesis, Anders. Can you please discuss AMP8 in U.K. This is a GBP 100 billion investment plan for water infrastructure. This one is much larger than the last one.

Should I start -- yes, we know there are several investment initiatives going on in the Water segment, and that's also what we see, for example, with our company, Auger there. Who's experiencing and that's also the collaboration I discussed previously with Topas. So that is one initiative, and we also see investments all over Europe with one just recently being launched together with the European Investment Bank of EUR 50 billion. So it's an interesting opportunity for us, but we also see opportunities in all the European countries.

There was actually one more question. You guys have the same question. So to [indiscernible], thank you for your question, but I think it was answered otherwise, e-mail and blame me, but it looks similar.

So we continue here. And this one is to Bengt. You distribute SEK 8 share per year after tax earnings to your preference share. Your redemption price is SEK 105 per share. Thus, this financing costs 7.62% and is not tax deductible. More cost-efficient financing should be available for Sdiptech. Have you considered redeeming the preference shares? I think...

You have heard that question many times.

Yes. That's what I figured.

But to start with, it's a question for our Board of Directors to decide upon this. It's dependent on many factors, depending on our overall leverage situation. I agree it will strengthen the earnings per share a little bit. It will lower the P&L a little bit from increased interest costs, and it will increase the leverage since we, instead of share capital we'll need more debt or at least more net debt. So it's a bit of a complicated question. But I guess our Board will take a thoughtful decision whenever there is a situation that could support such a decision. But it's nothing now.

As a former Communication Director for a listed company, I just take for granted you guys answer what you can. And I'm just going to answer -- ask questions and you answer and if its ticker related, you just tell me.

So we have a question for Peter as well. Peter, it goes back to a bit where you already mentioned Anders and Peter before about the broadening geographically. How -- to Peter, how do you view the risk aspect of broadening geographically? Why do you think it will work? And what are the key risks you foresee? This is from Stefan Knutsson. Thank you.

I think it's a very -- it's a difficult answer -- question to answer, I think, but we look at each individual market individually and we make an assessment there. It's a combination of looking at the market and go for markets we like where we have lower risk situations. But then also it's an opportunistic approach we take. So when we find good targets, we can enter new markets that way. But it always needs to be a good fit with both in terms of the target, but also the market itself.

There's another broad question here now from the same person, and this is for, I think, Sarah and the rest of the team in a way. This is to Anders or business area heads. So you can have a long answer here.

How do you make sure that the products of your core business do not get commoditized, my English should be better, commodity sized, how do you say that in the future? Is that correct? Like a commodity?

I think I can start. I think the example of Michael from ELM was a good example of that, that he showed that these are the standard products, they're commoditized and here, we have the special products for our niches. I think it's clear that the niches we have selected and when we do our research with M&A companies, we focus very much on how protected that niche is, how difficult it is to enter it and if it's broad enough for growth potential in it. So from that perspective, we are quite comfortable we will be able to grow within our niches. There's always, of course, some risk that the specific USPs will disappear fading away, but continue to develop the products, make sure you're investing in R&D and you can keep that strong position.

Any more questions from the room? Otherwise, I continue. It's a long -- there's a lot of questions, but I think we will have time. So I go straight to this question from [indiscernible] his name. Anders or Bengt, does your group ROCE metric exclude goodwill from the capital employed? And if so, how do you plan on hardwiring discipline into your valuations, including earnouts?

No. In our group KPI, the 12%, 13% return on capital employed, all the goodwill and everything else is on the balance sheet. So it's when we look at our operational units, we don't include the goodwill from acquiring them that had been a bit strange. So the answer is yes, it's included.

Okay. Thank you. There's another one here for Anders that came up. I have tried to take them in the order they come up. Can you please talk about organic growth at the continuing operations and how it compares to your reported figures? It looks like continuing operations showed positive organic growth over the last 2 years, despite reported organic growth being negative.

Yes. I was talking more about quarters, the specific quarters that we have shown negative organic growth. I don't know exactly the number of quarters we showed it. This last quarter, Q3 was the first one we could show an organic growth of adjusted EBITA again. So I think it's from that perspective that we're going to continue to build and grow organically quarter-by-quarter and of course, year-by-year as well. That's what I can answer to that, I think.

Thank you. Please text if you're not happy with the answers, and we'll try to do them again. I think this -- I don't get any back here. I think they're happy thumbs up here. Okay. So we have -- this one is to Peter. Out of the pipeline of 800 companies, how many are well advanced as prospects?

Yes. Good question. I think it's a very wide portfolio of opportunities there, of course. It's very backloaded. Many of those deals will take years to convert and many of them will never happen, of course. But I think we always try to have at least, say, 5 to 10 that we can convert within the next 12 months. And that will change from day to day, I would say, but that's the ambition.

Thank you. And then this was to Anders. When are you expecting to have sold the 11 companies?

Yes. It's -- Peter is working hard on that to work on the -- not Peter here, the other Peter I talked about, about the divestments. It's a lot of ongoing processes, and we were actually quite happy to say that we signed the first one. But the plan is to do it before the summer. So before summer 2026, the majority of the companies we would like to have sold them.

Thank you. Anders, you get another one here. And that is when -- Bengt or Anders, when do you expect to be below 3x in leverage? Well written 3x here.

Yes. of course, and this is depending on Peter's work here, more we acquire, a bit slower that will take. And if we don't acquire so much, it will go much faster. So -- but we're almost there. So it's not very far away in the future.

We have another one here. When are you planning to replace your SEK 800 billion bond? And how? And what is your view on the sustainability-linked targets for the bond?

Yes. To start with the bond matures in August 2027. But we have a possibility for some fair amount of extra penalties to make an early redemption in August next year. But we haven't decided if we'll go for that or say all the way to the final redemption. And when we redeem that one, and we will most probably replace it with one or more bonds to the same amount or some other amount that is a reasonable amount at that time, depends on our financial situation.

But when it comes to our sustainability linkage to the bond, it's a goal that goes all the way through 2026. And so we don't have a new goal before that. So before early 2027, we can set a new goal. So it depends if we would -- depending on when we replace this bond, if we will add another sustainability goal. But so far, we only have this one. And for you who may not remember that one is to reduce our CO2 intensity by emissions per turnover by 50% from '21 to '26.

This one -- I think this one is for you, but it's open. How will you ensure financial capacity over the coming years? And what will be the split between bonds, credit facilities, cash flows?

Yes. As I showed on the graph, we have still plenty of headroom in our financial credit facilities. So we don't need to put more either bonds or other credit arrangements in place for a number of years. So the balance will be more or less the same as today going forward, quite some time.

Actually, I think these were somewhat similar. So I took them away. I hope you guys are online are okay with that. It was some similar questions. Do we have any more questions from the floor? Because I know -- I guess you know we have a mingle -- oh, there's one. Here you go. Thank you.

[indiscernible]...

Can you just -- sorry, the microphone, can you just push it? Yes, there you go. So they can hear your question online.

Okay. Perfect. Yes. Linus here from Nordea. First of all, just a question here on the proceeds from the divestitures. Can you give us any valuation range that you're expecting? And in terms of priorities, will you delever? Or will you have it as headroom for M&A?

I can start with, say, the valuation. The valuation of the portfolio has been -- we try to focus and try to find new homes for these companies where it fits good. So we've been -- the initial discussion we have had has been quite good on the valuation side, actually. So it's between 5 and 6 roughly, if we're talking about the multiples. But I think from that perspective, it's important for us not to be too aggressive to sell it. We will have a high speed and try to divest them, but some is actually see a great value of the companies there. So from that perspective, it's quite good.

Yes. And the money, the proceeds itself will, of course, go into our cash accounts and Peter will soon have used them for new acquisitions. So -- but I mean, when it calculates KPIs, it's a net debt. So it will lower the net debt, of course, then as we sell those companies.

Did that answer your question? Yes?

Yes, it did. And just another question, if I may. You talked about Germany in the pipeline for the M&A. I was just wondering, why do you think you will be successful there when others have struggled? And also, what is the size roughly on the companies in the pipeline overall?

The size, I mean, it's in between the SEK 20 million and the SEK 50 million in EBIT. I would say that is also the average for the companies we have. So 800x that.

For Germany, we agree that it can be a challenging market. But the way we operate with the -- with the way we handle the companies also stand-alone, and we value the culture is very important in Germany because of the market and how it looks with a lot of family-owned businesses. So we're not saying it's not a challenge. It's different in Germany. But the way we operate, we think we can be successful there.

I can add to that as well that the previous countries we have entered into the U.K. and Italy, its data availability has been very high. Germany has always been a problem for us from a data perspective, but it's been opening up. So we can, from a sourcing perspective, look much more at the size and the margin, et cetera. So that's also important. We get more information now.

And we've also seen, thanks to other companies in the portfolio that has pinpointed attractive companies in Germany, and we have started discussion and it's been quite fruitful the discussions. So from that perspective, we also believe it's the right thing to do to try to enter it.

Thank you. More questions coming up here. Nobody is addressed, but I think it will probably be Anders or Bengt or Peter.

How much EBITDA contribution through M&A can we expect in 2026? Yes, it's Peter, given that you also aim to delever a bit. Will 2027 be the first year of proper M&A growth, you think? Maybe -- do you want to do that one?

I think the way we -- the way we model it at least, I think we need, say, like 5% in growth to get to the 15% over time. But of course, the growth is somewhat slower probably in next year, as Anders alluded to. So yes, I think that's the way we think about it. It very much relates to how we can deliver organically.

Yes, I like the way we mentioned it before. The engine is really the organic growth, and then we pick up M&A as fast as much as possible to be able to deliver on the 15%.

Thank you. There's a lot of questions from the same person. So with all the respect, I will take a question from somebody has not asked in the chat. And no, it's the same person again, okay. No, you're a lucky man. You're a lucky man. How do you ensure that M&A is done at lower valuations and at higher ROICs? Are there incentives now tied to this metric?

We don't have incentives linked to that directly. But of course, earn-outs is an incentive itself, of course, that has been very, very important for us. So I think it creates good alignment there to create value, absolutely.

But I think it's a very important thing for us that when you acquire a company and you put the earnout in and you tie the earn-out only to the EBIT growth, it's what we have seen in many cases, they drive it and they focus on it. But what we need to do as well then is to tie more of the working capital or the capital efficiency to the earn-outs as well.

And we don't want to complicate it too much for the entrepreneurs. They would like to have a simple target that they can reach. So we have all kind of tools to make that as simple as possible. How much dividend can you make to the owners depending on the yearly result and so on. So it's very clear for them. But again, we need to have some kind of metrics in longer earn-outs to improve capital efficiency as well. That's for sure.

I think this will be the final question actually that came in now, and it's for Anders. How many clusters have you identified within the portfolio?

So we don't actually look at the specific numbers. It's more about what you heard from the business area. It's a few here and there, and we're still exploring new ones. But I think right now, we have 3, 4 that are more structured, and we really see clear benefit from working together in.

Thank you. Thank you so much, and thank you for asking questions online. And if we don't have any more questions on the floor, but we will mingle so you might get some more questions when we have the drinks. So for you online, I would also like, if you want to see this again, you will find this on the website, the presentations on Sdiptech's website within short. But now it's Friday. So should we give them a warm hand. Thank you. And thank you also to you and Michael, the Head of Business areas.

And yes, I will invite everybody to drinks, Anders, right?

Perfect.

Welcome to Sdiptech Q2 2025 Report Presentation. [Operator Instructions]

Now I will hand the conference over to CEO, Anders Mattson; and CFO, Bengt Lejdstrom. Please go ahead.

Hello, everybody, and welcome to Sdiptech's presentation for the Second Quarter. My name is Anders Mattson, and I am, since 1st of June, the CEO of Sdiptech. And today, I also have with me our CFO, Bengt.

I will start with a short introduction to Sdiptech. Sdiptech acquire and develop niche businesses within the infrastructure sector. We look for high-quality product-based companies with a strong market position that can be protected.

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We divide the group into 4 segments: Supply Chain and Transportation; Energy and Electrification; Water and Bioeconomy; and Safety and Security. The key drivers for our business are an aging infrastructure that constantly needs improvement and upgrades. We foresee continuous investment into our selected segments to increase the efficiency and safety and sustainability in the societies. Geographically, we have a strong footprint in the Nordics, U.K. and Italy. We are today 41 companies in the group. And since 2017, we have grown profit by 32% in average per year.

So some highlights from the report of the second quarter. It was no doubt a challenging quarter for us. Net sales decreased with 4% to SEK 1,288 million. That is minus 4% organically, additional minus 4% due to currency effects, but plus 4%, thanks to new acquisition coming into the group. We had a stable demand in our core portfolio, which is good to see. But we had a lot of customers postponing orders and sales later into the year, and that is due to the overall uncertainties in the market.

If we look at adjusted EBITDA, it decreased with 10% to SEK 242 million in the quarter, minus 9% organic, additional minus 5% due to currency and plus 4% due to the new acquisition coming into the group. That resulted in an adjusted EBITDA margin of 18.8% compared to 20.1% last year, the same quarter. And adjusted EBITDA dropped, of course, as the result of the lower sales. We also had some high comparables due to specific project deliverables in quarter 2 last year. An example of that was strong deliveries into the Olympics, for example, last year.

Cash flow, SEK 121 million in cash flow, corresponding to only 45% in cash flow generation. That is, for us, a relatively low number, but it was affected by inventory buildup in specific companies that have orders and deliveries to come in the second half of the year.

So as a group, we are not happy with the developments in the last quarters. That is the reason why we have initiated a number of strategic actions to restore, very importantly, the organic growth, but also to improve a very important metric for us, the return on capital employed.

The first section is around the business area organization. We would like to increase experience and sector knowledge for our key segments that we work within. I have also decided to include the 4 heads of the business areas into the management team of Sdiptech going forward. We have recruited a new Head of Supply Chain & Transportation, starting in August. And another very important decision is that we have decided to

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Head of Energy and Electrification in the U.K., located in the U.K. It definitely makes sense for us to have a stronger footprint in the U.K. and also for the Energy and Electrification, which is a very important segment in the U.K. for us.

Second important strategic activity is portfolio divestment. We made a strategic shift in 2018, '19, where we said that we focus only on product-based companies, and we initiated a new investment criteria. For example, companies with -- should have at least 15% in EBIT margin to be able to join our group. We still have a number of companies that do not meet these requirements, and the group of companies represent roughly 15% of the sales and 5% of the adjusted EBITDA. And we have decided to divest these companies. We will report them separately from Q3. It will be a one-off effect of roughly SEK 400 million to SEK 500 million in goodwill revaluation.

And why are we doing this? The primary reason is to allocate capital more efficiently and according to our strategy, where we want to be. We would like to be able to focus more on a core portfolio, which looks very attractive if you're looking at the numbers later. And also, of course, for the future acquisitions to come. And we would like to be more strict on the acquisition criteria we have decided together in the group. And this is nothing new for us actually. We have already divested 8 units since 2021, primarily the service elevator businesses. So we are comfortable that we will manage this in a good way.

The third strategic initiative is around fine-tuning our strategy. We have a solid strategy in place, but we need to fine-tune it, and we need to set ambition for a partly new management team that we are building up now, especially to start in August. And it's also important to align the day-to-day operation with the long-term goals to see how we're going to reach the goals year-by-year.

So that's important topics for today. And I would like now to hand over to Bengt to more of the financial results for the quarter.

Thank you, Anders. Yes, and we will start to talk a little bit about our sales. In the quarter, as Anders is mentioning, we had a decrease all in all of the sales with 4%, which also was the organic decline, 4%. But many of our units had a very stable demand coming in, ticking in. And even though some companies see that customers are postponing or delaying their orders, the demand is still there.

So as many times before, when the situation occur, we know that the demand is out there and our project deliveries are important to our customers. So they will come sooner or later. But right now, it's a little bit of wait and see in some companies.

So as Anders mentioned, we had some extremely good performances last year, especially within the business area, water and bioeconomy as well as in the Energy and Electrification. And we will come back to that when we walk through the business areas in a little bit more detail.

But over time, we have had a very steady sales growth, 23% on a compound annual average. And of course, some of that coming from acquisitions. But as you see in the chart on the right-hand side, where these circles mentioned what the organic, excluding currency effects, have been, the organic growth has been in the sales year-on-year. So it's a combination of both successful organic delivery and successful acquisitions. And in the last 12 months, now as of last of June, we see a minus 3% in organic growth. But we're taking measures, as Anders was mentioning here to improve that number.

Looking into the sales split on the geographical dimension, it has been more or less stable over some time. We have roughly 45% coming in from U.K.-based customers. And that's also a reason why, as Anders was mentioning again, that we're looking for a new member to the management team coming from the U.K. since it's a very important geography for us.

Sweden is obviously reducing its part of the pie while exports are increasing as we acquire product-based companies. U.S. is, of course, an important geography to have a look at. And as previous quarters, we don't have that much sales. It's a few companies selling their products, software and hardware into the U.S. So far been able pretty much to mitigate any tariffs. So not a huge impact on that directly. It's more of these indirect effects we mentioned with a kind of wait-and-see approach for the bigger projects that some customers have.

Looking on the turnover by revenue type. The product sales is increasing slowly but steadily, while installation then is being reduced, especially since last year since we closed the business in a Swedish installation company and now also some more than is up for scrutiny in the program that Anders mentioned, divestments. So that share piece of the pie will also probably decrease.

We like installation if it's on our own products as we like service on our own products. So a lot of that service, the 25% is on our own product deliveries, which, of course, is very good when it comes to customer stickiness and retention.

Having a look then on the EBITA development, increased with 10% all in all, of which 9% was organic decline, but then acquisition, of course, contributed. We could see that those acquisitions had a big impact, especially for the safety and security area, where also some -- the other companies had good development. So all in all, we had a positive contribution on the profit from the safety and security business area. While on the supply chain and transportation and water and bioeconomy, we had a negative contribution, meaning that profits were lower than last year. Energy and Electrification was more or less flat versus last year. But we will comment that a little bit more.

So on the margin side, we saw a drop in the margins because of sales drop with fixed costs that happens. We get a lower EBIT margin. We also saw some cost increase on wages still. We mentioned that in the Q1 report because of the new legislation in the U.K. for minimum wages and social fees, and that was also an effect in Q2. We have reduced the number of employees to mitigate some of the volume decline in the companies. So the number of employees is less, but still the cost per employee has increased.

We continue to focus on initiatives that link to profitability. So a lot around pricing, procurement and then, of course, cost cutting or being very careful about costs all in all. So that will continue.

As with the sales development over time, we have had a good EBIT development, 32% on annual average over the years, both then coming from organic growth, as you see in the chart in these circles. A number of years having a very strong positive organic growth, but also, of course, then acquisitions.

Taking also a view then on cash flow. We see this quarter coming in lower than usual. And as Anders mentioned, we had a 45% cash conversion with SEK 121 million coming in, but it was impacted mainly then from an increase in working capital due to inventory buildups in companies that have strong deliveries in the second half, some of them seasonal type of companies, but also some other companies having good project sales. And also for this project-based sales, we saw some increase in revenue recognition. This also then hurts the working capital. But that will come in as cash soon enough. And so we're working on that, of course, to improve. The average over the last 12 months was 73%, which is in our span of some 70% to 90% on average that we should be within that band.

I could also mention then regarding cash flow that we had some heavy tax payments because of the good profits last year in some companies, we had to do some final payments on tax as well in this quarter. But for the last 12 months, we had around SEK 800 million coming in from our operations, which, of course, is good that we can spend the money on acquisitions and on other CapEx.

Looking on some additional metrics. We see the profit after tax declining, of course, then because of the lower results compared to last year, but also that last year had a very -- had a profit from a sale of a company, and that improved the numbers with SEK 12 million all in all as an effect on the profit after tax. But otherwise, it's also increased tax percentages all in all compared to last year with an increased number of profits coming.

[Audio Gap]

Countries. So that dilutes the profit after tax as the earnings per share as well a little bit.

Looking at the financial situation. Our financial net debt, which is all that we have, excluding the debt for conditional considerations, increased because we paid out some of these conditional considerations, which, of course, is good because that means that these companies have had a good development during the years we have owned them. So that increased quite a lot. But the total net debt, which includes these provisions for the conditional considerations didn't increase as much because that's more reflecting the result and new acquisitions coming in. So still a little bit high perhaps, but still very much under control, and we think a very comfortable level still.

Then finally, before handing back to Anders, some on the return on capital employed that has decreased since last year, mainly due to a lower result all in all, but also then because of adding some capital employed through the acquisitions. So of course, we're addressing that. And as was mentioned, that we will see next quarter, we will make a write-down on some of these goodwill and other material assets which, of course, will make the return on capital employed improve for the group.

But the business units themselves are strong, 57% on average for our businesses. The difference is, of course, all the assets that we add when we acquire companies, which is mainly then goodwill or other immaterial assets. So it's a big difference between the group level and the business units level. Of course, very important that the business units have a solid and good return on capital employed. That's what we have calculated with when we acquired the companies.

So with that, I hand back over to Anders.

Sorry, Bengt, I think you had one more slide there.

Yes, sorry. Yes, of course, in itself. As mentioned then that we saw a decline in some of these business areas and while Safety and Security improved, we saw specifically in the Supply Chain and Transportation, we saw this a little bit.

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The effect with postponed orders, which negatively impacted the business area. As we saw in the water and bioeconomy, we had all these high comparative figures in a number of business units as well in the Energy and Electrification. And there we have this Olympic game business unit, for example, with deliveries of temporary electricity equipment to all these events going on in Paris.

So all in all, the different business areas affected a little bit about the overall market, but also some very specific reasons for having a little bit less sales. And then, of course, acquisitions contributing to the different business areas.

On the right-hand side, you see the profit development and more or less the same reasonings behind the development on some lower sales affecting the margins, some high comparative figures, some one-offs last year, some wait and see in the market and some acquisitions then contributing. But overall, the demand situation looks cautiously promising for the future for the second half of the year. And the EBITA margins should be pretty stable at these levels at least.

So with that, I hand over to Anders.

Yes. Thank you, Bengt. So I would like to give you some more information around our strategic action to work with our current portfolio to refine the portfolio. And just to repeat why we are doing this, and that is to allocate the capital more efficiently for our long-term strategy, focus on our core portfolio, which we think is very attractive, and we would like to add future acquisition within the same type of business. And we would like to be more strict and adhere to our acquisition criteria.

So now we're going to try to look at the table, the pro forma, how it's going to look like after the divestment. If we look at the green line, that's the line summing up the core portfolio that will be Sdiptech going forward. So if we're looking at the adjusted EBITA from January to June 2025, we see an EBITA of SEK 521 million with a margin of 23.1%. That, we should compare to the red line, which is the sum of the companies that we would like to divest. That's SEK 15 million in adjusted EBITA, but with a margin of only 4.2%.

The gray line is the core operations, including the central cost. So that would mean that adjusted EBITA for the first half of the year would be SEK 481 million with a margin of 21.3%. And that is how we will report the core portfolio in the future in Q3 and forward.

What's important here as well, if we look at organic growth for the core portfolio, if we look at the first half year, last year compared to this year, we increased in organic sales, plus 0.4%, and minus 2.8% for the adjusted EBITA. That should be compared to minus 8% as we reported during the first half year with the current portfolio or the overall portfolio.

And as Bengt also mentioned, in connection with this, in the quarter 3, we will have a revaluation of our goodwill. We believe it's going to be around SEK 400 million to SEK 500 million. which, of course, will improve our return on capital employed going forward. And this is nothing we will wait to do

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Already started to divest or to initiate divestment. We have talked to the specific companies. We have started to talk to potentially new homes. We would like to be very careful about how to select new homes, how to start the discussions. So we are doing that in a structured way, so far it's going according to plan.

Now coming into the acquisition part. Year-to-date, we have already acquired SEK 40 million. We did that quarter 1. We didn't acquire anything in quarter 2, but we have a solid pipeline, and we expect to welcome new companies in second half of the year.

Our prioritized geographies is pretty much the same. It's U.K., Italy, Nordics, Netherlands, but we want to enter into Germany, which so far looks promising, and we do that with our existing team. We have not taken the step to recruit somebody in Germany because right now, we have a good team in place that can manage and handle potential targets and discussions in Germany as well.

And the last slide, before we go into the Q&A. This is a little bit of key takeaways from the presentation today. There's been a lot of information, both financially, but also for the future. But I think it's important to mention that we have a solid demand from our core portfolio. Many orders and sales have been postponed into Q3, Q4, but still, the demand is there. 95% of the profit comes from our core portfolio with some very strong underlying drivers. We mentioned a little bit the sales organic

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Plus 0.4%, showing a very strong portfolio. We are, as Bengt also mentioned, slightly optimistic about the recovery in the second half of the year for the total portfolio.

The ongoing strategic actions, of course, is very important now for the future. We're going to strengthen the business area team. We're adding more experience. We're adding presence in the U.K. Divestment of the companies that do not meet our criteria is -- will be accelerated, already started. And as I was also mentioning, we will look into fine-tuning our strategy, especially around setting the ambitions and the goals for the future.

And finally then, in regards to our acquisition pipeline. The pipeline looks attractive. We have our internal team that constantly meet and develop the pipeline and we look forward to welcoming new companies in the second half of the year.

And that was all from the presentation, and I think we go into the Q&A sessions now.

[Operator Instructions]

The next question comes from Max Bacco from SEB.

Perhaps starting with, I guess, the most pressing question here. I mean as you mentioned yourselves, the deliveries during the last 4 quarters has been quite soft, driven by a number of reasons. But you seem a bit more optimistic here for the second half of 2025, cautiously optimistic. You also mentioned that you built some inventory due to larger deliveries for the second half. How confident are you that it will look a bit better here in the second half? Is it based on actual order intake that will be delivered during the second half? Or is it more based on, let's say, loose dialogues with customers that are of more optimistic in nature? That's the first question.

Yes, I can start there. I think in -- yes, we don't have any evidence of exactly how strong we believe the second half year is going to be. But when we talk to many of the companies, the larger companies that have built up the inventory, they have talked to the customer, the customer foresee that they need the deliveries to be able to deliver themselves or to use them in project work that they already initiated.

So I would say we are, yes, we are pretty sure that this will happen because it is a chain of deliveries that needs to happen. And usually, many of the projects have already started. That's what I see when I talk to the major businesses in the portfolio.

Okay. Perfect. And then on the 2 questions on the divestments. You said that -- I mean it's progressing according to plan relating to the companies within other operations. Do you have any indication of what kind of timeline we should expect? Is it something that's going to happen during 2025? Or is it more a 2026 thing with the divestment of both basically the companies within other operations but also Metus?

Yes. So with -- according to plan, we are very early in this stage. So we have only talked to the MD or the leader in each and every company that will be divested, and we have started dialogue with potential buyers. So no, it will not happen during 2025. It will take longer than that, but it's hard to say how long it will take because, of course, we are careful about price versus who is the best buyer. We're not going to do any stupid things to sell too cheap here. Of course, we have some of the companies definitely have some core strategic values for another buyer. So we will be carefully looking into that.

But Metus, it's a different story. We are still with potential buyers, and we have nothing, let's say, nothing to share here today with a signed LOI or something like that. But yes, so conclusion or answer to the question is we will not stress it. It's very important for us to find the best possible home for the companies.

Okay. Perfect. And then the last question on the same topic. I mean, for Metus, we have seen that you have been required to do some restructuring and so on and so forth in order to be able to divest that company, which has, of course, unseen some cash flow, will, let's say, a bit smoother process with the companies within other operations. Are they good to go in the current conditions? Or will you will you need to take some costs as well in those companies in order to be able to sell them?

Yes. I think in specific to Metus, it was a complex organization, a different story. But some of the companies that are in the other operations that will be divested, we are doing, let's say, more of a turnaround or improvement actions to be able to come out on the other side to be able to sell them. So yes, it's -- but it's a few companies. Many of the companies are looking okay according to their business model. Again, we are not doing this because they are not performing financially. We are doing this because of a strategic shift.

So we have both companies delivering good, companies that are having some more challenging time due to the market development and relation to -- or linkage to the construction sector as well. So overall, we believe it's going to be a smoother journey to do that compared to Metus, definitely.

The next question comes from Simon from ABG.

So first of all, you may have said this in the presentation, but can you clarify a bit more exactly how you will report going forward now with the new divestments? Will it treat other operations as a separate segment? Or will it put that discontinued operations?

I can perhaps answer that. We will not report them in the same way as this Metus as a formal discontinued operations because that follows IFRS standards in detail

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Important, as you say, more as a separate segment. So we will show what is the results and development of the core portfolio, the 95% of the business of the profit currently as usual, with the 4 business areas, and then we will then comment and report on the other businesses as a whole. And that will be all with pro forma numbers, et cetera for some historic periods as well for all of these. So it will be more or less as its own business area, even though it's not treated as a business area in itself.

I see, I see. So you -- will you continue to sort of comment on the organic growth for the separate areas as you did in this report?

We welcome those type of KPIs, which is what we call alternative KPIs will be on the core portfolio. But we will, of course, also show the numbers for the profits and turnover for the whole group. But when it comes to focusing on the development, et cetera, and the return, et cetera, will be on the core portfolio explicitly.

I see. Then also on the divestments here, and you highlighted that you think it will be positive for return on capital that they have been basically diluting over time. Can you be a bit more specific on sort of the magnitude of that impact, do you think? And then also how those units have performed in terms of cash conversion, if they have been dilutive to cash conversion as well?

Yes. To start with the balance sheet, as mentioned here that we will do a revaluation of goodwill and other immaterial assets for these companies. And when they were acquired many years ago, they actually had a higher profit level and so and could defend a higher goodwill, et cetera, in the balance sheet. And so far, they have been part of business areas, and it's the businesses [ house ] that have to have to justify, so to speak, the goodwill and so, and that has never been a problem. We have a lot of headroom in that impairment testing.

But when you put these companies on their own, there is definitely reasons for writing off some of the goodwill and so because they cannot really protect those numbers. So that will be a one-off, a noncash item, a one-off effect when we look upon that. And we have indicated some SEK 400 million to SEK 500 million of write-down all in all. But of course, we will do that in detail during the quarter and very thoroughly in next coming report.

And if -- you have the numbers in the report here, how much the profits are without these companies, what the core is. And if you then reduce also the numbers of this write-down, and you get a smaller balance sheet. You will also have a higher return on capital employed all in all. So that will affect positively, but we don't want to say a definite number here since it will depend on these revaluation activities that we will be doing, but it will improve the return on capital employed for the whole group and for the core business specifically.

The next question comes from Martin Wahlstrom from Redeye.

I just have one question to add on the strategic overview. Comparing it to the core and the noncore, there seems to be quite large differences. And I was just wondering if you could elaborate a bit on how you went about kind of singling out what companies to divest? How do you ensure that you're not just kind of divesting companies that are currently performing poorly. So some reason on that?

Yes. No, I think it's very important that this is not an activity we do, companies are performing poorly. We have talked a lot since, as I mentioned a little bit before as well, since 2018/'19 when we looked into the strategy of Sdiptech going forward, and we decided to focus on product-based companies. And I think many of the company here are more service installation type of companies. They buy other products and they use them to install, quite low barriers to entry and hard to scale from a product perspective.

So from that perspective, it's been easy for us. We have these companies and how we look at them for a long time. And as we have mentioned before, we had actually divested a number of companies over the years. I think Frigotech was the last company we did last year. But now we are taking a bigger grip on the total, let's say, group of companies according to this analysis. So yes, for us, it's been pretty clear what companies to include in this group of companies.

[Operator Instructions]

There are no more questions at this time. So I hand the conference back to the speakers for any written questions and closing comments.

Yes, we have received some written questions in the chat. And one question here. It's regarding the expression we say, we demand more from ourselves as an organization. We say that in the CEO comment, and there are many challenges ahead. And the question is then how will the new strategic initiatives specifically enhance Sdiptech's ability to meet these challenges and the overall economic environment? Yes, please.

Yes. No, it's a good, it's a valid question. I've been thinking a lot of this one myself. I was heading up one of the business areas. And I think when you acquire a lot of companies

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haven't done the succession from the owners, it's actually pretty easy in a serial acquired world. The owners, they drive the business forward as they always have done very successfully. It actually demands a little bit more of an organization when you have done the succession, new people coming into the organization, who is taking those strategic actions, where to go, where do we dare to invest, when to say we stop, when we cut cost, all of those decisions is pretty clear for me that owners are very strong with that. And you need to make the succession happen.

We, from Sdiptech, leading the organization, we need to be there to support and to have an overview of the strategic agenda and there to say stop or go in some areas. So that's definitely an area where I think we can improve. Instead of looking at quarterly or monthly reports, looking at the EBIT and EBIT margin, that's pretty simple, more staying on top of that agenda, what's happening with the companies, what's happening with the market, where are we going and support the companies, not telling them what to do, support and push them.

So it requires a lot from us from the business area side, but that's also why we are looking to recruit more experienced people with some more knowledge in the specific win. So yes, it's a very good question, but it's actually more exciting as well for us working with the companies to take that view working with the companies.

I think, Anders, and as a follow-up here, do we have an anticipated timeline to see results from changes, the improvements that we're doing in the different units.

I think short term is -- what we mentioned short term is be actively pushing and talking to companies about price increases, cost adjustments. And I think we have done that in many of the companies that came in to 2025 with a tough market conditions and also some, yes, tough comparables. So that, I think we have already -- most of them we have already implemented, but the full effect will come perhaps end of this year.

The long term is taking, of course, a longer time. But scaling down or scaling down, making sure that we have a portfolio we believe in, we, as a business area, can work more and better with those companies as well for the long term. So that's not a short-term action for sure. That will take longer time to implement.

Right, Anders. And then we have a final written question here. I can answer that. I think it's, why was the contingent consideration payout high in this quarter when the underlying businesses performance has been weak?

Well, our earnout setups, the earn-out structure we have saying that the sellers of the company, they get perhaps some 70%, 80% of the enterprise value day one, and they will get the rest after 4 or 5 years if they perform and to

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quickly, that means they need to increase their profit by year for 4 or 5 years. Many, many times also above a certain threshold, perhaps 5% profit increase. That's what they must meet and exceed in order for them to get any additional consideration. But it's for 4, 5 years. So if you have one week year or a quarter or 2, does not perhaps affect the total amount that you pay out. And it's also that what we paid now in this quarter were some larger companies that have been and still are very successful in their development over these 4, 5 years they have been part of the group.

So that's why payouts of continued considerations can seem high, even though the exact development the last quarter or 2 or 3 hasn't shown that. But for the company itself, it's always a proof of that they have been very successful over the years with Sdiptech as a group.

And now I see it comes one more question, and that is regarding M&A activities. If we can scale up the M&A activities with the current organization and how many companies a year before needing to invest even more in the head office? If I understand that question correct.

Okay. I think we are geared as an M&A organization to handle more volumes from the M&A. We have our local heads out there in the different markets, and we have an internal M&A team feeding them with the sourcing. So right now, we do not see any problems increasing the number of deals we're going to do. It's more about being cautious and making sure, keeping those strict criteria, what we want to buy and not to pay too much to increase the balance sheet too much. Of course, that's the 2 more difficult task actually. But we have that under control. And as we said, definitely, we are looking forward to welcoming more companies in the second year now.

Yes. So thank you very much all for your written questions. I think we can do the final remarks, Anders.

Yes. Okay. So yes, thank you, everybody, for listening in, and good questions. This, I think, was all for us today. And it was an exciting quarter 2 report with, I think, important information, where we are going for the future, and we truly look forward to that. We're excited about that. So with that, I think we wish you all a happy weekend. Enjoy the summer, and see you next quarter. Thank you.

Thank you.