Good morning and a warm welcome to Boreo's year 2024 financial review webcast. My name is Kari Nerg, I'm the CEO of the firm and together with our CFO, Jesse Petäjä, we will recap the happenings of 2024 and more specifically the latest quarter of 2024. The agenda is briefly as follows, so I'll start looking at the entire year, painting a bit of the picture on the last five years, and then Jesse will take the review and discuss the Q4 events in a more specific manner. If you have any questions, as normal, please use the chat function which is made available through the platform. Starting off first with some key highlights of 2024. Overall, it was a challenging year for the firm. Our priorities during the year were primarily on working with our existing portfolio of 22 companies.
The overall themes and the general themes throughout the year were controlling costs, managing our balance sheet, focused on optimizing working capital and through that creating cash flow, and also continuing to invest where the opportunities for growth continue to be positive, continue to invest in organic growth throughout our portfolio. We are an acquisition-driven firm. We have completed in the last five years 17 acquisitions. In 2024, we did not complete any transactions due to priorities to maintain a solid financial standing. Basically looking at the numbers, 2024 represents, with the exception of the half a year result from Delfin Technologies and a nine-month result from an add-on acquisition to Muotikolmio, made in 2023, they represent basically organic development of our portfolio.
In 2024, our revenues declined quite drastically, primarily in construction-related businesses, so Putzmeister operations in three countries, as well as in some of the Finnish construction-oriented companies. In addition to that, also the development or the demand environment for some of our primary, quite significant share of our firm with industrial exposure on the demand and customer side were tough, resulting in overall a 17% decline of sales throughout the year. We managed to secure and defend our profitability through actions taken both on pricing and improving gross margins, but also significantly reducing fixed costs, and thereby achieved a EUR 6.8 million operational EBIT, 5.1% in relation to sales, which we think is a decent achievement in a tough environment.
Clearly, the positive part of not only 2024, but also the last two years, including 2023, was that we've been able to manage our balance sheet well and creating an operating cash flow of over EUR 20 million in the last two years, and now especially in the last quarter of 2024, a strong EUR 7 million operative cash flow. Our financial standing continues to not be where we exactly want it to be. Leverage is too elevated, even though it came down from Q3 2024, but now landing at the end of the year to 2.8x, measured looking at our leverage ratios on net debt divided by operational rolling 12-month EBITDA. This is something we continue to manage in the coming quarters and throughout the year, intend to improve and target to improve our financial standing. Brief look at our strategic targets.
As the headline says, we have work to do to reach the levels where we want to be. We do think that we have bottomed now in our profit generation. We came down in the last couple of years from roughly a level of EUR 10 million in operational EBIT down to roughly EUR 7 million now in FY 2024. We do expect 2024 to be a better year compared with 2024 on the back of the investment or the back of the actions we have taken in improving our cost competitiveness, taking cost out, and also the improved order books we've seen compared to last year.
However, if we look at the returns, return on capital employed being at 8x, 8%, and leverage being closer to 3x, taking into consideration that we have a EUR 20 million hybrid on our balance sheet, leverage is clearly too elevated compared to the position where we would like to be as a firm. Now, showing a couple of slides from the last five years, so developments from 2020 to 2024 and focusing on some of the key developments in the last year. As already mentioned, the big headlines, sales decline, gross margin decline in terms of absolute euros, but an improvement on gross margins from 28% to 30% in 2024, and a decrease of fixed costs roughly by EUR 2 million. That basically brings us, that brought us to the operational EBIT of EUR 6.8 million.
The most positive developments in the portfolio throughout the year were overall seen within our electronics business area, which improved profitability compared to 2023, especially Signal Solutions Nordic had an extremely strong second half of the year and was able to go above the expectations we had going in the year. Very developed, a positive year after a somewhat over-challenging 2023 with SSN. In a similar way with FNB, our timber truck mounting business in Sweden, we had a tough 2023, a really strong operational development thereafter throughout the latter part of 2023 already, but also now throughout 2024. Reaching record sales in 2024 and very importantly also being able to reduce working capital and thereby generating good cash flow in 2024. The challenges we experienced in the portfolio are primarily in the businesses which have been part of the firm for a long period of time.
The YE businesses, our electronic component trading businesses here in Finland, but also in the Baltic countries, machinery, and then our Putzmeister businesses with exposure on the construction market. Overall, a decline of over EUR 30 million out of these portfolio companies. There, on the other hand, we succeeded rather well in defending profits through cost efficiency measures, but also then on the balance sheet side, managing working cap well. One note I brought to the slide is the last comment there on the slide bottom right corner. I mean, if we look at the profitability levels in our portfolio, the portfolio is a healthy firm from a profitability point of view. Probably 1/3 of the companies operate at + 10% EBIT levels. The other 1/3 of the business is around 5%-10% EBIT levels.
A few closer, I mean, between 0% and 5% and only a few companies on the smaller side which generated a loss measured on EBIT terms. Even though overall the picture is not something we're happy with, the portfolio generates a + 7, roughly 7% operational EBIT in a tough market like that, which is a good sign of the quality of the portfolio and the improved trend it has also seen throughout the last couple of years. As already mentioned a few times, a very strong operative cash flow, not only in 2024, but also in 2023. Overall close to EUR 24 million operative cash flow in the last two years, basically largely driven by the fact that we reached our target. We've been communicating the last 12-15 months, I believe.
Basically, we were able to bring working capital to a level of EUR 25 million at year end 2024. We do expect in early 2025 some buildup of working capital to happen, but going into 2025, intend to maintain a well-optimized working capital throughout the portfolio. Returns, I mean, basically, I mean, we follow the two key metrics looking at the return profile. On the group side is return on capital employed and the return on trade working capital metric we use to measure all of our businesses in the group. Looking at, as Jesse will show later on, the electronics portfolio is operating at a very healthy + 50% return on trade working capital level, whereas now due to challenges with profitability on the technical trade side, our returns have come down quite significantly in 2024.
The balance sheet is managed quite rather properly, but the key focus is clearly on investing in growth, creating and aiming to create sales growth, and through that then also improving profitability, which in turn then will improve the return profile going forward as well. Last two slides, we brought something new, I think, which we have not looked at before. Now we start to have some years of track record, so we start to be able to also sort of look at somewhat of larger trends and longer trends and how we not only have developed in terms of P&L and balance sheet, but then also looking at developments and our track record from a capital allocation point of view.
Basically here on this slide, you see a summary of cash outflows or cash outflows and cash inflows starting from the mid of 2020, which basically we see as a start of the Boreo era. Starting from the Muotikolmi acquisition we did in Q3 2020, we have altogether invested around EUR 50 million to acquisitions, including the earn-out payments we have made throughout the years. Looking at the uses of cash, CapEx does not represent too big of a share of our cash outflows, given that we are a capital light firm overall and the requirements to make capital expenditure are quite modest. Looking at basically the funding side of things, around closer to EUR 40 million has been funded with operative cash flow. We have also issued equity as part of transactions. We also made a personnel share issue in 2025.
Those combined close to EUR 6 million from a financing point of view are the sources of cash and what we've used. At the end of 2024, we still had EUR 24 million of two hybrid instruments on our balance sheet, but now as we speak, February 30th , we paid the EUR 4 million, the old hybrid back. Now basically continuing with the EUR 20 million hybrid on our balance sheet. If we look at the desired state and our goal, clearly the primary goal is to be able to fund majority of acquisitions and all other cash outflows with operative cash flow. Why indebtedness has gone up is primarily due to the fact that compared to our own expectations, it is basically the loss of our Russian business and the impacts thereafter, which put pressure on our balance sheet from late 2022 onwards.
In any case, a good sign of the fact that the portfolio has generated operative cash flow, which we've, as we should have been, primarily allocating into acquisitions throughout the last 4-5 years. Finally, before handing over to Jesse for Q4 review, looking at the acquisition track related to the EUR 50 million roughly invested since Q2 2020. I mean, if you look at in 2024, in terms of operational EBIT, the new companies you see being acquired since 2020 generated roughly a bit over EUR 5 million of operational EBIT in year 2024. Nowadays, already, especially now the more cyclical part of our business being the heritage portfolio, basically the acquisitions we made have supported our profit generations and the companies have supported our profit generation very significantly.
Looking at the return side of things, in average, looking at three-year average returns, we have generated a return of 15% for the EUR 50 million invested throughout the last years. Not quite where we expected to be. The multiple or the way of looking at it, the return expectation has been at 20%. Now we are at 15%. However, once market conditions improve and the development actions we're taking in the companies, they start to kick in over time, we do expect that once we look at these sort of graphs in some years down the line, we have a good chance of reaching those initial investment targets we have set at the point of acquisitions.
Overall, a rather decent track of acquiring companies, being able to operate them, transform from an entrepreneurial world to continuing in an entrepreneurial world, but in a different ownership setup and also then creating confidence of the fact that the business model works and we are able to allocate capital with good expected returns for investments. That is it from my side, and I hand over to Jesse for Q4 review, please.
Yes, thank you. Looking at Q4 a bit more closely, in general, the quarter went quite as we expected. After several weaker quarters, we returned to growth. Net sales grew by roughly 6% from the comparison period. Gross margin levels were a bit lower in Q4 due to some higher volume deliveries, but EBIT was at EUR 2.1 million, which was on the level of Q4 2023.
This was in addition to the sales growth supported by our cost measures, which we took earlier in the year, which in Q4 realized at roughly EUR 800,000 in lower fixed costs compared to the previous year. In addition to decent profit generation, we also managed to generate strong operational cash flows of roughly EUR 7 million. This was supported by our working capital management. We achieved our targets for inventory levels and bringing working capital down to year end. We were at EUR 25.5 million. This increased profitability and then strong cash flows also decreased the leverage from the previous quarter. As Kari mentioned earlier, the level is still elevated at 2.8x .
If we then look at the trading outlook and order books, order books decreased slightly from the previous quarter, but looking at the comparison period a year ago, we are at significantly higher levels going into 2025. We had some sizable orders postponed to 2025, which we expect will materialize in the first half of the year as well. If we look closer on the business area levels, electronics, they had a very strong end of the year. Their sales growth was 31% compared to the previous quarter in 2023 on the comparable quarter. This was largely due to SSN, as Kari mentioned. They had significant investments from their largest customer materializing. Then Milcon had a very strong year, both full year compared to 2023 and quarter four also achieved net sales growth compared to the year 2023.
In general, Milcon, we expect this will continue going into 2025 as well with strong demand on the defense industry side. Margins, as said, they were a bit lower on the group level, and this comes largely through the electronics side of the business where SSN had the high volume deliveries in the last quarter. The business area managed to reach 8.5% in EBIT margins, which was a very strong level. EBIT itself was EUR 1.7 million in euro terms, which represented a growth of almost 50% from the comparison period. This shows in the rolling 12-month EBIT figures then in the bottom right corner. The profitability has increased on a rolling basis, and then combined with successful working capital management, the return on trade working capital has increased quite meaningfully from 43% to roughly 52% in Q4.
If we look at businesses outside of SSN and Milcon, the performance was a bit varied in Q4. YE businesses, for example, Finland exceeded forecasts in the last quarter, but had a challenging year in total in a difficult environment. Especially the Baltic countries continued facing difficult market conditions and continued with decreasing sales compared to the comparison periods. There we do not see any immediate changes in the operating environment, but the companies have done a good job of managing working capital in these environments.
Due to these operating challenges and then a broader review of operations, we in Tallinn or our Estonian operations, we closed our consumer business and did a reorganization of YE International in Estonia, and this resulted in decreased need for space for the company to operate in, and we have initiated a sales process of the company on premises in Tallinn, which we expect will materialize in the coming months. For the other businesses, still varied, no return, underperforming in products meeting expectations. Delfin, our health technology company, had a challenging quarter, but the company continued its product platform reform, which was initiated last year. They've done work with renewing their global distribution network, continued developing their selected future strategic paths, and in general have a quite positive outlook going forward with the opportunities with the business.
As a whole, electronics performed well for both the Q4 and full year. On the other hand, if we look at technical trade, we had a modest performance in the last quarter, challenging operating environment continued. Sales declined by roughly 11% compared to Q4 2023. As Kari mentioned, for the full year as well, this was largely due to the machinery businesses and Putzmeister businesses. Here, profitability for the business area reached 4.5%. This was reflected also in the quarter-to-quarter results, which was EUR 900,000 for Q4 for the total. This was roughly a 45% decrease from the comparison period. Really tough quarter.
If you look at the R12 rolling EBIT figures, these have been declining this year and reflected in the return on trade working capital, which was at 24% at year end, even though the business area here as well did a very good job with working capital management and bringing inventories down to our targeted levels. On a more business unit-specific side, the Putzmeister business is suffering still in Finland from a tough market. This was both in Q4 and during the whole year. We expect the demand outlook to remain uncertain going forward as well. Sweden fell a bit below expectations in Q4, but had a solid year all in all. They defended profitability very well through their strong aftermarket sales. They have developed a strong order book for 2025, part of which we have communicated earlier, large orders from a customer.
In other businesses, FNB was mentioned in Kari's overview. They had a very successful end of the year as well. High sales in the quarter and all-time high sales for the full year 2024. They have managed to get their ERP implementation done, which has presented challenges previously. For the operations, they've done a successful reduction of inventory levels and developed a solid order book into 2025, in addition to already reaching record higher sales in 2024. For the other businesses, going quickly through the largest business unit in the business area, Machinery Power performed decently in Q4. Machinery also completed the separation of the metal machining business into its own unit, Machinery MT, which had a challenging quarter at the year end. This was as opposed to Fronius, which is in the welding product business.
They have also had a challenging environment, but performed well in the last quarter and have been defending profitability during the year very well, also due to their strong market position. On other businesses, Machinery Construction, for example, performed up to expectations, but the environment is very tough. Muotikolmi construction side, same thing. They had a tough Q4, and demand outlook still continues to be quite moderate, but Muotikolmi did a good job during the full year defending profitability as well, both on the business sales mix side, defending margins, and then cost measures during the year. The remaining businesses, varied performance, Filterit performing up to expectations and taking growth investments, finding good opportunities to grow the business going forward. J-Matic having a tough year due to demand from their largest customer, but also working on expanding the business and finding good opportunities. ESKP, similar.
Q4 was a bit tougher than the full year in whole, but they have also successfully won new business to expand going into 2025. In general, looking at the two business areas, electronics has been strong this year, and technical trade has had a tougher operating environment, largely due to Putzmeister businesses and then machinery and the construction-related stuff. If we then jump over and take a look at our financial position, our debt facilities, to be more accurate, we in December agreed to extend our credit facilities by one year, the maturity from 2026 to 2027, and simultaneously agreed to postpone loan repayments of roughly EUR 2.5 million from 2025 to 2027. Now at the year end 2024, we had a liquidity of EUR 24.5 million, of which EUR 9.7 million was cash, and the remainder was unused short-term credit facilities.
Going into 2025, we have a scheduled debt repayment of EUR 2.5 million. As Kari mentioned, and we notified, we have redeemed EUR 4 million of the old hybrid on February 10th, which was originally issued in 2022. Now we then have our maturity leading towards 2027, where we have at that point EUR 60 million left of our term loan, our acquisition facility, of which EUR 6.5 million is of use today. We have a reset date of the new hybrid, and there is a revolving credit facility up there showing us EUR 4 million, which is unused as of today. If you look at the whole facilities, which we have EUR 73 million of at the year end, EUR 54 million was in use, which includes EUR 24 million of the hybrids, EUR 4 million which now was redeemed.
Moving onwards into our outlook going forward, order books, as mentioned, coming into 2025, we are at significantly higher levels than in the previous year, so a decent start to the new year. The cost measures we have taken during the year will support operational improvement on an annual basis. We have lowered fixed costs by roughly EUR 2 million, and then we have continued positive outlooks in several of our portfolio companies when they have interesting opportunities to grow that meet our criteria, and the companies have been developing these even during the year where our focus has been to focus on profitability and working capital management. To summarize, the message is the same as in Q3. In the short term, we continue executing on our back-to-growth plan. We have successfully managed the cost programs. We have managed the working capital release. Reorganizations are completed.
We continue investing and developing our existing companies where we have opportunities to grow with projects that meet our criteria, and then where we see that companies do not meet our criteria in the short or midterm, we continue to evaluate if we do reorganizations, which we have communicated that we are willing to do if the case be so. That's it from my part for Q4.
Okay, thank you. Thank you, Jesse. I think there are some questions. There is a new platform in use, I think not only in our case, but we try and cope with it. Looking at questions here, not sure if you see them, but we'll go through them one by one. First question is, you've done reads like this. You've done some OpEx investments, including recruitments.
Can you give some indication of the net impact from the cost-cut actions and additional spending when thinking of 2025 compared to the year-end 2024 situation? Yes, it is correct that recruitments have been taken, I mean, partially already at the end of 2024, but now going into 2025 as well. Some examples, including, for example, Delfin Technologies during Q4, investments there into organization. Same thing with Machinery's auxiliary power business, where the demand outlook on the back of data center industry developments and security of supply topics, for example, these sort of items and actions we've taken to prepare for growth. It is partially now going into 2025. There is some pickup and overall inflation picking up to a certain extent when it comes to personnel costs, especially. Of course, in a year like 2024, the level of compensation bonuses or similar have also adjusted downward.
Going into 2025, there will be provisions on the balance sheet going forward, expecting for somewhat different performance as compared to 2024. There is some pickup, definitely not back to the levels where we were looking at fixed costs in total, but let's say increase of fixed costs overall is something we expect to happen in 2025. If, at the other hand, the market would not support us to the extent that we expect at this stage, then of course, there's always an ability to flex downwards as well. That broadly, I believe, answers the question. The second question is that, do you foresee the significantly better development of SSN continuing this year? What does their order book look like? Overall, the outlook is positive, especially in Poland and in the Finnish market.
The outlook is rather positive, somewhat more challenging looking at the U.S. market and Sweden, but overall, as SSN group, rather positive. We do see that there is a chance to continue operating close to levels of where we were in 2024, which is closer to levels of 2022 as well and 2021, which was strong as opposed to a tougher 2023 we had in between. Looking at phasing and so forth, Q1, there was a certain backlog that was brought in successfully in Q4 2024, taking something out from Q1 now 2025. We do expect, as in 2024 as well, that the performance of SSN will gradually improve during the year. There is a third question of what kind of working capital buildup do we expect in the near future?
I mean, I think in general, I would say that if we would remain close to the current activity levels where the business is running from a net sales point of view, we're looking at a couple of million EUR trade working capital swings in the business. Of course, some timings of larger deliveries and machines can deviate and increase the swings as well. The EUR 25 million mark is roughly, I mean, we don't see significant opportunities with this portfolio to squeeze much more without jeopardizing our ability to serve our customers well. Basically, I would see in the beginning of the year some buildup as we communicate it to be happening.
I think it will obviously grow a bit once we hit the growth we target, but I think in general, we run a tighter ship now, so the absolute or the relative level will be lower going forward than has been historically.
Yes, yes, for sure. Continuing, can you provide an update on the timing of Putzmeister deliveries in Sweden? As we see the world today, there is a possibility that first deliveries will happen during Q1. Now looking at the delivery schedules, the first deliveries of a significant batch we won would be timed during Q2 and Q3 this year. However, due to challenges on the supply of chassis to the pumps we are about to deliver, it has taken some time, and it is not 100% certain yet what the timing will be.
As we speak, hopefully starting from Q1, then going into Q2 and Q3, being able to complete already a good sizable chunk of those deliveries. We will continue. I think now we're coming into electronics-related questions. The question goes, your electronics sales increased significantly in Q4, especially driven by a couple of companies. Could you comment that a bit more, was there something exceptional? For example, SSN was quite much in 2024. Will this level continue? And do we see this demand level? I commented already part of that, SSN. Looking at Q4, Milcon has historically been a company that has always been generating the majority of its profits in the second half of the year, and especially going into Q4. This happened as well this year. There is clear tendency to that with SSN, which was now a major contributor to the result.
There's no similar type of typical seasonality in the business, but it's more on how timings of investments will happen in different years. Overall, I would comment that the outlook for electronics businesses is quite stable. Positive signs on the defense side, in particular, the industry side continues to be stable. We do not see a decline, but not either a broad positive trend as we speak, looking at the market. Given that we have somewhat better order books compared to order books which are in the level of the last six months roughly, that provides us some confidence for the performance in 2025. A detailed question on Baltic consumer electronic businesses: how visible will this be in sales? It is not material. You cannot, so small importance in terms of profit and loss statement, that it is something I would advise not to consider.
The impact is more on the balance sheet side, as being able to reduce working capital as a result of ending that business and lowering inventories, which we have already done to quite a good extent so far. This question on order books still continuing. How much are we up? How much of the growth in order book on a year-on-year basis is the PM business? It plays a role. It has a good share of that, but it's not the entire growth. We do see overall in the portfolio a positive development. Order books are up in both business areas, excluding PM Nordic. Electronics up versus Q4 2023, and also technical trade up if PM Nordic is excluded. On the financing side, the question to Jesse, how did the changes in debt repayment schedules affect your debt conditions? Does this bring increased costs?
Did covenants change?
Yes. As you most well know, we do not comment on our specific covenants and debt conditions, but the changes did not affect the current debt terms we have. No material effects.
On the cost side, no changes there. Always some cost related to topics of changes as part of senior facility agreements, but not going forward. Rather one-time impacts. There is a question on fixed expenses developing 2025. I think I answered that question already before. Increase versus 2024, but not back to 2023 levels. Last question, which we have here, are there businesses where you still see demand going downwards? Not really. I think the sharpest declines have been seen, I mean, especially on the construction side where it has been tough in all markets.
If we look at the situation now, basically our expectation is that we are seeing growth in these businesses, even though modest in some of the cases, but anyways, growth going forward. I do not think we have any single business that comes in the portfolio where the expectation would be or the signs as we see the world today that there would be demand going downwards. Of course, there is plenty of uncertainty in the world, and things might happen during the year, but overall, that gives a feeling that sort of there is a basis to believe that we would have bottomed in terms of demand now. Let's hope for the best and continue executing on things we can influence. I think that was all. If there are no new questions, then we would, as always, thank you for taking the time.
In case of any additional questions, just feel free to reach out directly. I appreciate the time, and all the best for 2025 when we speak again latest after the Q1 results are out. Thank you.
Thank you.