Good morning, from the Boreo headquarters, and welcome to the Q4 2025 Results Presentation. I will start the session here shortly briefing on the announcements that we made earlier this week. So, following the press releases and communication from Q4 2025, our new CEO, Tuomas Kahri, has been announced to start in his position now in the beginning of April 2026, so basically in one and a half months' time. In addition to Tuomas joining the firm as a CEO, he will also lead one of our two business areas, which is the Technical Trade Business Area.
Following the changes in communication, the Management Team from first of April 2026 onwards will consist of four individuals: Tuomas as the CEO and Head of Technical Trade Business Area, Mari Katara as before, as the responsible for people and sustainability topics, Tomi Sundberg of the Electronics Business Area, and Richard Karlsson as a SVP of the Technical Trade Business. So just to clarify briefly, there's been a few discussions in investor forums on this. Basically, with regards to the company-related responsibilities from the group side, the changes Tuomas will head in the future, in addition to being responsible of the entire Technical Trade Business Area, a few businesses in the portfolio, and so he will be chairing those companies.
On the Electronics Business Area side, it is Tomi Sundberg, and also Joni Sollo, our Vice President in, in the Electronics Business Area, who both together chair the electronics businesses. And then on the Technical Trade side, in addition to Tuomas and Richard covering roughly half of our companies within the business area, it is the two gentlemen, one called Joonas Korkiakoski, the existing or the current Managing Director of Filterit, who's been promoted as the Vice President of Technical Trade, and Mihkel Tasa in Estonia, the Managing Director of our Agent Nordic business, who are the Chairman of our businesses. So this just as a clarification of the responsibilities following the changes announced.
In addition to the changes related to Tuomas and the management team, we've appointed... The company has decided not to recruit a CFO for the time being, following the coming departure of Jesse from the firm. We've appointed a gentleman called Rafael Osmanov as an Interim Head of M&A and Financing in the Head of M&A and Financing position. Sami Hanerva, who's been with us since year 2020, responsible for our, among other things, our external financial reporting to date. There are additional, let's say, responsibilities for Sami, covering also internal reporting and other items in the future.
So these are very much the changes related to the organization on the group side that have been communicated, and the organization is eagerly waiting for Tuomas to join and for the new leadership team to take the company forward to the next phase of growth. With that said, we continue to the presentation. I will recap the 2025 year as a whole, briefly the key highlights there. Yes, and we continue with some specific comments on Q4 2025, and also related more in-depth related to our business areas and businesses. And then I will end up with a couple of words on the outlook for 2026.
And then, as usual, we will finally take questions that you can ask during the session. Moving on, once we get the slides working again. So year 2025, in brief, we're happy to say that we were able to return Boreo back to growth following a challenging year 2024. So growth of sales 40%, increase of operational EBIT by 17%, is a strong result in continued challenging operating environment. In addition to improved revenue and profitability developments, we continued to generate strong operative cash flow.
So altogether, if you look at our track record in the last five years of managing our balance sheet and working capital, we continue to successfully manage the balance sheets over the cash conversion of 83%. With the support of the leverage... With the support of improved earnings, and also the financing arrangement we completed together with a Norwegian insurance company Protector, the EUR 10 million hybrid convertible bond. Our financial position improved significantly in the last 12 months. And now excluding for the hybrid, two hybrid instruments we have on the balance sheet, the net debt to operational EBITDA stands at 2.1x at the end of 2025.
Following a no acquisition year in 2024, we're also pleased to return back to executing growth via acquisitions and buying two companies. First, in Q2, the acquisition of YERS.
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It's okay. Now we are back on track. Apologies for that, and a note for the new CEO that maybe you can do some improvements going forward for these sessions as well. So I was in the middle of commenting on our long-term track record on strategic targets. So last 5 years, if you look at that, we've been growing profits on an average 17% basis. So above our 15% target. However, if we look at our capital efficiency targets and leverage, we have a financial standing. We have work to do.
The drivers and the playbook in improving returns in our situation, primarily going forward, will be around being able to grow the business, grow profits. The balance sheet, even though it does continue to provide us with opportunities to optimize our balance sheet to a certain extent, I would generally say that we're managing the balance sheet in a rather good way in the firm as today. Definitely going forward, the focus will be primarily around creating growth and growth of sales, and through that, improvement of earnings as well.
With regards to 25 still, if we look at how we managed to improve profits by 17%, that's primarily driven by the 14% sales growth, of which 11% was organic. So looking at the contribution from... We did see a 3% contribution to the sales growth from the acquired 2 businesses. However, due to mainly the integration process ongoing within the YERS business, there was pretty much no additional profit coming out of these two acquisitions.
So going forward, as we're getting stuff in order and processes in order within the newly established YERS business in particular, we do expect for 2026 and a gradually improving performance of that new platform, which I think is nicely set up for long-term success. The sales and profit improvement both was driven by strongly our by our Technical Trade Business area. In particular, there were companies, the largest business machinery, the other spun-off business from the old machinery, Machinery MT, and the entire Putzmeister business portfolio that improved trading in the course of 2026. In addition to being able to,
I mean, having been able to record sales growth, we were able to continue improving our gross margin profile. So, extremely pleased to see the long-term development, where you see a drastic uplift of the margins of gross margins in the last years. Primarily, of course, related and due to having acquired businesses at higher margins, so an improved quality of businesses within Boreo umbrella, due to the capital allocation and investment criteria we put in place in the last years. In addition to that, we've done, as you might remember from the history, quite a lot of stop and accelerate decisions, so to say, within the portfolio and within our companies.
We closed down low-margin businesses, done decisions to invest in growth in businesses with higher quality service, higher quality higher margins in general. So pleased to see that this trend has been positive in the last years. Now, of course, there's some impact of the sales mix as well. We will hopefully, in the coming years, see an increasing volume of higher and large volume deliveries of machines in certain businesses. And if that's the case, then those businesses will dilute the gross margin somewhat, but definitely not expecting to go back to the historical levels, but continue to operate with this existing portfolio close to the 30% mark there.
As I already said in the beginning, I mean, looking at cash generation in the last 5 years, we're close to the 6 years here all together. We've generated operative cash flow close to the total sum of operational EBIT generated during this period. So quite a strong track record there in managing mainly working capital. Now, at the end of 2025, net working capital stood at roughly EUR 29 million. We expect there to be some optimization to be done going forward as well. Of course, then depending on our ability to grow the business, there's some investment that needs to be carried out to inventories as well.
But we do expect us to be able to continue managing balance sheet quite prudently. Two slides which have a bit more of a longer-term perspective. I wanted to note here again that, I mean, following the return to M&A with the two priorly mentioned acquisitions, we've now deployed roughly EUR 50 million of capital into acquiring or into acquisitions the last five and a half years. Even though we're not quite there where we expect it to be from a return point of view at this stage with regards to these acquisitions, we've generated in tough environment roughly a +15% average return for these acquisitions.
Going forward, looking at the positive outlooks, for example, for our defense business, Milcon, Filterit, Delfin Technologies, and generally a stable portfolio and good portfolio of companies we've acquired. I think there's a clear potential in the future also to post quite a lot of improved return metrics as well. So the second of the two, or the one of the two value creation engines here, the allocation of capital to buying companies at reasonable valuations with high quality.
Characteristics, I think, this is a good showcase that even with all what has happened here in Finnish and Baltic economies in the last years, we've done a rather good job in creating returns for the capital invested. And finally, before turning over to Jesse, a brief look to the capital allocation track. So you can see from here that the big from a uses and sources of capital point of view are basically the two big dots there. So the 50 plus 50 million EUR from an EV point of view deployed to acquisitions, which has been primarily funded by the operating cash flow of the businesses, so the + EUR 50 million in the last 5.5 years.
In addition to that, mainly due to the losses related to the loss of our Russian business and challenges, we tapped into and strengthened the balance sheet through the hybrid instruments. And I think going forward, definitely the objective is to arrive into a situation by further deleveraging and strengthening the balance sheet to be able to fund more and more of the growth, the acquisitive growth, through cash flows of the business. But looking at all that, I'm impressed to see that we've been able to now in the last years to improve or increase the importance of operating cash flow in financing the growth initiatives as well.
With that said, yes, please take over and then review the Q4 part.
Thank you. So a brief look on the Q4 financials. This was our fifth consecutive quarter with organic sales growth. Sales being EUR 46.3 million in the quarter, which represents a growth of 18% from the previous year. Of this, 12% was organic growth, which is a very good performance from the portfolio. Gross margins were at 28%, slightly down from last year. This was mainly due to sales mix and some larger deliveries in the Technical Trade business. Operationally, EBIT at EUR 2.8 million, very strong, 33% growth from last year, with also margins improving up to 6%, on an EBIT level.
This also, as Kari mentioned, for the full year, on the cash flow basis, we had a very strong cash conversion of 176%, which was supported by a reduction of net working capital of close to EUR 3 million in the last quarter. On top of this, order books also continued growing, both compared to the previous quarter and then last year's Q4, and we are seeing signs of some improvement in the industrial side for the demand there, while the construction sector continues to be on the slow side, at least in our portfolio and distribution businesses.
On the return on capital employed, we also had an improvement up to 8.8% for the last 12 months, and return on trade working capital, due to the increased profits and management of working capital, has also increased to 27.2%. Leverage, as Kari mentioned, due to increasing profitability and a strong cash generation, is going to a right direction then combined with the convertible hybrid that we did during the summer in 2025. Then if we look at the business areas on a closer level, we have a bit of a division here, how Q4 went for the business areas. So Electronics defended their profitability somewhat despite a decrease in sales. So sales decreased by roughly 13%, from last year, being at EUR 17.2 million.
This is mainly driven by lower sales at SSN, which had a very strong Q4 in 2024. Operationally, EBIT similarly at EUR 1 million, with the EBIT margin decreasing to 5.8%. Despite this, the business area had a quite solid working capital management during the quarter and the year return on trade working capital being at a 44% level. And on a business side, Milcon still performing up to expectations, and SSN continuing with the solid performance, with both of them expecting a positive 2026 development as well. The short-term outlook in general for the business area is stable, although there's uncertainties in the environment, and we see that in some of our customers in the broader sense.
Order books, on the other hand, on a positive side, continued increasing from both Q3 and last year, which will then support us going into 2026. The business area is implementing efficiency measures, which we see continuing supporting profitability going into 2026, taking into account that we have some investments in H1 coming up in electronics involving ERP... ERP projects and such, which will somewhat be visible on a short term, but improve profitability for the business area in general going forward. Then if we take a look at Technical Trade , on the other hand, which had a very strong sales growth, significant increase in profitability. So sales grew by roughly 50% up to EUR 29 million.
This was driven by a strong performance in the whole business area in general, but especially due to Machinery, Machinery MT, and the Putzmeister businesses having strong deliveries in at the end of the year. Operationally, EBIT very strong, EUR 2.2 million, grew by 143% from last year, and EBIT margin similarly increasing to 7.4%. The business area has also, due to the increased profits and then well-managed working capital, increased return on trade working capital to 30% by the end of the year. In general, the positive performance comes from several of our businesses, but especially the companies serving process and mechanical engineering industries performed very well, and the profitability improved progressively towards the end of the year.
Order book side, similar story to electronics, grew from both Q3 and Q4 from last year. Here we had especially strong growth in order books for both machinery and PM Nordic into 2026, with some larger deliveries being weighed towards the end of the year or H2 2026. Short-term outlook, in general, overall reasonable, but there's progressive improvement in different clusters and sectors within the business area, which are developing very well. As mentioned, the construction sector is coming back a bit slower. Finally, for our Q4 recap, a revisit to our financial position. This is unchanged from Q3.
So we have total facilities of EUR 76 million in use or at our hands, and 59 million of this is in use, excluding some commercial guarantees and credit facilities in some of our subsidiaries. But from these, our senior debt has maturity dates in 2028. As discussed in previous quarters, this was rolled over from 2027. And then our main focus for the financing in the coming year and year and a half is our EUR 20 million hybrid, which has a reset date in Q1 2027. But overall, the liquidity position is solid, on a solid basis going into 2026, and our financial facilities are in a good place.
We have EUR 5 million of debt repayments coming up in 2026, supported by a strong cash flow generation and good liquidity position. That's it for Q4.
Okay, thanks, Jesse. And we will, before going into questions which have been posted now, and I've published all of them in the portal as well. To sum up the outlook, which we both sort of commented here. So I mean, we see that the position going into 2026 is clearly better than the year 2025. The order books, our order books, as Jesse mentioned, in both of the business areas, are stronger, compared with the situation a year ago.
Also, the same goes comparing that to the last quarters. We do... I mean, generally, the market conditions are, I would say, still not, I mean, not close to being good, but it depends. In general, the challenging environment and modesty, I think, is there for the Finnish economy and the Baltic economies as well. We do have the positive, we do have— We are positioned in certain niches where the development is really strong, namely the defense industry driving a strong development at Milcon especially, but also a bunch of other businesses as well. For example, machinery, our metal industry-related businesses here in Finland.
On the other hand, construction sector, it continues to be tough. And for example, the outlook here in Finland that doesn't seem too promising for this year. Summing that up, we do see a solid foundation for earnings improvement in 2026. An important comment goes around the weighting of our order books. So it is from looking at the last 5-6-year history, I think there is a higher than normal weighting of the order books toward the second half of this year. These orders relate to primarily Technical Trade ?
... business area businesses, the Putzmeister businesses, machinery, MT, and other companies as well. When we couple this with the mentioned ERP renewal projects and the costs attached to those, which we're quoting roughly EUR 500,000 related to these projects, this will. The way we see the world from the company side today is that the earnings improvement is expected to be weighted more toward the end of the year. With regards to priorities, clearly, the focus here, as always, is in developing our existing businesses to continue to support and allocate resource also from the group side in the highest potential situations and companies where we can generate earnings growth.
This is something where we are, I think in a good position with regards to the quality of management in our business and the work done in the recent years to sort of improve the quality of the portfolio. De-leveraging is a priority, considering the upcoming refinancing exercise that will be there for therefore, in the short run, and thereby, when looking at new acquisition targets, it's always in this situation important to make sure the company is well-positioned toward the refinancing as well.
But all in all, I think, given this will be the last results update from both of us, I mean, we're pleased with the situation of the company, having been able to bring the firm back to a good situation, I would say. The growth prospects are there, and then I think, with Tuomas' leadership and the existing team, I think the firm is well-positioned to continue creating value for the shareholders in the coming years. With that said, we go to Q&A. There are some questions that have been posted. Thank you for those.
If I go one by one, starting from the top, the first question goes: "How about Technical Trade order book versus year before?" I think we both commented that already. There, so, a strong improvement, mainly driven... I mean, I think a general improvement, but the clear uplift there, which we can see, which I would call material, relates to the quoted Putzmeister piece, as an example, and also the machinery and machinery MT businesses. There's a second question that goes: "Is there any one-offs behind the good operational result?" No, there are no one-offs.
We've been communicating earlier around any adjustments done on earnouts or similar, and so forth, but there are no such things now impacting the result. There are then three additional questions, starting first with the business areas. Number one is on a bit more of a positive side. "Technical Trade was much better than we expected. Was there any one-offs, or do you foresee a better market for your subsidiaries going into 2026?" Well, the one-off piece we already touched upon, so no. The market conditions on an aggregate basis, the market conditions are better than a year ago. The variation between the units within Technical Trade Business Area is, that scale is quite vast.
On the other hand, I don't foresee, and we don't see, the market conditions being, I would say, in any of the businesses worse than a year ago. So I think that tells quite a bit on the trend. The world is what it is. It's a bit of, I guess, uncertainty is the word of the day, but the information we have today, I think, we can be quite confident that the direction for that business area is right.
Continuing a bit of a similar question with electronics: "Was the weakness within electronics due to tough comparables, or are the market environment- or is the market environment getting worse?" It is definitely purely the quarter-to-quarter comparison was mainly due to a really strong performance of SSN last year in Q4. Milcon also posted strong on a reported basis now, a stronger result a year back, but that Milcon's position has improved quite significantly during the year, and we've done a lot of investment in 2025, including also the Q4 2025, which sort of pushed down margins. So those are... So from a quarter-to-quarter comparison, the two major things impacting the result. The third thing is then the YERS business and the integration phase, which we both mentioned that-...
that the profit contribution from that operation now in the result in the entire H2 2025 was quite limited. But we do see that in the course of 2026, we're on a positive track with being able to gradually go toward the expectations we had going into the transaction as well. The market is not getting worse, or we don't see the signs of market getting worse in the electronics trade business area either. There's, in our opinion, quite significant operating leverage there, when the component trading businesses start to pick up, hopefully with some support from the market. So that's, I think, something to keep in mind.
Now, the growth initiatives we've been generating, those are sort of as a result of investments done into businesses such like Milcon, Delfin Technologies or YE, RS as well. And then finally, a forward-looking question: "As your financial position strengthens and you become more active in acquisitions again, have you observed any changes in the competitive landscape for acquisition targets in recent years, particularly regarding the activity of serial acquirers when in Finland?" The... Well, I would frame it this way: the competition has increased in Finland as well in the recent years. It continues to be rather, the amount of parties operating in this space is, it continues to be somewhat limited.
We do see in transactions, the Swedes being there, also some increasing activity from Finnish actors. But there's definitely a room to play there and an interesting market to continue working with. But in general, I think it is getting into a direction a bit, and there's more interest toward this space as well. In my opinion, it provides for Boreo good, however, a good market to continue to be active and searching for acquisition targets, which might be totally new platforms, or specifically as we're working in the business with proprietary sourcing, looking at potential acquisitions to existing companies. Or anything to add, Jesse, there?
No, I agree. The brokered processes find their way on the table of the Swedes more than they did a few years ago, due to the model being more known and the advisors recognizing the buyer candidates more than two, three years ago. But on the proprietary side, I think it's quite unchanged from our point. The number of players is quite stable. Some actors come and go. I think the larger Swedes, they put their proprietary sourcing efforts into other markets, and then some of the smaller Swedes are expanding outside of Sweden, so then we see them. But I think on net-net, I think the competition level is slightly increasing, but on a proprietary side, there's plenty of room.
Good. And then a final question. "In addition to Milcon, is SSN already in defense business, or could it have growth or possibilities there?" Yes, SSN is present within the defense sector as well. Not in the level of materiality compared with Milcon. In a similar way, SSN, as is the case with some of the other businesses in the portfolio, there is support for the demand side there as well. But definitely a topic that is on the radar of the management and the guys working in the business, running the business and from the HQ side as well. And an interesting question and a point of view for also considering potential M&A activities there with SSN.
But in general, quite an interesting situation in regards to the defense business, particularly, of course, with Milcon, which is in a really strong, strong position to continue growing significantly in the future. With that said, I think we're closing it from our side. Thank you. Thank you for the questions. And thank you, on our behalf, for the recent years. I said this will be the last webcast from our side. I really appreciate the active involvement of many of you there on the line as well.
We will thank the organization and other stakeholders there directly, but eager to see the new management getting on board and taking the company on a positive trajectory in the future. We will be making sure the transition goes well and support in the next coming months a smooth handover of our duties to the new team members. I think with that said, we close it for today. Wish you all a good winter and hope to all the best for the future. Thank you.
Thank you.