Good morning. My name is Tuomas Kahri, and I'm the CEO of Boreo since beginning of April this year. Welcome and thank you for joining us today. Today, we will walk you through Boreo's first quarter results of 2026, and we will put the performance into the context of a serial acquirer business model. Q1 marks a strong start for the year, continuing the positive trajectory we've seen over the past six quarters. We delivered strong solid growth. We improved our profitability. We had a strong cash generation, and we strengthened our balance sheet. With that, maybe it's a good time to introduce the rest of the team. We are three persons from Boreo in this call this morning.
I'm joined today by Rafael Osmanov, who is our Head of M&A and Financing and our VP of Finance, Sami Hanerva. Rafael will dive deeper into our financing situation and our M&A activities, and Sami will cover the business areas. Sami also is the man with the historical background on Boreo, so since Rafael and myself still have a fairly short experience of Boreo. Before we jump into the numbers, just a few words about my background and maybe some few first observations from Boreo. I have worked for over 30 years in various businesses with the focus on growth and strategy development, M&A, and achieving high operational results.
During the past 10 years, I've spent time as a CEO, as a partner, at McKinsey & Company and as an operating partner with a Finnish private equity buyout fund, called Intera Partners. The first weeks with Boreo have given me a confidence that Boreo's business model is sound. The company's in a very good shape to continue both organic and inorganic growth, and that is enabled by the efficient capital allocation practices that the company has in place. A very nice place to start the leadership of the company. If we go and look at the quarter one, quarter one 2026 was very strong quarter operationally. Our net sales increased by 16% versus the comparison period in 2025, and they amounted to EUR 39.5 million.
The organic growth was 9%. This was the sixth consecutive quarter of organic growth. Operational EBIT increased by 28% and was EUR 1.7 million, which corresponds to 4.3% margin. The EBIT for the quarter was EUR 0.9 million, which was a little bit below 2025 comparison period. It is worth mentioning that in the 2025 period, we had a positive non-recurring items of EUR 0.6 million. Our cash flow was EUR 2.1 million, and the cash conversion was very strong at 116%. Also, our balance sheet strengthened further.
The net debt to operational EBITDA was 2.2x, which compares to 3.1x in first quarter of 2025. Our return on capital employed was net 9.1%, and the return on trade working capital was 28%, which also increased from the previous year. Maybe finally a little bit more on the order books. The order books still grew compared to quarter one 2025 and to quarter four last year. The order growth was driven by improving demand that we saw especially in our industrial and defense-related businesses.
We still see that the construction business remains quite subdued, also there we see some cautious improvement happening. If we look at the positive development this year, there are three key focus areas for the management. The first one being accelerating M&A activities. Those will be now focusing 2026 into our existing businesses. We are continuing to strengthen our cluster thinking, meaning that companies operating in similar industries would be kind of handled a little bit more like a, like a cluster, and then we invest into the operating companies within those clusters that we feel are have the best opportunities to meet our financial targets.
The second focus area is to review the role and the status of each operating company. There we really want to make sure that we understand clearly where do we have the largest potential for both organic and inorganic growth. How do we then drive the capital allocation decisions that we make as a management. Thirdly, we continue to strengthen our balance sheet to make sure that we can support the M&A and growth activities going forward. A little bit more in a concrete level. We see that in 2026 the earnings improvement potential is supported by kind of a systematic development of organic growth, as well as our development of the operating models.
In order to accelerate the organic growth, we will drive the cooperation within the kind of the clusters where the company is operating with a similar industry, we'll be sharing more and more best practices, especially in the customer interface. Also, for the operating model, the big item of course is the five ERP system renewal projects we have ongoing. Out of those, the first one is now completed, the four still ongoing projects are progressing according to the plan. These projects will improve our efficiency and reduce fixed cost in the coming years. The implementation cost for these ongoing ERP projects have been adjusted in our Operational EBIT. If we look at our performance against the long-term strategic targets or target setting.
The Q1 represents again a clear step forward or to the right direction, according to meet our strategic targets. Operational EBIT growth was 10%, that was largely driven by the organic growth. Once the M&A activity grows, this should impact also the growth further. Capital efficiency is developing well, however, there we still are behind our strategic target. Finally, deleveraging continues with the senior debt reduced roughly by EUR 5 million year-on-year. I will let Rafael in a few minutes talk more about the financing and our balance sheet. To continue with some of the key KPIs.
The sales grew by EUR 5.5 million or 16% compared to Q1 2025. 9% of that came from organic growth, reflecting the improved market demand, and 7% is the impact of acquisitions completed in 2025. The two acquisitions that were completed were the Spet Electro and Elfa Distrelec operations. Together these two contributed roughly EUR 2.5 million to our sales. On the business areas, Electronics overall level was stable, but there was a very good development of Milcon that serves defense related businesses. Also in Technical Trade we had a strong growth, and that was especially supported by machinery and Putzmeister businesses.
If we go forward to the cross margins. The cross margin level remains stable at 29%. And that is a good achievement, taking into account that the sales mix changed quite a lot as you saw from the sales. The lower margins of the heavy equipment sales were offset by other businesses, both in the Technical Trade as well as in the Electronics business. Overall, we see that the sales margin development was healthy during the period. On cash flow. Cash flow generation, of course, is a core pillar of the serial acquirer model, and we will continue to focus very much on the working capital as well as of course on the return to drive the capital efficiency.
Our working capital decreased slightly at the end of quarter one, so roughly by EUR 0.1 million, and the cash conversion on the rolling base was 103%. On the main measurement on the capital efficiency, so return on trade working capital, it was at 28%, so roughly stable compared to year-on-year. And again, as said, we will continue to focus on the working capital, but really we see that the big improvement in this KPI will come from the improved profitability going forward. I will now turn it over to Rafael to review our financing status and then over to Sami for the business area updates.
Okay. Thank you, Tuomas, and hello from my part as well. At the end of Q1 2026, the company stood at a solid financial position. We had a good level of liquidity available to us at EUR 19 million, which was roughly EUR 5 million more than year before. Our total financial facilities were roughly EUR 74 million, of which we had used EUR 57 million. Breakdown of this is terminal facility is roughly EUR 18 million, EUR 19 million and acquisition loan facility EUR 12 million of which we still have EUR 4 million unused. Then we have our hybrid instruments and RCF facility, which is at the moment currently unused. We have a good capacity for example, small M&A.
Going to debt maturity structure, we amortize our senior loan at EUR 5 million annually, and we still have EUR 2.5 million to amortize during the rest of the year. In 2027, we have a reset debt date for our hybrid bond and in 2028 our senior debt package expires. Keeping that in mind, we have been mapping different financing alternatives with our priority to strengthen the balance sheet in order to support our M&A and organic growth activities. Our criteria for long-term ownership are unchanged. We want to own asset-light industrial businesses with strong cash flow profiles.
Currently, we're analyzing the current portfolio to identify organic and inorganic growth opportunities to drive our future capital allocation priorities. One of the focus areas for this year is accelerating M&A activities and we take a highly disciplined approach, currently focusing on target companies that expand our existing businesses. Currently, we see that the M&A market is favorable for us. We have a good deal flow of potential targets, and we see that there are more sellers than buyers. Because of that, the valuation levels are reasonable. Thank you.
Okay. Over to Sami then.
Yes. We jump into the business area highlights. First, for the Electronics business area. In overall, good quarter, first quarter of the year improved margins and growth. Milcon especially driving the performance in the Electronics for the Q1. Sales increased by 10%. It was mainly driven by the inorganic growth of YE RS and the Elfa Distrelec acquisition we made last year. Operational EBIT increased to EUR 1.3 million compared to EUR 1.0 million Q1 2025. EBIT margin increased to 7.7% compared to 6.4% at the comparison period. Rolling return on trade working capital on a rolling 12-month basis was on a 48% level. Decreased compared to comparison period mainly due to the decrease in profits.
As mentioned, we measure it on a rolling 12-month basis and in the Q1 2025, we had a really strong Q4 2024 when their Electronics made EUR 1.7 million Operational EBIT. That's impacting there. On a company level, we would like to highlight Milcon with continuing solid performance and with a strong earnings capability for the future. Related to Milcon, we would like to highlight that the company received so-called AQAP, Allied Quality Assurance Publications certificate during the quarter, which is a NATO certificate. T he certificate opened doors for Milcon to participate in the NATO tenders. We see that as an interesting opportunity for the future growth. The short-term outlook for the business area is in overall stable. We still see some uncertainties in the operating environment.
That hasn't changed compared to previous quarters. At the end of Q1, the order book decreased slightly compared to previous quarter end, so the Q4 2024. The order books are on a higher level compared to situation a year ago. The order intake for the Q1 for Electronics was on a reasonable level. The reason for the decrease is mainly the deliveries made during the quarter. We jump to the Technical Trade. Strong quarter also for Technical Trade, strong growth and improved EBIT. However, the margins were impacted by the sales mix. In Technical Trade for Q1, the sales growth was 21%, from which roughly 15 was organic and 6 inorganic. Operational EBIT increased to EUR 1.0 million compared to EUR 0.9 million at Q1 2025.
The EBIT margin decreased slightly, and it was mainly due to the sales mix, as mentioned. Return on trade working capital increased to 30%, and the increase was driven by the better profitability. On a company level, we would like to highlight for the Q1 the performance of machinery and the Putzmeister businesses when comparing Q1 2026 to Q1 2025. Also the companies serving the process mining and the manufacturing industries performed well in the first quarter of the year. In Technical Trade, order books grew from compared to Q1 2025 and also compared to the year-end situation. Here we'll still would like to highlight or mention that some large deliveries are expected to be delivered in the latter part of 2026, so in Q3 and in Q4.
The short-term outlook remains overall solid for the business area with some gradual improvements, supported with the stronger order book. Yes, hi, Tuomas.
Yes. Thank you, Sami. To conclude our story from today, the Q1 demonstrates that Boreo delivers profitable growth, strong cash flow and improving capital efficiency. With the disciplined ownership model and long-term perspective, Boreo is well-positioned to grow and prosper. We'd like to thank you for your attention and happy to take any questions at this point.
Okay. We have received certain questions from the listeners. Okay. Let's start with Technical Trade question. Technical Trade saw impressive growth of 21% in Q1, yet you state that order books are being more weighted towards the latter part of 2026. Should we view this as a strong outlook for the rest of the year, or were the comparables especially easy in Q1? I think this is maybe Sami's question.
Thank you. I think that the Q1 growth reflects the improved execution as well as some support from the comparables. The order book, particularly towards the latter part of the year, supports the continued development. I would say that the market remains somewhat mixed, and we expect gradual rather than linear improvement for the Technical Trade business.
Okay, going to the next question. You had a EUR 2.5 million contribution from acquisitions in the quarter. It was lower than I expected. Can you give some more details on that, especially regarding contribution from Elfa Distrelec, as your original PM stated yearly sales of EUR 15 million for that business? Again, I give this to Sami.
Thank you. I would say that this contribution reflects the, maybe the timing and the ramp-up phase, which is still ongoing for the Elfa Distrelec and the YE RS business. For the Q1, the YE RS as a whole was a bit below for our expectations, but we expect that the contribution will increase gradually over the time.
Thank you, Sami. There's a question, how do you view the financial stability, especially as you have some hybrid debt that are not classified as debt in your reporting? This is something I could take. What we see is that the company has had a good cash flow, and we expect to decrease our leverage during this year. We have good liquidity position, so in that sense, we view that we have a solid position, we have options and we have full support from our financial partners. There are questions regarding Delfin, how it has developed. I give this to Tuomas.
Okay. Delfin has gone through the development of the new platform, which has been more or less completed at this point. Of course, that still impacts kind of the future outlook of the business where we see the scientific business growing nicely and developing nicely and at the same time, we are still looking at the medical business opportunities, especially in the U.S. All in all, that business still is developing nicely. However, the investment that needs to be made for continued growth is somewhat impacting the result.
Thank you, Tuomas. More company specific questions. Has the YE RS business developed according to management's expectations? I give this to Tuomas again.
The YE RS business has developed a little bit slower than what was expected. This is due to some, let's say kind of a uptake by the customers who have transferred to the new business. However, we still have a very positive feeling that these customers will return and the business will continue to grow as expected.
Thank you, Tuomas. One more operating company question. Had the SSN weaker than expected Q1, or can we assume that this development will continue? Tuomas, please.
Yeah. SSN is more of a question of actually a kind of a delay of some of the deals that the company has made. We don't see a kind of a this being a kind of a change in the trend of that business.
Okay. Thank you, Tuomas. There's still one question. You talk about both accelerating M&A activities and strengthening the balance sheet as main focus area. Can you describe that dynamic a bit more? Yes. I'm gonna take this one. As mentioned earlier, we are paying down our debt during this year and we're exploring different financing alternatives by the recent date of hybrid bond. How we see is that we have opportunity to make small add-on acquisitions at this stage and when our balance sheet is a bit more stronger with deleveraging continuing, we can take on bigger and bigger targets.
Also what we mean by accelerating M&A activities is that we see that we want to be disciplined and gather a deep enough pipeline of potential targets to be very selective. There is obviously a certain lead time between accelerating and execution. I hope this opened this item a bit. These were all the questions that we received so far.
At this point, we'd like to thank you, and Vantaa is logging out. Thank you very much and, looking forward to continuing the discussion.
Thank you.
Thank you.