Hello, welcome to today's webcast with Balco Group. With us today as presenters and CEO, Camilla Ekdahl, and CFO, Michael Grindborn. After the presentation, there will be a Q&A, you can either type in your questions in the form to the right, or if you call in, you can press star nine to raise your hand. With that said, I hand over the floor to you, Camilla.
Thank you. All welcome to our presentation. First, for new listeners, a snapshot of Balco Group. Can you take it up?
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Oh, yeah. Balco Group was founded in 1987, and consists of several companies in Sweden and Denmark, with sales offices in Norway, UK, Germany, and Netherlands. The head office is in Växjö, and the group has over 500 employees. Balco operates in two main segments: renovation and new build. The core expertise is in supplying glazed balconies and balcony solutions, primarily on the renovation market and the tenant-owner associations. However, the group has a broad offering of balcony solution, including both open and glazed balconies, as well as offerings such as facade renovations. Balco Group is a market leader in Scandinavia, with key markets being Sweden, Denmark, and Norway. We also have a strong challenger position on the other Northern European markets. All glazings of balcony results in energy savings.
Simpler glazings provides 5%-10% energy savings, while Balco's glazing provides a documented energy saving of 15%-30%. Facade renovation can give additional about 10% if they do additional installations. We go over to the highlights of quarter two. We had good net sales and stable profitability in a challenging market. The net sales amounted to SEK 346 million, and the adjusted EBITDA margin improved to 8.9%. I have several times talked about that Balco can contribute to the needed green transition with our energy savings glazings, but I can now proudly also say that we have developed a patent-pending solution with a smartly placed air-to-air heat pump, where the piping is integrated into the balcony's glazing.
During the month of June, we have reached an agreement with a housing association in Norway regarding an installation, and we are also a chosen supplier for two other Norwegian projects, where the votings will take place during the autumn. In Norway, the apartment buildings are heated with electricity, and therefore, the air-to-air heat pump solution is very interesting for them. With the balcony, Balco solution, where we can integrate it into the glazings, it's also very nice looking from the outside. During the quarter, Balco also took the first order in Sweden as a supplier for solar panels together with our glazed balconies.
Of course, we will also continue to develop our core products. There we have a product that we launched a couple of quarters ago, which is called Levitate, where we have had very good sales in the U.K. in the new building segment. That was a steel balcony. We have now also launched an older version, which gives us a lighter product, easier to ship, and also easier to install. We have established a final assembly of the product locally in England, that will give us even more. We are even more competitive in the U.K. market with the Levitate product ahead. I would say also that there are still challenging market conditions. We can see that continued interest rate increases has affected our order intake during the first half year.
We assess that this uncertainty remains until we can see clear signals from the central banks that the increases are over. With that said, I hand over to Michael, which will go more into the figures.
Yeah, some quarter results, and also update of year-to-date result. If we look at the quarter, our net sales amounted to SEK 346 million, down from SEK 351 last year. Acquired growth was 9%, the currency effect was positive by 1%, and our organic growth was negative by 11%. Year-to-date, our net sales has increased by 5% to SEK 672 million. Our adjusted profit, the EBITDA, improved to SEK 31 million, compared to SEK 29 last year, with an adjusted operating EBITDA margin of 8.9%, compared to 8.2% last year. Year-to-date, our EBITDA profit is SEK 59 million, with a margin of 8.8%.
Order intake in the quarter amounted to SEK 301 million, down from SEK 364 million last year. Year to date, the total order intake is SEK 547 million. Our order backlog right now is SEK 1,195 million. It has decreased by roughly SEK 400 million compared to a year ago. The earnings per share improved to SEK 1.25 in the quarter. Year to date, it has improved to SEK 1.93 per share. Our operating cash flow amounted to minus SEK 7 in the quarter, y ear to date, it's minus SEK 18. The cash flow depends a lot between quarters, about when we get timing for new building permissions and also the different phases of the projects.
If we have a look at our renovation segment, we had good growth in net sales and also improved profitability. Net sales in the quarter increased by 5% to SEK 322 million, compared to SEK 306 million last year, which was 93% of the total net sales for the group. Order intake was SEK 288 million, down from SEK 350 million last year, and it was 96% of the total order intake. Our adjusted profit improved to SEK 30 million, compared to SEK 25 million last year, and also the adjusted operating margin improved to 9.4%, compared to 8.3% last year. Order backlog for the renovation segment is SEK 1,054 million.
It's also decreased by roughly SEK 400 million compared to a year ago, and it's 88% of the total order backlog. If we have a look at the new build segment, we had a decrease in sales by down to SEK 24 million compared to SEK 45 million last year. The order intake was more or less the same as last year, at SEK 13 million. Our adjusted operating profit decreased down to SEK 0.3 million, with just an operating margin of 1.3%. Both the net sales and the operating profit is affected by that the maritime business, that in the recent years has been both a quite big part of a new build segment, and also the most profitable part the last years of a new build segment, has no longer any turnover.
We also have some projects in the UK, which we have stopped during the quarter due to our customers have some financial problems. Order backlog is SEK 141 million for the new build segment. Next page, we have a look at our financial position, which is still strong. At the end of the quarter, the group's equity was SEK 757 million, and increased by SEK 26 million compared to a year ago, and the equity ratio is 56%. Our net debt, including leasing, divided by EBITDA, was 1.5, an increase from 1.3 last year. Net debt, excluding leasing, was 1.2 compared to EBITDA, an increase from 0.7 last year.
The increase come mostly from, we have done three acquisitions during the autumn last year and spring this year of Söderåsen, ART-TECH, and NMT. We still have acquisition headroom. We have a revolving credit facility with Danske Bank, which is of SEK 510 million, and also an overdraft facility of SEK 75 million. We still have a lot of unused cash flow in the revolving credit facility. If we look at our financial targets, we have a group target in the group, that we should have achieve a group of 10% per year. Looking at the last 12 months compared to 12 months before that, we have a group of 13%. Our profitability target is that our earnings per share should grow by 20% per year.
Here, we have seen a negative growth of 8% for the last 12 months. Our capital structure goal is that the net activity shouldn't exceed 2.5, and here we are at 1.5, including leasing, 1.2, excluding. We also have a dividend policy that we should distribute 30%-50% of our profit after tax to our shareholders. The last decided decision taken in May, is that the dividend for 2022 should be 1.50 SEK earner, and it's 40% of the total profit after tax. We also have a sustainability goal that 30% of the group's sales should be within the EU taxonomy, and last year it was 61%. Some more about the sustainability.
Balco has now an ESG risk rating from Sustainalytics of 18.7, which mean that we are a low-risk company, and among the 20% of the companies in the world with the lowest ESG risk. During last year, we improved our waste handling, so the part of the waste that was recycled increased to 77%, compared to 67% a year ago. The share of female managers in 2022 was 21%, compared to the total share of female employees of just 11%. We are in a market where it's quite few female employees, but as you see, we can give good opportunities for them, also in the group. I hand over back to you, Camilla.
Yeah. If we took a little bit, talk a little bit about the market update. I have talked about it quite also before, but as we said, we have challenging market conditions right now. We can see that the number of inquiries and discussions about progress has increased during Q2 compared to Q1. Our customers have started to get used to a higher interest rate level, but we can see that, especially in Sweden, since the inflation is not coming down as quickly as we would like to, some customers are still postponing their decisions. We assess that the strategy will remain until the central banks clearly communicate that their interest rate increases are over, and that we can expect more stable interest rates going forward.
However, the need for renovation of balcony remains, and as we said also before, around 90% of Balco Group's turnover comes from the renovation segment, and that makes us confident that the order intake will take place again in the future when we have a more stable market conditions. Some of our companies focus now more on the publicity-owned companies, which continues to invest in your renovations also during the little bit more challenging market conditions. New building for social housing in UK and Germany has a good demand, and we have very good products for these markets. As talked in the highlights, we also now launched the new product, Levitate Aluminium, which makes us even more compatible on the UK market. We continue also to work with acquisitions.
As Mika said, we made 3 acquisitions during the autumns and the start of this year. Acquisitions are an important part of Balco Group's growth strategy, and we see now that opportunities coming up for us. What we're looking for are European balcony companies or with activities that can either European balcony companies or companies with activities that can complement our green transformation offering. When we are taking in companies, we offer them a decentralized business model, where the company retains its own brand, identity, and culture, or it can also be, as we made for NMT, that we integrate them more into the Balco Group, because they don't have their own products, and therefore, it's better to integrate them.
It can be, of course, a little bit different business model with each company we are buying, but the decentralized business model is our main focus when we are doing acquisitions. Concluding remarks. We had a good net sales, SEK 346 million, and we have an improved profitability during quarter two. We have new products developed and launched, but we are affected by the interest rate increases, and especially in our order intake. If you look ahead, the need for renovation, as we said, that will remains, and we are very sure that the order intake will take place again. The lower order intake that we have had the last year will probably affect our sales and earnings during the next coming quarter.
Balco, as we said, has a strong financial position, and we plan to continue to grow through selective acquisition, and we have discussions and opportunities right now coming up also for us. That was all from us. Questions?
Thank you so much for the presentations. I just want to repeat, if you have any questions for Balco, you can either write them in through email or press nine to raise your hand, and I will let you into the call. Star Nine to raise your hand. I will start by letting in the person that have a cell number, ending at 05.
Hello, Henrik Jambek from SEB here. Okay, thank you for the presentation, and I just wanted to ask a question regarding the different geographical markets. The year-over-year development in Sweden was quite good. The clear weakness was in the other Scandinavia. Could you elaborate a bit on where exactly you've seen the weakness, in which country and in which segment?
Yeah. As you mentioned, Sweden is doing quite okay. Also Germany and UK is developing well. Denmark has still strong sales, net sales, and also quite good profitability. The order intake has been tougher in Denmark. It's taking longer time. They still have a lot of discussions, the decision-making, and especially the last, just to get signature of a contract, takes a longer time. That's why it's affected the order intake in Denmark. In Norway, as we mentioned, roughly a year ago, we have had some problems with some projects. We have also had quite tough conditions in Norway to get order intake from autumn last year until May of this year. We have had a very low order intake during that period.
That has also affected net sales in Norway during the first half of this year. We have got some quite good order intake the last 2 months, so it looks better for the coming half year in Norway.
Okay, thank you. In terms of how the tenant-owner association, discussing right now, I mean, are you seeing translations or where in terms of the order intakes, was like in the discussion, like which. Sorry. The tenant-owner associations, like, how are you feeling in the discussions and why are they not pulling the triggers? Is it only because of the interest rates right now that is the biggest uncertainty?
The main factor is the interest rate and the uncertainty. As we said, they have started to get used to the higher interest rate, and that especially, of course, in Sweden. Sweden, as you know, is our main market. What they are waiting for is more or less that they know where the top will be on the interest rate. As soon as they feel that, okay, it will go up to maybe 4.5, then they know what to calculate with. That is what we see, that is the most that they are postponing.
We have also seen in some projects, and that's why we still have quite good order intake, and we have discussions with them, is that we are trying to really reduce sometimes the project to what they are really needing to do as a renovation as a first step, and then they can add on products later on, for accessories, for example. It can be also that the project is a little bit smaller, they don't add on all the accessories in the first place. That's also one of the trend we can see now when the interest rate is higher.
We haven't got any cancellations.
No cancellations.
This half year, first half year. We see that it's much more activity.
Yes.
They are starting to get more used to the level. We, well, for us, I think it's even a little bit positive that they are not saying, the central bank, that it will be a decrease quite soon, but we will keep the interest rate on a good level, because then they know that it's no need to wait any longer.
Thank you. As we may have touched upon, the renovation segment is obviously the strong one in this quarter, and especially looking at margins as well. New build year-over-year is clear underperforming, I guess, I could say. In terms of the, I mean, the renovation market, it looks like it's going all right, but in the new build market, I mean, what have you seen so far in, I guess, the start of Q3? It hasn't been very long, but have you seen anything, like, going forward that makes you a little bit more optimistic on the outlook within new build?
New build is mainly coming from U.K., and in the U.K., we have been affected by the, in the sales on the first half year, depending on that we had, as Michael said, we have 1 customer that had some finance problems, and we are not detecting on it on the project side, but we said, "Okay, then we don't do any more work until we are certain that they also can pay." That's why we are affecting the sales on the first half year on the U.K. market. Now we see, well, what we have got as an information is that that is over now. That means that we can then start those projects again, as well as we also will start the other projects that we have had order intake on.
We see also now that when we have the material prices are much more stable and actually going down, together with that, we have taken the new orders on a higher margin with the material costs. That is also giving us more confidence on the new building segment ahead.
Yeah. You mentioned here also in the report regarding the new build, that the maritime business has basically zero tu rnover. Do you expect it to come back in the future?
We have not closed down the maritime segment. We know that these orders, so to say, and quotation periods, that come back quite seldom. We are not expecting to get any new orders within 1-2 years ahead. We are, of course, always in contact with the existing customer we have there. If it comes up that they will build new boats, we will of course, make a quotation on them also.
Okay. That was all for me. Thank you very much.
Thank you.
Thank you. I will now hand over the word to the cell number that ends with 23.
Hi, thank you. This is Sofia from Carnegie.
Hello.
Can you hear me?
Yes. Hello.
Hi. Yes. Thank you for your presentation. Yeah, let me follow up with some questions on order intake as well. All these pending orders by the tenant association, how long can they wait? If... Yeah, how long can they wait until they actually put this order, and could they make any alternative that you actually like, this is not a reported pipeline, but can they do any alternative solution instead of actually putting this order to you or any competitors? Basically, my question is: how long can they wait? Of all these unreported orders that you have in your pipeline, is this still discussions from previous year, Q2 previous year, or is it just from discussions from, this first half of 2023, would you say?
If we start with your last question there, I can say that.
Yeah
... are, so to say, still discussions from previous year, but we also have some new ones coming out. So for example, the one that we have recently, we received 1 order here in Norway with this, as I said, the air-to-air heat pump solution, and the other 2 that we are having developing for during the autumn, they are totally new. And we have also other big projects that are totally new for us. So we for sure have new projects also in the pipeline where we are, so say, waiting for decisions. The, the first question is really difficult to answer, actually, because you can always say it like this, that you can postpone, of course, 1 year and then maybe sometimes also 2 years, decision. Here the question is that the, the need is not going away.
You still need to do something, and it will be either with us or with a competitor to us, that's for sure.
The timing, it is, as you say, it is not. In the most of the cases, the balcony is not falling down. If we don't do it.
No.
We'll do ahead. That of course, difference also on the different projects. Some balconies, some projects that we are discussing, as, and as you say, that we have been discussing for maybe a while, they're getting worse and worse all the time. They really need to take a decision quite soon, and some of them can maybe wait also a longer time. That's also, as Michael said, that's also why it's important for us that the central bank comes with clear communication about the interest rate, as we say, that it will stay also ahead on a quite high level, or at least not going down to 1%, which nobody believes any longer.
if that is very clear, then they know, "Okay, we can take the decision now, because we need to do it anyhow.
All right. This central bank and what they will decide is an external factor, could you, in some way, given that you will need to operate with this uncertainty for a period of time ahead, could you meet your customers in any other ways by fixed interest rates or any solution like that could meet your customers to actually enter a project?
We have a new, template that I have done together with our sales people.
Okay
... at both cash flow and the profits and loss statement for the tenant owner, suggestion, not just the coming year, but a 10-year period. We can see how an investment will affect the cash flow and the operating profits for the tenant-owner association for a longer period. We have also in some cases a solution that we can help them with, kind of rebate or, using an interest rate that is quite, more or less fixed for a certain time period.
I also would like to underline here that the tenant-owner association that we are dealing with, they are quite old.
... with new housing tenant-owner association with a very high debt. We are very often d ealing tenant-owner associations which have very, very low debts. Therefore, the discussion is not, as you see in the newspaper all the time, with the very high debts and everything is increasing for them. Some of them have very, very good financial positions, and they really need to very low increase of the rent, depending on the balconies. That's why the new sales instrument that Michael has developed together with the salespeople are so important to show for them.
They really understand how they can use their balance sheet also in this situation.
All right, thank you. Regarding the cost-saving program, have you seen the full effect of the already implemented cost-saving program, or do you expect to see some more improvements?
We have seen a more or less full effect of the sales of the cost, because we took them as one-time cost when when they were implemented. The cost we're seeing now is yeah, the level that we will be long term.
All right, thank you. Your gross profit that has decreased, or gross margin that has contracted compared to last, previous year, you mentioned that, you have quite low production occupancy in Q2, compared to last year. How do you say this? How high occupancy do you have in your production facility at the moment, at these levels, would you say? Is it, like, 70%, 80%, 90%?
Yeah, we have especially in the Balco plant in Växjö, and also in Poland, I would say, yeah, 50%-70% use of the total capacity we have. We have reduced.
Okay
... personnel, of course. With personnel, that's not been really below occupancy. It's mostly that we have the plants, and you usually can't get rid of the cost for the plants. We are reducing personnel, but we can't reduce full cost.
All right. Thank you. My final question is about M&A. Are you looking only now in Sweden, or you're looking outside Sweden as well?
Also outside.
Also outside. We look in Nordic countries and all our current markets.
Yep.
We are present.
All right. Okay, thank you so much for your answers.
Thank you. Does anyone have any more questions? Any dialer that have any more questions? All right, we got a, I will carry on. We got a email question here, in Swedish. From an inaudible.
I think, should we translate maybe into English?
Yeah, we can translate in English.
Yeah.
One stock owner here wonders how you will work forward to create a shareholder value now when there's been a decrease in the stock.
To create shareholders value is to be a profitable company and a stable company also in long term. That's what we are creating right now. We have adjusted our costs accordingly. We have not hit, so to say, our main core competence. What we have done is that we have made cost reduction for the company to adjust according to the situation as it been, as it is, and the market conditions. We are keeping our core competence, which also make us very much prepared for the coming order intake that will come. We know that when the coming order intake will come, we will also increase our profitability. We are also looking on acquisitions, as we said.
We see that there are opportunities out now on the market, and we are of course taking these opportunities that we can, also depending on that, we have a very strong financial positions. That is how we create the stock value, is to be a stable, profitable company also ahead, and we will increase the profitability ahead.
Thank you so much. That was the last question. I will give everybody 30 seconds to ask another question. If some of the dialers wanna raise your hand again, it's star nine, but we'll give it 30 seconds to see if there is any more questions. That looks like no more question. I wanna thank you all for listening in today and answering questions, and I wanna thank Balco for the presentation, and I wish you all a good summer.
Thank you a lot.
Thank you.
... to all the listeners, and good summer to you all.