Good morning, everyone. Welcome to the presentation of Fasadgruppen's Q1 results for 2024. With us today, here we have our CEO, Martin Jacobsson, who will present the results, and also, in the room, we have our CFO, Casper Tamm, and myself, Adrian Westman. With that, I hand over to you, Martin, for the presentation.
Thank you, Adrian. Some highlights here for the first quarter of 2024. It's clearly low activity here in the first quarter. It is a typical low season for us. This is then connected to our services, which is mainly produced on the outside of the buildings, and in a cold environment. This affects clearly the activity levels. I would also like to highlight here that new production levels were quite much lower this quarter than compared to last year. Moreover, I would like to highlight here that the competition in Sweden is still tangible, but I would not say that it has worsened compared to the latest couple of quarters here.
I'm pleased to see that we've had a healthy organic order backlog growth, and in this environment, I would say that this is a clear positive that the demand is holding up so well for our kind of services, and that the customers continue to trust us. In the quarter, we've also completed two acquisitions of Elenta and Alumen, which we spoke of in the last conference call. So, moving over to net sales development, we have a clear negative organic development here of 12%, and that is mainly then due to the development in Sweden. I would like to highlight, as I mentioned in the start here, that we've had a low product activity, unfavorable weather conditions, and also an early Easter, which was in March this year compared to April last year.
In this is as I mentioned earlier as well, the new production levels is quite clear down, I would say, in the portion of some 40%, of our new production companies, compared to last year. Looking at the EBITA level, we have a weak margin here of 1.9% compared to 6.5% last year. Also here, the results are affected by the low activity levels, but, in honesty, we could say that we are more seasonally affected, than we were last year. This combined with a larger overhead, in comparison to the project activity, makes up for the weaker results.
But you can look in the chart to, in the bottom right here, you can clearly see the darker blue bars indicating the first quarter of each year. So, I would still not say that I'm very worried about 2024 in that sense, the results, due to the weakest, I would say, seasonality effect here for the first quarter. Looking at the order backlog development, we have a positive organic development of some 4%. And the clear positives here are the markets in Denmark, Norway, and Finland, which are all growing, somewhat muted growth here for Sweden.
I would say that a positive here is that the order backlog margin is actually somewhat up in the quarter here, indicating at least that we are able to win orders at healthier margins. Moving over to cash flow, I would say that the cash flow follows our typical seasonal pattern. We see an improvement in the working capital of some SEK 7 million compared to a negative of SEK 7 million last year. I would also like to highlight here that the investment levels in CapEx was some SEK 35 million compared to SEK 10 million in the first quarter of 2023. So, we are poised for future growth in that instance.
That is then connected, of course, to what we see in the activity levels in the market and our positive order backlog development. Looking at our financial capacity and our net debt, we first of all see that the interest rate here in the first quarter was around 6%, compared to 4.6% in the last quarter. We have a very short interest rate period of 1-3 months. In the case of a lower interest rate environment, we will adapt quickly. In terms of our net debt to adjusted EBITDA, it was on a non-pro forma level, 2.7, and on a pro forma level, 2.6. I would say that I'm not worried about these debt levels.
We are eager to continue to acquire companies and to continue our growth journey. Speaking of our growth journey, we are here presenting our two latest acquisitions, which I also mentioned in the last conference call. What I would like to highlight here is the special setup for Elenta, which we only acquired 60% of the company with an option then to acquire the rest, which is a new take, which we've not done before, which is another tool that we're adding to our work belt here in terms of acquisitions, going forward. I would say all in all, there's still plenty of many opportunities out there. Then an update on the Energy Performance of Buildings Directive, which has been finalized, which some of you may have heard.
I would say that this is a clear market trend there, positive for us. Yeah, all in all, I would like to highlight that the building stock by 2050 in the European Union will be a zero-emission, and we are eager to help our customers in achieving that. We also see that there's coming stricter requirements from financing institutions, and to take advantage of that, we've also initiated a collaboration with SEB, the bank, a larger bank here in the Nordics, in order to take advantage helping our customers in the tenant owner associations so, that they can achieve both in financing and advice, as well as the project execution from us and SEB. With that, I would like to highlight here the concluding remarks.
I would say that, at first glance, you could absolutely see a big difference here in the results of Q1 2024 compared to last year. Then bear with us that the results last year was unusually strong, I would say. And it is clear that when it's a lower new production level, that is, hindering us in achieving greater results in the first quarter. So, I would say that there's plenty of disadvantages with new production per se, but the clear advantage is that it often is producing during Q1.
Often it can be that if you have a deadline where you will move in, let's say, in Q1 or Q2, where the customer wants that the building is finalized in this new production stage, then you make that so that you work even in during Q1, even if it's cold outside. However, on the renovation side, that is not the case, I would say. Renovation is then more starting up during spring. So, in this instance, I would say that our high season compared to low season is then in, let's say, from April to December, depending then on weather. I'm also positive here that with the order backlog growth indicating future healthy growth, and also then that the margin in the backlog is stable to positive.
So with that said, I would say that we are still positioned to capitalize on our long-term market drivers and eager to assist our customers in helping them. And with that said, I'd also like to highlight that we have a Capital Markets Day here on the second of September, 1:00 P.M. in Stockholm, so, I hope to see you all at that stage. And with that, we open up for questions.
If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Max Backo from SEB. Please go ahead.
Good morning. Thank you for taking the questions. So, the first one on your comment there, that the margins in the order backlog stable to slightly growing here in the quarter, could you specify growing compared to what? Is it the margin in the order backlog last quarter, or is it compared to the EBITA margin that we have seen there in the last 12 months or something like that?
Mm-hmm. Good morning, Max. So, to give some more flavor on that, it is then in compared to last quarter. And with that said, I mean, it's usually that the order backlog is poised for growth in the first quarter, and it was so this year. But what was interesting was to see that the margin development was also positive in that sense. And where it stands out, I would say, that it's growing in Sweden, and that is a clear positive because we've had, as you know, the competition pressure, especially in Sweden, I would say.
And is it possible to say, I mean, the, the margin in the order backlog, how does it compare to, to the actual EBITA margin for the last twelve months or for 2023, perhaps? Is it stable compared to that, or is it also on that, comparison base, slightly up?
Now I would say it's stable towards compared to the EBITA margin. But no tear marks, as we usually say, that when we get an order, it usually grows by 20-30% in extra work. And that is not then affected in the order backlog growth if it's, I mean, up until it's finalized and approved by the customer.
Ah.
And in a harsher environment compared to competition, then, these kind of extra works, going back a couple of years, I would say, was better than it was in these latest quarters here. But hopefully that with an eased competition, hopefully soon, that would also mean better margins in the extra work. So, that is also a factor you have to take into consideration, so you cannot only look on the order backlog margin.
Yeah. Understood. And then on your comments that, I mean, Q1 is perhaps more tilted towards new build than the rest of the year. I mean, you normally say that you have a split of 8-20 between renovation and new build. Is it possible to specify how it usually looks during Q1, isolated?
Yeah, I mean, Q1 stands out that it's much more, of course. But in the ballpark, I would say maybe if you just take in the Q1 compared to full year, so to speak, maybe that's it's 40% the new build in Q1 usually. But I mean, then, of course, it stands out this quarter and due to the-
... the low activity levels. But I would say, I mean, you have to go back here. We go back to 2022, the market around new production was still okay for us, if you understand what I mean.
Then you had lag effects going into Q1 2023, which we saw then in the activity levels. Remember that the organic growth in Q1 2023 was 25%. And that also, of course, affected the results in a positive way in Q1 2023.
Yeah. And, I mean, you mentioned this yourself, that you are not that worried about 2024 as a full year, despite quite weak performance here in Q1. And, I mean, as you highlighted yourself, the order backlog improved year-over-year, organically. Hopefully, we will have better weather going ahead in the coming quarters and the ongoing quarter. We have more working days, and of course, then less dependency on new building in the following quarters. Should we expect that- and of course, the comparables are also easier for Q2 and forward. Should we expect, I mean, adjusted for seasonality, that Q1 was the low point, and it will look better year-over-year, for the coming quarters?
I mean, low point is always hard to tell exactly-
Yeah, yeah
... from that. But, I mean, what we see is clearly this weak performance in Q1. I would say, hopefully an outlier in the future. That's our best take, I would say.
Yeah. And if I may, two very quick questions to perhaps Casper, relating to the financial details in the report. I mean, it was quite large deviation looking at financial, net financial items of SEK 25 million in the profit and loss, and then in the cash flow analysis, you have interest paid of SEK 52 million. What explains that deviation?
You mean, you mean between interest paid, the SEK 16.7, compared to the SEK 52.2, or is that, is that your question, or?
If I look at the, I mean, yeah, exactly. I mean, interest paid SEK 52, exactly. And then in the profit and loss, you have net financial items of SEK 25 million.
I mean, that's the increasing interest rates that we have seen between quarter 2023 and first quarter 2024. But I would say, Max, that we managed to pay later. That's, I mean, some of those interest rates were-
Oh, you mean cash flow-wise?
Cash flow-wise.
Yes.
I mean, we've had, when you pay it, or if you pay it in, in December or in January, that is,
It's a combination, of course, of both.
Yeah.
Yes, understood.
I think you could see, I think we had, the terms of the loans were between 1-6 months. First quarter, 2023.
Yeah.
It's now we are down to between 1-3 months, so, that's also w e remember we made a new financial deal with the banks in the summer of 2023. There were some new terms in these two quarters here.
Yeah.
When the payment is due, so to speak.
Understood. On the same topic, then perhaps the same answer also, I mean, tax paid here when looking at the cash flow, SEK 60 million, which is almost close to the full year tax paid during 2023. Is that also a timing effect?
That's, I mean, it's mainly the difference between the 2023 first quarter and this year is mainly residual tax coming from actually the income year 2022 here, which was one-
Okay
... of our years, ever, income-wise.
Yes, perfect. Understood. That was all for me. Thank you very much.
Thanks, Max.
The next question comes from Carl Ragnerstam from Nordea. Please go ahead.
Good morning, it's Carl here from Nordea. A few questions. Firstly, looking at the organic growth in the quarter, negative 11.5, I mean, you had the pricing deflations in the past quarter here. Could you give some flavor on what the sort of deflation on raw material was in the quarter? Yeah, let's start there. Thanks.
Yeah, sure. Good morning, Carl. So, if we take a look at the raw material impact, we've seen that the prices in general are going down, which is, I mean, it's a pass-through effect for us, so then, of course, affecting us in terms of negative organic growth. But it differs compared... I mean, we have a wide variety of materials that we're using, so it varies between different materials here. But in general, I would say a negative development for the prices for the materials.
So, on an aggregate level, perhaps-
Yes
... what would you say it's?
How much it, I mean-
Yeah
... I would say in the ballpark of 5%-10%.
Okay. So, volume-wise, it's maybe down low to mid-single digits, perhaps?
Yeah. I would say that, I mean, especially the Easter effect is something you should take into account, which should affect April in a positive way.
And if you look at the margin in the quarter, I know that Q1 is seasonally low, but you mentioned a few effects here during the quarter. Obviously, the long and cold winter, yeah, the Easter effect, also, I guess, the fierce pricing environment and also a bit of a sluggish market. Could you help us to rank these effects in a way?
I mean, the rank number one, I would say, is the low new production activity in that sense. As I mentioned, it was down somewhat. If we take a look at our pure play new production players, the revenues for them was down somewhat in the ballpark of 40% in Q1. So, that is, of course, affecting. And then, I would say, I mean, unfavorable weather, Easter effects, if I rank them one, two, three, in that sense.
Mm. Okay, very clear. And if you look at the start here in April, demand-wise, obviously, you have a tailwind on from the working days, but how is it April looking so far? I guess the weather has clearly been at least better.
Yeah, absolutely. I mean, this is when the services start in the new renovation cycle to a large extent. So, absolutely, the high seasons have started well. I'm pleased with the development so far in April, activity-wise.
Also, you mentioned on the margin here in the backlog. I mean, how do you ensure that the margins are sort of healthy and taking at the right level? I guess the project margin often tend to look quite healthy once taken, but then it's up to project execution and other factors that comes into play as well. Have you done any changes in the way you price your projects? Is it more or less fixed price projects, or is it any other way you making you certain that the margin in the backlog will or looked better, I mean, also when actually being delivered?
Mm-hmm. I mean, of course, we are working, as you know, with fixed prices. That is our strategy where we see creating the most value. But I would say that we have an internal matrix on how large a contract one, let's say, project manager and then subsidiary CEO going up to various levels can approve. So, more diligence there, I would say, that's one effect from the new organizational structure. That's from the first of November last year. So, I would—but we have to also be clear that the order backlog margin is—I mean, we have not followed that closely, what we've done now, let's say in before the IPO.
So, we have not the huge amount of data in that sense. But of course, it's stable to positive in the development, which is all else equal, healthy for us.
Okay, very clear. I mean, also, on the cash flow side, a bit soft here in Q1, leverage is trending upwards. But you also said that you're eager to continue to acquire companies. How does that square? Is it, then you must have pretty, pretty, pretty good outlook for the cash generation for the year 2024? Or are you willing to take up leverage a bit further, given that it's maybe a trough year? Or how do you look at the capital allocation here?
So, it's a multitude of factors affecting that, of course. One factor is then, as I mentioned, with the Elenta acquisition, you can be using your tools in a more efficient way, where you don't have to acquire 100%, which we have done historically. And you can, I mean, enter into agreements with these acquisition targets in various, let's say, acquisition matters in that sense. So, I'm comfortable around that, and we are also comfortable, of course, around cash flow generation in that sense. So I mean, various amount of factors and also, of course, multiples paid is not to be forgotten there, the price of the actual targets.
So, I mean, in 2023, if we go back to that year, I think we mentioned that before to you, Carl, that we were actively taking the multiples paid into account, into that sense that we were more cautious around multiples paid. But I would say the start of the buyer's market, which I referred to earlier, was absolutely in 2023, and we see that ongoing as well. But of course, there's always a discussion with the sellers around the price. So, with that said, even though we have multiple opportunities, I would say that it takes two to tango, if you understand what I mean.
I'm certain that we will reach agreements here with plenty of opportunities, acquisition opportunities going forward as well, and not worry that in that instance around the current debt levels.
Okay, very clear. And the final question is around the cost levels or SG&A. You mentioned that you've taken out some costs here. Is that fully materialized during the quarter? Could you elaborate on how many FTEs you've taken out, including perhaps, I mean, both temp workers and sub-suppliers as well, or subcontractors, sorry, and if you plan to do more here?
Yeah. So, we mentioned that in last year, that we've made some, you could say, adjustments to the workforce in the ballpark of 100 people, which is then affected by this, you could say, lower activity levels, compared to our workforce of around 2,000. So, that is in terms of how many affected. But I would say that, with the positive or the backlog development, we have actually kept more than that were announced to be affected in that sense. They announced was more in the ballpark of 200.
So that, I mean, all else equal, that is, a positive for us, where we see that we can rehire people here during the spring due to the demand for our specialist and renovation services.
Mm. Okay, very clear. Thank you.
Thanks.
...The next question comes from Sofia Sörling from Carnegie. Please go ahead.
Yes, thank you. Hello, Martin. Hello, Casper.
Hello, Sofia.
That's a great question from previous speakers, so I have an additional on the regarding the order book. Could you say something more about the order trend during the quarter in terms of January, February, and March, and in comparison to previous, not only last year, but previous Q1, quarters? That's my first question.
Yeah. So, I mean, if taking the larger trends for us, I would say that often in the first half of a year, it's a positive where you build up the order backlog and you execute it more or less. And to say that Q1 was no exception. We saw strengthening in all three months here, actually in first quarter. So, January, February, and March, in that sense. So,
Yeah. Also, can you give some more details around the different services and the demand regarding the different products and services during the quarter? Has that-
Yeah.
-seen a quite significant, differences between them?
You, you mean in the order backlog?
Yes.
Yes. So, what stands out is renovation is the positive, if you just would take out renovation versus new production, it's the renovation orders that are growing yearly. And remember here then that Sweden is the country where we have the most new production, and I would say that most affected, yeah, of the current market environment, and that's in the Nordics, for us at least. And we also mentioned here that positive development are in the countries outside of Sweden for us.
All right. And no differences between the different type of services and products?
I mean, I would say no. In general, it's a healthy demand, whether it's masonry, plastering, roof or windows.
Okay. And you mentioned about the competition, and that it's continued to be quite fierce during Q1. But should we interpret that this fierce competition will ease already in Q2, or is this something that you see will continue all through Q2, Q3? Or what is your expectation?
I would say it's too early to tell. And we are following things such as amount of bankruptcies in Sweden, as an example, then where we've seen. If you take it- you can take that back, look at that historically. If you go back to, let's say, in the nineties crisis, then the amount of the construction companies that went bankrupt was in the ballpark 94.5% of all the- of all the construction companies, bankrupt in the ninety-four in Sweden. Then that eased off, and it was around a low of 1% going between the years, let's say, 2005 to 2023, but then or 2022. Then in 2023, 2024, we're doubling that.
So, let's say in the ballpark of 2% of all the construction companies went bankrupt here in 2023. But with that said, there's so much more companies now compared to 2009. That is, I would say, an interesting part of the puzzle here going forward, where we look at closely and all else equal, with a larger amount of bankruptcies, the fewer starts of new players in that sense would be positive for us in the competition-wise. But I would also say that to take a look at the order backlog development, the customers are choosing us for a reason. They see us as a safer player, and
Quality, and the customers in upgrading their buildings, which we are eager to do, of course.
All right. And, yeah, and pretty soon we will have a new decision about the interest rate from the Central Bank here in Sweden. So I'm curious about how is the discussion with your customers? Does this matter quite a lot for you, if they will keep it unchanged or decrease it, or in the short term, positive, negative impact, would you say?
Yeah. Yeah, I would—I wouldn't say that it has a super huge importance in, because the renovation demand is there, whether the interest rate is high or low. So, in that sense, of course... I mean, if it can increase the sentiment, as I mentioned, around the new production levels, that is, of course, a positive. But on the renovation side, it's not that important, I would say. But of course, all positives are positive for us, so, we would—we would welcome, of course, lower interest rates from these levels.
All right. Okay, thank you. No further questions.
Thank you, Sophia. Thanks.
There are no more questions at this time, so I hand the conference back to the speakers for any written questions and closing comments.
Yes, we have received a few written questions as well. I think we have covered some of them, but we can, we can go through and see what there is here. So, first off, I think we touched upon it, but is it possible to quantify the negative impact from seasonality compared to last year?
Mm-hmm. Yeah, so, I mean, last year was then, as I mentioned, clearly positively affected by the higher new production levels. I mentioned that earlier in the ballpark. Yeah, if we take our pure play, new production players, the sales development for them in Q1 2024 was somewhere around 40% down compared to Q1 2023. So, that is a quantification around that, I would say. But of course, Easter is also a negative for Q1 in that sense. I would say that it was around 4 working days or somewhere around that. And that is then obviously, and especially negative for Norway and Denmark, I would say, where they have somewhat longer Easter holidays than in Sweden.
Do you expect a lower margin in coming quarters due to low levels of new construction/new buildings?
So, we don't give any guidance around the margin in that sense. But of course, I mean, we are positive around the future.
Great. Then on somewhat the same theme, what do you expect in regards of personnel costs in the coming quarters?
Yeah. So, I mean, personnel cost is, of course, this is a clear, I mean, seasonal thing for Fasadgruppen Group. We have an overhead, which is in, in fixed in, in that sense, around the year. And this has been the, the factor for all facade companies for, for a large amount of years. So in Q1, you can say that we have two large overhead. It depends on how you see on things. But, but of course, when the productions ramp up in the spring, then I would say you're almost, almost undermanned in, in that sense. So that is a balancing act that we have to, to take into account each year. So this is not a new phenomena in, in that sense around personnel costs.
So, I'm not worried around the personnel cost per se, that's just more of a fact that our seasonal company is affected by the Q1 due to natural causes such as temperature.
And then two more questions on the margin in the backlog. I think they're a bit on the same theme, so we'll, we'll go with one. Just to confirm, your adjusted EBITA margin in the backlog is stable compared to the adjusted full year 2023 EBITA margin.
Mm-hmm. Mm. As I mentioned that in Mark's question here, and there was, I mean, if we refer to quarter-over-quarter, in the backlog, margin.
Last one: Does it exist any economical help by the government in order to achieve the objectives of reducing emissions?
Well, of course, it depends on which government you are referring to. We are acting on four different markets here. But I would say in Sweden, I would say maybe stands out, there's not that many financial aids in that sense, compared to, let's say, Denmark and Norway, which have more of those. But of course, I think it's a combined package that the market needs to in order to reach the future emission targets. And I think that the state is in all of our countries, the states there are prone to assist in whatever way.
So, I think that the renovation wave that is coming will have two severe factors taking into account on how we can assist the customers in achieving all of these greater emissions, as I mentioned before, and that is the workforce. There will be a lack of workforce due when the renovation wave truly sets in. It also will be a question of capital, who will pay for all these upgrades that they-- that's coming. If you can get some financial aid from the states, that would, of course, be beneficial, and it varies between the states, but we would, of course, welcome more of those aids.
Excellent. So, no more written questions. Any concluding comments?
Yeah. I think we've given you the clear answers that we could here, and hope to see you again in the next conference call due in August. Thank you very much, everyone, for today. Have a great day.