Welcome to the Fasadgruppen Group H1 2023 results presentation. For the first part of the presentation, participants will be in listen-only mode. During the questions and answer session, participants are able to ask questions by dialing star five on their telephone keypad. Now, I will hand the conference over to the speakers, CEO Martin Jacobsson and CFO Casper Tamm. Please go ahead.
Good morning, everyone. Martin here. A warm welcome to our H1 2023 results. With me in the room, I have our CFO, Casper Tamm, and also our Head of Investor Relations, Adrian Westman . After the presentation, we open up for questions. H1, in brief, we ended the period with a record high order backlog, and we saw a significant cash flow improvement year-over-year. The net sales came in at roughly 25% increase year-over-year, of which 9% was organic. The organic growth came down in Q2 compared to Q1, which was mainly due to the falling material prices, but we still saw some volume increase in Q2.
Looking at the results, the Adjusted EBITA increased by 21% year- over- year, corresponding to a margin of 8.2% for the first half of the year, which is a decrease of some, 30 basis points year- over- year. The cash conversion was pretty good at 86.1% here in the period. Looking on the last 12 months, we had a cash conversion of 98.6%, very close to our target of 100%. The order backlog came in roughly 13% year- over- year better, and we saw several large products won during this period. I can also mention here that we saw increased competition in the metropolitan areas of Stockholm and Copenhagen, which had a negative effect on the margin. Next slide, please.
Looking at our M&A agenda, the latest acquisition was Weldmatic, which we signed here in June and completed in July. As of today, we have five letters of intent signed with various acquisition targets throughout the Nordics in various segments. We just the other week here, entered a new financing agreement of some SEK 2.7 billion, which is roughly SEK 600 million more than before, also meaning that we have roughly SEK 1.1 billion unutilized credit facilities at this moment. This ensures us having a high financial flexibility going forward. Looking into Weldmatic, this is a balcony manufacturer with local production in Denmark.
They had revenues of some DKK 27 million in 2022, their niche is within the traditional craftsmanship within welding, but they have complemented that with a robotics technology, meaning a high productivity for these balconies, producing these balconies in a cost-efficient way. Some of the customers for Weldmatic is one of our current subsidiary, Altan.dk, which we acquired last year. We see several opportunities here to grow our balcony business, as Weldmatic is a complement, or, you could say, pretty similar company to our company called Alnova, which lies in Gothenburg. We see synergies within these companies to learn from each other and also within purchasing. Yes, move forward there. I'm pleased to see that there's a strong demand for energy efficient facade measures here, which we've seen during H1, and believe we'll see going forward as well.
Our product, SmartFront, had an organic growth of roughly 200% here in the first half of 2023. You could say that the customers are becoming more and more aware of the legal requirements around energy efficient buildings, not to say the least, here in the European Union. There are measures here, stating that the renovation rate needs to at least be doubled to become net zero here in the European Union by 2050. All in all, very positive for us. Going forward here, last week, we committed to set a near and long-term company-wide emission reductions in line with the science-based net zero targets. That will be done within 24 months. It's a true step forward here for us in our green agenda.
So we will develop these targets and submit them, submit them to a Science Based Targets initiative here. Also our new credit facility, which I mentioned earlier, will be linked in, in line with these new targets. In the last couple of months here, we've announced several large orders, just to mention a few, Byens, our company in Copenhagen, has announced two orders of a total DKK 220 million. Please note that one of those orders of DKK 155 million was after the period ended here in, in June. DVS Entreprenør , our company in Norway, announced a large order within a tenant owner association renovation. Stark Fasadrenovering , our company here in Stockholm, announced two orders where they will renovate schools.
Front, which have a headquarter in Eskilstuna, Sweden, announced a large order of SEK 160 million renovation in Linköping. To sum up our order backlog, we have roughly 2,000 projects ongoing, and we see that's, that's a fairly okay number of projects going forward as well, the same amount. The average order value here is roughly SEK 3 million. Please note that these large orders are spanning through over several years. If we take a look at the whole, we still have quite small projects in the range of SEK 3 million. With that, I leave it to, over to our CFO, Casper Tamm, that will guide us through some financials.
Thank you, Martin. I will take you through some highlights in the first year financials. Organic growth and good order backlog with improved cash flow characterized the first half year. Revenues were up 25% to SEK 2.45 billion, with an organic growth of 9%. We had 44 companies that were comparable out of a total of approximately 50. Adjusted EBITDA was up with 21% to SEK 202 million, with a margin of 8.2%. Customer pricing could be managed satisfactorily during the first quarter, but was negatively affected by the slightly increased competition during the second quarter. Order backlog was up 13% to SEK 3.53 billion. The order backlog developed strongly during the second quarter, particularly towards the end of the quarter.
Profit for the period, it was SEK 85 million, and basic earnings per share were 1.72 SEK. We had a strong operating cash flow, which improved to SEK 193 million, and the strong development of working capital during the first half year is partly the result of the measures implemented since the turn of the year to improve tied up capital within the group. We will return to about figures later in the presentation. Coming back to net sales, first half year, we had an acquired growth of 16%, and between the periods, we have four new acquisitions, acquisition that has been made. Organic growth reached 9%. We had exchange rate changes had a positive impact on organic growth with 0.4 percentage points.
The considerable impact on organic growth from cost inflation on materials in the first quarter quickly wore off during the second quarter. Still, falling material prices during the period points to a healthy volume growth in relation to the comparison period in 2022. Going to order backlog. The order backlog for comparable companies in at the end of June 2022 was slightly up with 1%, in spite of very strong comparison figures due to cost inflation for materials. The order backlog developed strongly during the second quarter, particularly towards the end of the quarter, and increased by 18%, plus SEK 445 million compared with year-end 2022. Next slide, other than that. The quarter saw an adjusted EBITDA increase of 21% on a year-on-year basis, with a margin of 8.2%.
Customer pricing could be managed satisfactory during Q1 with a positive effect on the margin, but was negatively affected by the increased competition in the metropolitan regions, in particular, during Q2. Looking on the non-recurring items, they amounted to SEK 26 million and included mainly a revaluation of earn-outs with SEK 18 million. Next slide. Some comments on the P&L. Looking on other revenues, in Q2 2023, we have done the reclassification between other operating income and net sales for a sub-subsidiary covering H1 2023, with a negative impact on other operating income in Q2, amounting to SEK 5.5 million. Going down to depreciation and amortization, the depreciation acquired intangible assets amounted to SEK 15.2 million in H1 2023.
Some comments on the other operating expenses. Here we find the negative non-recurring items, like earn-outs. The negative effects from revaluation of earn-outs amounted to SEK 18 million in the first half of this year. Some comments on the net financial cost then. We had interest cost on external debt, which amounted to SEK 38 million in the first half. The increased cost on external debt, with approximately SEK 30 million between the period, is the main reason for the negative development of the EPS, from which was 2.09 in the comparison periods, and 1.72 is in the first half of 2023. Some comments on the balance sheet here. We have now a total balance sheet of SEK 5.2 billion, with a healthy solidity of 41%.
On the asset side, the increase in brand and, and especially goodwill , mainly due to our active acquisition agenda between the periods and has no depreciation included. Between the periods, we had four new acquisitions. On the equity side, between the periods, we have seen offset share issues on acquisitions that added a further SEK 91 million of equity and some warrant payments also, up to SEK 3.6 million. We had a negative impact of the dividend in May here with SEK 85 million. The rest of the change in equity is attributable to comprehensive income between the periods. Looking on the debt side, increased interest-bearing debt from finance institutions was up with approximately SEK 0.4 billion to SEK 1.6 billion, with a net debt of approximately SEK 1.4 billion.
Going to the right-hand side here, our leverage key indicator. Net debt to Adjusted EBITDA, compared to last quarter, was slightly up to 2.4x at the end of the period. Net debt to Adjusted EBITDA pro forma was approximately 2.4x as well then, so on the same level. Our covenant for leverage key indicator indicates a potential headroom for acquisitions financed with our new debt in the range of approximately SEK 500 million for 2023 here with normal multiples. We could go to the next slide, yes. Some comments on the cash flow and cash conversion. The operating cash flow increased strongly to SEK 193 million, and cash conversion up to 86% for the first half of 2023. Really strong figures.
Main reason was the strong improvement in net working capita l change between the periods, this in spite of the major one-off investment in scaffolding during the second quarter, which totaled SEK 22 million. The improvement in net working capital is due partly to us not purchasing materials early, as was done last year to lock in lower purchase prices, partly due to the measures that we have implemented to improve the working capital since year-end. With this, I leave it over for Martin to do some concluding remarks.
Thank you, Casper. Yes, actually here in H1, if we're looking at last twelve months, it was the first time that we surpassed a revenue of SEK 5 billion. As you know, we have a growth target of growing 15% annually over a business cycle. As a clarification, if we should continue to grow on that path, then we will reach SEK 10 billion by 2028, and I like to keep it simple. This is a clarification around the organization and now also to you here that we aim to have a revenue of at least SEK 10 billion by 2028 and a margin of 10% by then. This first half year, we saw a record high order backlog, many of our companies are actually fully booked this year.
We saw tougher competition here in Stockholm, Copenhagen, and we will continue to focus on the project margin. We can also mention here that in, in our other markets, except in Stockholm and Copenhagen, we have not seen that increase in, in competition in that sense. We also saw the strong cash flow improvement, which was very pleasing to see. All in all, we have solid conditions now for continued M&A delivery and profitable growth. With that, we open up for questions.
If you wish to ask a question, please dial star five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial star five again on your telephone keypad. The next question comes from Max Bäck from SEB. Please go ahead.
Good morning, Martin and Casper. Nice to hear you both. A few questions from me, if that's all right?
Yeah, sure.
Perfect. Just first off, starting with the EBITDA margin. Here in Q2, we saw a slight decline year-over-year with some 0.5 percentage points. What should we expect for the second half of the year here? Is it possible for you to increase the margins year-over-year, or should we expect some pressure on the margin given the heightened price competition in Stockholm and Copenhagen?
Yeah. I mean, what, what we said before 2023, so that we had better conditions now, with more for improved margin during 2023. We did not count with this, with an increased competition in this sense. I mean, in general, a lower material price environment could be beneficial for us. The customers feel that they can buy our services cheaper, so to speak. Also, remember, we have a lower margin on just the pass-through on material. If you just say, take our, let's say, personnel expenses in a margin in that sense, that's, that's higher. That should be beneficial, but then you have the competition situation as well. You have both the sweet and the sour in that sense. We remain positive, and we have our target of, of, a margin above 10%, and that's what we're aiming for, absolutely.
Okay, perfect. Could you perhaps remind us how much Stockholm and Copenhagen together accounts for share of sales for the group? Do you have a rough number on that?
How much of the revenues come from Stockholm and Copenhagen?
Yeah. Yeah, yeah.
I mean, I would say, some 30%, 30%-40%, around there.
Okay, perfect. Then in terms of the organic growth, as you, as you highlighted yourself, quite the notable deacceleration compared to Q1 here in Q2 with your % organic growth. Could you rough the number also, the split between price and volume? Is it correct to interpret that the price component in Q2 was indeed negative?
We can mention here that in Q2, it was a trend that was broken because the last 10 quarters before that, the material prices had grown faster than the revenues, so to speak. This was the 1st quarter for the last 10 quarters or so, that the material prices actually grew slower than the sales, indicating that, yeah, the material prices are falling in that sense. It's quite easy if you look at. You can look at maybe natural gas prices or lumber prices, something like that. You can see it's a dramatic drop, here in, in, 2023 and, compared to, to the last couple of, years, which been, which we've stated several times now, very dramatic increases, but also very dramatic now on, on the downside.
Mm. I mean, I expect this effect to remain here in the second year, second half of 2023. Should we expect negative organic growth in Q3 already for you with the price component taking out its toll on the total organic growth?
Yeah. It's, it's, it's actually quite hard to tell since we have this strong order backlog now with-
Mm.
I mean, I mentioned several companies fully booked. You have the material price component, of course. We, we can't see into the future where the material prices are heading, but should they continue decreasing in this way, that's absolutely having a negative effect on the organic growth in that sense, so to speak, but it could, it could have a, a beneficial impact on the margin.
Yeah.
Yeah, sweet and sour there once again.
Okay, perfect. That was all from me at the moment being. I'll jump back in the line. Thank you very much.
Thank you, Max.
The next question comes from Carl Ragnerstam Nordea. Please go ahead. Carl Ragnarstam, Nordea, your line is now unmuted. Please go ahead.
Since we can't hear you, Carl.
There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.
Okay. Yeah, thank you very much for taking the time. We hope to see you again in the third quarter results. Thank you very much.