Welcome to Inwido's Q2 Presentation for 2022. This conference call is being recorded and will be posted on Inwido's and Financial Hearings' webpages afterwards. Participants will be on listen only mode, and there will be an opportunity to ask questions afterwards. Today, I am pleased to present CEO Henrik Hjalmarsson and CFO Peter Welin. With that, I will hand over to speakers. Go ahead.
Thank you very much. Good morning, everybody, and welcome to the presentation of Inwido's second quarter and first half results 2022. My name is Henrik Hjalmarsson. I am the President and CEO, and with me I have Peter Welin, CFO and Deputy CEO. We will spend the coming 25 minutes or so going through a short intro to Inwido, an update on the Q2 trading and first half , an update on M&A and an outlook. Peter will then go through a bit more of the details of the numbers in the quarter, and I will wrap up with a summary after which there will be plenty of time for questions. Next page, please. Page two.
For those of you who might be new to Inwido, we are a leading window group in Europe, a clear market leader in the Nordic region with a strong and growing presence in the UK and Ireland. We have net sales of SEK 8.6 billion rolling 12 months and a return on operating capital of 17.9%. We employ roughly 4,900 people in the geographies you can see marked in dark blue on the right-hand side of this chart. We market and sell all the fantastic brands you can see on the bottom part of the slide. Next page, please. Page three. We operate with a clear and over time, very proven value creation model, which is our approach to drive sustainable shareholder value over time and in a sustainable way.
These are five elements that are the basis for the value creation model that ensure that we drive long-term and cost-efficient both customer and employee value in a sustainable way and hence then shareholder value. We do this based on our proven ability to improve the businesses in the group over time and obviously plug in acquired businesses, being sensitive to the start point to generate as much synergistic value as possible from them being part of the group. Next page, please. Page four. Looking then at some of the highlights of the quarter. In the second quarter , we continued to see fairly healthy markets in general, and we closed the quarter with a record high order backlog. We posted a good growth rate and with a ninth consecutive quarter of organic growth.
Very pleasingly, we added two strong businesses to the group with the acquisition of Westcoast Windows in Sweden and Hyvinkään Puuseppien in Finland. We saw continued growth and good profit development in three of the four business areas. However, as also commented in conjunction with the presentation of the first quarter , we've struggled with the implementation of growth enhancing investments in business area e-commerce, which has impacted the factory efficiencies negatively and in combination with the investments in future growth and unfavorable product mix has also then impacted margins negatively in the business area. In the quarter, we've continued to see increases in costs for input materials. However, towards the back end of the quarter, we're starting to see a stabilization at high levels. Next page, please. Page five.
Looking at the numbers, it's really pleasing to see posting of another record quarter for Inwido. Sales grew 23%, or 15% organically to SEK 2,475,000,000 , with operating EBITDA growing nicely by SEK 30 million to SEK 297 million. Operating EBITDA margin slightly down, mainly driven by margin decrease in business area e-commerce to 12%. Order intake continued to grow 11% up or 7% growth adjusted for acquisitions, which means that the order backlog increases year-over-year by 32% to SEK 2,687,000,000 . With continued good cash flows, we still stand with a very strong balance sheet, despite an increased dividend paid out in the quarter and closing of two acquisitions.
With a net debt versus operating EBITDA of 1.0, down from 1.2 last year, we're looking at it excluding IFRS 16, then 0.7 times. Next page, please. Page six. Looking at the development, the first six months, sales growth of 24%, organically +17% to SEK 4,548,000,000 . Operating EBITDA growing healthy to SEK 447 million with a margin then at roughly the same level as last year, 10.3%. LTM operating EBITDA of SEK 997 million and a LTM EBITDA, first time ever over SEK 1 billion at SEK 1,008,000,000 .
We closed three good acquisitions in the first half of the year with the Dekko Window Systems in the UK and as I mentioned, Westcoast Windows in Sweden and Hyvinkään Puuseppien in Finland, and continue to make good progress on earnings per share, growing to SEK 56.74 per share. Next page, please. Page seven. Looking briefly at the business areas, starting with Scandinavia. We saw continued good growth in all three markets, Denmark, Sweden, and Norway with good profit improvements in Norway and Denmark. We've seen the acquisition of Westcoast Windows contributing positively already from the start to sales and profit. Overall, we've done a good job adjusting prices to match the higher input costs and compensating for inflation.
All in all, this means that the sales grew by 21% to SEK 1,360,000,000 . Operating EBITDA margin basically same as last year, at 15.1%, and the order backlog at the end of the quarter up 18% year-over-year. Next page, please. Page eight. If we look at Eastern Europe, we've seen overall healthy consumer and industrial markets, which has helped us generate a strong growth in the quarter. The largest business unit in Finland grew very strongly and increased profits, and we've seen an overall positive continued development in the business units in the Finnish geography, which then combined with the acquisition of Hyvinkään Puuseppien. We have in the quarter continued to see disturbances and turbulence in the input material supply chains.
However, I'd say during the quarter, we've done a good job managing this with very limited impact on our ability to deliver and service our customers. As I mentioned earlier, the prices for input materials has continued to increase in the quarter, but at the back end of the quarter, then started to stabilize, however, at historically high levels. Next page, please. Page 12. As most of you knew, value creating M&A is a very important part of the shareholder value creation model for Inwido and a key growth driver. We see a continued considerable opportunities in continuing to consolidate the fragmented window and door market in Europe, and therefore accelerating our M&A activities to deliver material acquired growth on an annual basis.
We've made good progress with three acquisitions in the first half of the year , and we see positively on the opportunities for M&A, both in the short term and in the longer term, not the least given the strong balance sheets we have. We strive for post to multiple arbitrage, and we try to leverage two-step acquisitions in the case of standalone businesses. We evaluate and assess potential acquisitions with the eight dimensions you see illustrated in the picture on the right-hand side of this chart. Next page, please. Page 13. A few words on the acquisitions we closed in the quarter, starting with Westcoast Windows, which manufactures windows, balcony doors, and sliding doors in wood and wood-aluminum with 80 employees in a production facility in Trollhättan in Sweden.
Sales of roughly SEK 164 million in 2021. Westcoast mainly sells the product to retailers, but also have an export operation on the ground in the UK. Westcoast will operate as a separate business unit in business area Scandinavia, but we see considerable both operational and commercial synergies with our existing business, both in Sweden and actually in the UK. We've acquired 100% of the shares of Westcoast Windows. Next page, please. Page 14. We also added another strong business to the Finnish group of businesses with the acquisition of Hyvinkään Puuseppien , which was founded in 1958 by today's CEO's father, and today's CEO is Ilkka Turpeinen. It's a business that specialized in solid wood doors and made-to-measure windows for the Finnish market.
Got 16 employees in a production facility in Hyvinkään in Finland, with sales of roughly SEK 40 million. Hyvinkään Puuseppien will operate as a separate business unit in business area Eastern Europe. However, also in this case, we see considerable both commercial and operational synergies with our existing businesses in Finland. Here, the existing owner will retain 35% of the shares for a period of at least two years, and we will strive together to develop the business for future success. Next page, please. Page 15. Given the importance of sustainability for the long-term value creation for the Inwido Group, a few words on the outcome. In the case of the sustainability KPIs, the five of these are measured on a quarterly basis, and they have a one-quarter lag in reporting.
The numbers you see here are actually the numbers for the first quarter 2022. Of the five quarterly KPIs, I'm happy that we made progress in four of these. We had a slight setback on sick leave, but as you may remember, the first quarter this year still had some considerable impact from the COVID pandemic, which has obviously impacted sick leave negatively. I'm particularly happy about continued progress in terms of reducing our hazardous waste, which decreased by 16.8%. Very, very importantly, and a topic that's very close to my heart personally is the lost time accident development, where we saw a decrease with 17.1%. Obviously, still very far from the long-term ambitions we have and the vision of taking this to zero, but a good step in the right direction. Next page, please. Page 16.
Looking then at the outlook, we closed the second quarter with a record high order backlog, which will obviously support sales in the near term. We see continued price increases in the quarter. However, the input material price is starting to stabilize at the high level at the back end of the quarter. We're in a market that's characterized by high inflation, increasing energy costs, and rising interest rates, which will obviously reduce consumers' disposable incomes. However, we see a continued focus on the home and a renewed interest for energy savings, which creates new opportunities on the households. We continue to have a very optimistic long-term outlook with regards to the need for energy-efficient windows and doors to support a sustainable and good life at home and at work. Next page, please. Page 17.
With that, I'm going to hand over to Peter, who's going to take you through the numbers. Peter, please.
Thank you so much, Henrik. Then we go to page 18, please. On this page, we can see the income statement for the group. To the left, we can see the Q2 report for this year versus last year. In the middle, the year-to-date result, the first six months, and at the right, the rolling 12-month. I must start with the operating EBITDA for the rolling 12-month. For the first time ever, the EBITDA is above SEK 1 billion, and the operating EBITDA is just shortly below SEK 1,997,000,000 . For the first time ever, Inwido has a rolling 12-month EBITDA result just above SEK 1 billion. If we now start with the quarter, sales was +23% in the quarter. Organically, it's +15%.
The margin declined in the quarter from 27.1% down to 24.9%, a decline of 2.2 percentage points, mainly due to the inflation, material inflation. Operating EBITDA margin was down 1.3 percentage points compared to last year from 13.3% down to 12%. We have some higher overhead costs, mainly driven by sales administration. We have some sales and marketing activities this year that we didn't have last year, so it was a higher cost level. However, the increase was not as high as the sales increase, and thereby a little bit better EBITDA margins decline compared to the gross margin decline. Operating EBITDA was +SEK 30 million, an increase from SEK 267 million to SEK 297 million.
The EBITDA was +SEK 29 million or equal to increase, an increase by 11%. The difference between operating EBITDA and EBITDA is the acquisition cost in the quarter. Further on the income statement, we can see the profit after tax is +12%, and the earnings per share is +11% compared to last year, SEK 3.29- SEK 3.66 this year. If you now look for the first six months, January to June, sales is +24%. Organically, it's +17%. Operating EBITDA has been improved by SEK 89 million from SEK 388 million- SEK 477 million, an increase by 23%. The margin is slightly down compared to last year, 10.6%-1 0.5%.
Further on the income statement, we can see the profit before tax is +16% compared to last year, and the earnings per share is +15% compared to last year. From SEK 5.00- SEK 5.74 . On a rolling 12-month basis, we have now sales of SEK 8,620,000,000 . We have an operating EBITDA of SEK 997 million, equal to 11.6% operating EBITDA margin, and we have an EBITDA just above the one billion mark, SEK 1,008,000,000 . Then EPS LTM is now SEK 13.03 . If you then turn to page, we go to page number 19. On this page, we can see the sales development as well as the order intake development for Q2 2020 to 2022.
To the left, you can see the sales development, and to the right, you can see the order intake development. Sales was +23% in the quarter. Organically, it's +16%. The increase, the 23% increase equals SEK 466 million. Of this SEK 466 million, SEK 84 million is acquired growth, and SEK 52 million comes from the currency impact. We have a weaker Swedish krona, so when translating to Swedish, we have a positive currency impact of SEK 52 million. Organic growth is SEK 330 million equal to 15%. In Scandinavia, we were +21% in total. Adjusted for currency was +17%, and acquisitions is +17%. East was +30%. Organically, it was +25%.
We can see high growth in Finland in the quarter. E-commerce was in total -2%, again -8%. Western Europe was in total +17%, organically +13%. The order intake in the quarter was also up. The total order intake was +11%. However, when we make acquisitions, the acquired backlog is booked as order intake. So when adjusting for acquisitions, the order intake was +7% in the quarter. Scandinavia had a total order intake growth of 8%, and they acquired Westcoast. Eastern Europe had a total order intake growth of 16%, and they acquired Hyvinkään Puuseppien . e-commerce was -12%, and Western Europe was +68%, and they acquired Dekko.
However, we also have a good growth when it comes to in West when it comes to Ireland. We had a good growth in the quarter compared to last year. If you then turn page, we go to page number 20. This page is showing operating EBITDA and operating EBITDA margin for 2020 to 2022. To the left, we can see the development in the quarter, and to the right, we can see the development for first six months. We start with the quarter, and operating EBITDA reached SEK 297 million, which is the highest Q2 and the highest quarter ever when it comes to result in SEK. The margin was slightly down from 13.3%-12% . The margin was down due to inflation as well as the development of e-commerce.
Scandinavia had more or less the same margin as last year, 15.1%, or 15.2 last year. East had also slowed and minor decline from 9.1%- 8.8%. In West, we had a higher margin this year compared to last year, an increase from 5.3%- 9.9%. In e-commerce, we had a decline from 20% down to 7.6%. The inflation, as Henrik said, continued in the quarter, but stabilized end of the quarter, but we had a high inflation in the beginning of the quarter. Inwido, most of the business units within Inwido have increased the sales prices in the quarter, and that will give a full impact second half of this year.
Looking at year-to-date, the year-to-date improvement is SEK 89 million when it comes to EBITDA compared to last year. When comparing to 2020, we have improved the results by SEK 226 million. The margin is slightly down compared to last year from 10.6%-1 0.5%, above the margin of 2020 of 7.9%. Compared to last year, Inwido had a good margin development in the first quarter , and then the second quarter , as I said before, the margin declined by 1.3% units. In total, we are slightly behind last year in operating EBITDA margin. If you then turn page, we go to page number 21. This page is showing the order backlogs from end of each quarter from Q2 2018 to Q2 this year.
The backlog is up by 32% compared to last year, equal to SEK 658 million higher backlog compared to last year. It is up 100% more or less, more than 100% compared to the backlog of two years ago, June 2020. If you then adjust the backlog with acquisitions, the backlog is +26% compared to last year. Scandinavia is +18%, East is +76%, e-commerce -3%, and West is +5% compared to last year. If you then turn to page number 22, this page is showing the return on operating capital development in Q2 2018 up until the Q2 this year.
We had a good improvement in return on operating capital, and we have improved the KPI the latest 10 quarters in a row. From 10.2% in December 2019, now up to 17.9%. In the years 2020 and the year 2021, we improved the cash flow, and we reduced the average operating capital by about SEK 600 million. Comparing December 2019 compared to December 2021, the average operating capital is down SEK 595 million. Now the average working capital has increased, and this quarter it has increased by SEK 170 million, and that is due to acquisitions. We have acquired companies and thereby we have a higher average operating capital.
At the same time, the rolling twelve-month EBITDA has been improved by SEK 29 million during the second quarter . Thereby the margin or the KPI has been improved from 17.8% end of Q1 to 17.9% end of Q2. We are still then above the target of 15%. If you then turn page, we go to page number 23. This page is showing the net debt development, including as well as excluding IFRS 16, and it's also showing the net debt versus operating EBITDA, including as well as excluding IFRS 16. The net debt, including IFRS 16, is today SEK 25 million lower compared to end of June last year. Despite the dividend payments now in May this year of SEK 356 million, and also despite the acquisitions we made during this year.
The net debt plus EBITDA is now down to 1.0 including IFRS 16, was 1.2 last year. Excluding IFRS 16, it was 0.7 compared to 0.9 last year. The IFRS 16 debt is about SEK 400 million right now, SEK 396 million in detail. Looking at the net debt, it has increased during this year, and that is due to the dividend payments, the acquisitions and also seasonality. We have a quite high seasonality within this business, and the working capital is always at its lowest in December, and thereby the net debt is the lowest in December. The net debt also includes the earnouts as well as expected payments for call and put options. We have earnouts in the Dekko acquisitions, and that earnout is including our net debt.
We also have valuations for future call and put. We don't own 100% of some of the acquisitions. We have a minority between 25% and 35% in the latest three acquisitions. Or sorry, not the latest, but in three of the four latest acquisitions. Those expected payouts for those call and put options, they are included in the net debt as well. If you then turn page, we go to page number 24. On this page, we can see the development of sales and operating EBITDA margin since the IPO in 2014. Sales has been growing by 75% since the IPO on a CAGR of 8%, and the operating EBITDA has more or less doubled since the IPO.
The margin has been improved from 10.2%- 10.6%. Slightly lower margin now rolling twelve months compared to full year last year, and that is due to inflation and the e-commerce, as I said before. I now hand over back to Henrik. He will make a summary, and then we will open up for questions.
Next page, please. Page 25. In summary, in the second quarter , we saw continued good growth and the ninth consecutive quarter with organic growth and into the third quarter with a record high order backlog. We added two more strong businesses to the Inwido family with the acquisition of Westcoast Windows in Sweden and Hyvinkään Puuseppien in Finland. We see high inflation, increasing energy costs, and rising interest rates impacting the consumers' disposable income. We also see a continued focus on home and renewed interest for energy saving, creating opportunities among the households. With that, next page, please. Page 26. We open up for questions. Operator, please.
Thank you. If you wish to ask a question, please press zero one on your number pad. If you wish to withdraw your question, you may do so by pressing zero two. There will now be a brief pause while questions are being registered. Thank you. Our first question comes from Rasmus Engberg from Handelsbanken. Your line is now open. Please go ahead.
Hi. Thank you. Thank you for a very thorough presentation. I had two questions, if I may. The first one is when you say that order intake slowed towards the end of the quarter, do you mean that it declined year on year, or do you mean that it slowed, but was still in positive territory? That's the first question. The second question is- You had margin pressure from inflation in the second quarter . Do you expect to have this pressure also in the third quarter , or have you caught up? Those were the two questions. Thank you.
Thanks, Rasmus. Responding to your first question, it depends a little bit on whether you include acquisitions or not. Towards the back end of the quarter, the growth rate in order intake definitely slowed down. Excluding acquisitions, there was a slight decline year-over-year in order intake. Excluding acquisitions, that is. If you look at the second question, which I lost you for a little bit there, but I think was around the margin and the input material cost increases. Given that we normally have, let's say, about a quarter lag in terms of price increases, I think we've actually done a better job than normally now during this period protecting our margins.
You'll see that if you look specifically at the margins of, for example, Scandinavia. Given that we see stabilizing input material prices towards the back end of the quarter, we expect to be able to be in a more, let's say, caught up state towards the back end of the third quarter .
Right. Some negative impact, but that's leveling out towards the end of the quarter. That's what we should be expecting at this point.
True. Correct.
Okay. Thank you so much.
Thank you.
As a reminder, if you wish to ask a question, please do so by pressing zero one on your number pad. There will now be a brief pause while questions are being registered. Thank you. Our next question comes from Sofia Sörling, Carnegie. Your line is now open. Please go ahead.
Yes. Thank you, and hello, and thank you for your presentation. I have a couple of questions, and they are also related to this comment on slowdown in orders by the end of the quarter. Would you say that it's in general for the group, or is there in any specific geographical markets that you have noticed this slowdown? Also perhaps if you can give us some color on if it's within the consumer or the industry segment. Thank you.
If we look at specifically the development relating to that comment, what we have seen is we had a very strong order intake progression in the first half of the quarter in Eastern Europe. Given the delivery times, and you'll see that the order backlog is up 76% year-over-year. Given the delivery times in the market there, we did see some decreases in the order intake activity, particularly then in Eastern Europe towards the back end of the quarter.
Mm.
We actually continued to see more healthy activity levels in Sweden. Throughout the quarter, e-commerce order intake has been at a lower level year-over-year, mainly then linked to the supply chain challenges, which has impacted our ability to take new orders. There we actually saw a slight stabilization or rebound at the back end of the quarter. The biggest single driver of that slight decline, excluding acquisitions, is actually Finland and Eastern Europe.
All right. Okay.
To your second question, it's-
Mm
It's fairly evenly spread between industry and consumer.
All right. Perhaps I will continue then. In previous quarters you have expressed the longer lead time. Is this still the case? Or, what is your current expectation on lead times in your existing order backlog?
Yes, that is correct. Our lead times are still clearly above average. If we look at, let's say, a 3-5-year horizon. We should remember that, as Peter said, the order backlog is more than twice as high as it was the same time two years ago.
Mm.
Particularly in Finland, but also I would say in Sweden, we are to some extent also in the geographies in Western Europe substantially above normal lead times. As we said, looking only at the year-over-year perspective, in Eastern Europe order backlog is up 76%. That also means that the capacity is not up 76%, so it means that the order delivery times are longer than normal.
All right. Thank you. A last question here about M&A. Are you expecting the same pace of acquisition during the second half of 2022 as the first half of 2022?
I mean, as we've communicated before, it is always a little bit difficult to forecast M&A. I actually five quarters ago made the mistake of trying to project the development during the second half of 2021, where I ended up being wrong, and then instead we did three acquisitions quite quickly here at the start of 2022. We are continuing with the same pace and efforts, but we also have respect for the fact that in many cases we are talking to family owned and led businesses, and that the exact duration of a transaction process is very hard to predict. At the moment, I'd say we're working with the same pace, but the exact progress we'll make is difficult to predict.
All right. Thank you. Sorry, just one last question I forgot. About e-commerce, are you expecting now that the challenges with the production capacity is finalized and that you have more of a normal quarter in the following quarters for e-commerce?
As we communicated in conjunction with the report for the first quarter , we said that the situation was gonna continuously improve during the second quarter . It has continuously improved. From a production capacity point of view, we are almost fully back at the level where we should be. From that perspective, yes. In terms of forecasting, the order intake for the quarters to come is more difficult. From a supply chain perspective, we are more or less back to where we wanted to be.
All right. Okay. Thank you so much.
Thank you.
As a reminder, if you wish to ask a question, you may do so by pressing zero one. There will now be a brief pause while additional questions are being registered. Thank you. There are no further questions at this time from the telephone line. I will hand over to the speakers for any closing remarks. Go ahead.
Okay. Thank you very much for listening in, and for following the Inwido journey. We wish you all a fantastic summer. Thank you very much. Bye-bye.