Jörgen Wigh speaking, CEO of Lagercrantz. Together with me here we have Kristina as well, CFO. Welcome to you. Welcome to everyone. We will run as we normally do, a quarterly presentation here for our Q2 report, our fiscal year, and it starts right now. We have a lot of attendance today, so we will put you [on mute] collectively so that we don't disturb each other. If you have something, we will open up for Q&A at the end of the presentation, which will usually around 40, 45 minutes. We will open up for Q&A at the end. If you have something urgent, of course, and you do that by unmuting yourself with what?
With star and the six.
Star six, and you unmute yourself. At the end, I think that will be for that. Good to know then. Thank you. Good. Welcome, everyone. We will run through the presentation that has been uploaded to our website on lagercrantz.com. You can all get it there. We have run these sessions in Swedish a few times, but now we have changed to English because we feel that there is a lot of international interest, and we will run it that way instead. Therefore we will go through the English presentation, which, of course, is the same as the Swedish then. The interim report was released this morning, and I think some of you commented as a solid quarter, and I think that is a good word for it. We will run through the presentation, which is normally put into three sections.
The first section is giving those of you that are new, a short introduction to Lagercrantz and Lagercrantz Group. We will go through the numbers that was released this morning. At the end, we have a third section with what we have called all importance ahead, giving some comments on things that we think are important to us and crucial things in the development of Lagercrantz. I will go through the presentation and round out. I'll try to also mention the pages we're on so that you can all follow through the presentation. We will start on page number two then. That is an overview of Lagercrantz Group. We are a technology group, a tech group with leading position in niches.
All our companies, there are 50 at the moment, or 55 even, companies that are working in different niches trying to achieve market leadership in their specific niche. What they have in common is that they all are working business to business, serving business customers. They're working under their own names, each of the companies, we also have M&A and acquiring companies as a key DNA of how we build the group. We try to make four to six acquisitions per year, which I think is a very reasonable target along the way here. We have put our different companies into the four divisions, the Electronics, Mechatronics, Communications, and Niche Products divisions. You can also see how we then run the companies in a very decentralized way, with them putting up P&Ls and balance sheets and running them as profit centers.
You can see how they're distributed between the divisions there up to the left. You can also see over to the right where we are present geographically, and we have our presence in Northern Europe, but also some footholds in other markets where we see opportunities for growth when we go for exports, and especially in the U.S., but also in China and also in India, we have some footholds, as you can see over to the right there in the picture. We have been listed as a separate company since 2001, and have now on the Stockholm Stock Exchange and currently on the Mid Cap. Moving over to page number three, we can look a little bit at the different technologies and companies that we have within the group. Within the Electronics division, we used to work quite a lot with electronic components and distribution of electronic components.
We still have some of that left, we have also really pushed for other types of products, more of modules and semi-finished goods rather than components. We've also moved into more of proprietary products, which is a common theme for the full group, to have more of proprietary products within the group, I'll come back to that. That we also pushed within Electronics division. The current biggest division is then the Mechatronics division, which has put up in the last 10-15 years, which as opposed to electronics, they're working more with electrics and connection systems and cable harnesses and other types of infrastructure products. Within Mechatronics division, we have also our biggest profit center, which is the Elpress, but also a few others that are very important to us, the Elkapsling and also the Frictape are very important within Mechatronics division.
The Communications division is the third division. We're building along two lines, really the technical security, where we have a number of companies. It used to be quite a lot around electronics-based technical security, surveillance-type companies, but we've also then moved now into more mechanics and also especially with the acquisition of R-CON, which is currently the biggest profit center within Communications that we acquired now, I think it's two years ago, which has been very important in the buildup of Communications. Within the control and access, we also have a number of companies, quite many of them, and they're somewhat smaller, but on the other hand, very profitable, some of them, so it's also very important within the Communications division. Here we have some examples are Precimeter and Radonova within that area.
Last but not least is then the Niche Products division, which we've been building now for some nine, eight years, something. I think we founded it in 2012, putting up the fourth division within Lagercrantz, where we have found some really even more niche-oriented companies, all running proprietary products. Here we found a portfolio of really interesting companies. Here we also made some important acquisitions in the last few years, and I will come back to a couple of them. I think Tormek is really one that is important to us and has proven with very good development in the last year or so. Also a few others have been doing very well within the Niche Products division. That's to give you an overview and a start for the group.
I think we will start with the revenues and profits chart, which we normally have in our presentations. You can see there that we added a little bit of an uptick in our profits again here in the last quarter. I think we were affected in some areas more of the COVID-19, and we saw some decline in our business volumes, and that also affected the profits. We have taken some measures that is also included in here, that meant that we've had a couple of quarters now we didn't increase our profits, now again, we increased them here in the Q2 of this last quarter, which is good to see that we have this good trend over a long period of time. You can also see that we have had good margins along the way here.
Moving to page number five and looking at the business conditions during the quarter, I think we've seen here some limited effects connected to the COVID-19 pandemic. We've seen some gradual improvements here in recent months. Since it started to improve a little bit in May even, more so in June. Along the way here, we have now a summer quarter. It was, of course, a lot of uncertainty in what would happen during the summer. I think we've had a pretty decent improvement along the way here. The fall has been good for us, we think. All in all, the business volume was down approximately 5% here year-to-date, which sort of gives you a rough estimate of how much the COVID-19 affected us here during these six months.
I think that's limited really, compared to many others, but I think that's been very good. What we, however, saw was some volatility among business units. We of course have some units that are more affected than others, but all in all, we also have a couple of companies that have positive effects. All in all, on a group level, it was then 5%, as pointed out there. The uncertainty remains going forward. As we write in the report, of course, we see the shutdowns on some countries again and what is happening in some markets. We have not seen anything in the business yet, but of course, if there will be more shutdowns, of course, that will affect us as well along the way. So far, it's been holding up very good, even though we see the headlines in the newspapers as well.
I think what was also good in the quarter was that we saw really that our main companies and the ones that are really important to us, performed very well through the pandemic and through the summer and have done so now for a long period of time. Elpress is especially a really strong company within the group and very important to us, and that is within Mechatronics. The R-CON within Communications with the sprinkler systems has also been performing very well. As I point out in my comment there, they also have now full order books, basically six months ahead. It's filling up at the same pace, basically, as it has been for a year or two. Tormek, on the other hand, showed great improvements.
They have their sharpening tools and they improved their performance quite a lot here in the last year or so. On the other hand, we've had a couple of companies within Niche Products that have gone the other way. All in all, Niche Products are performing a lot better with Tormek as the engine, but also with Wapro and a couple of others. Dorotea Mekaniska is another one doing very well within Niche Products. Also Nikodan has been doing it after a reboot that we had last year in that company.
A couple of companies and the main ones are doing very well, and that is, of course, helping a lot when talking about the group and overall figures. We've also pointed out, if we look at the numbers, we can see that we have a couple of divisions doing it very well, which is the Mechatronics and the Niche Products, while Communications is doing so-so, and Electronics are doing better than they have been doing in the last couple of quarters, but still not on the level what we expect from the electronics. Therefore, we have conducted quite a lot of restructuring within electronics, and that is also hurting the numbers a little bit, but it's, in this quarter, better than it has been for a couple of quarters. I will come back to that later on.
That was what we have to mention around the business conditions. Looking at page number six, to add up the numbers, so to speak. The net revenues amounted then to SEK 980 million, which is down a little bit from last year, organically around 5%, as we pointed out. Mainly due to the COVID-19 pandemic, but also then that we see some restructuring going on, especially within the Electronics that is hurting the top- line there as well. What we're really doing is restructuring in some of the areas where we don't see the profitability we would like to see, and that is hurting the top- line. On the other hand, we also cut out costs then. The EBITA increased by 5%, reaching the SEK 132 million.
I think we are pruning, and we are improving the overall quality of the group by doing these efforts, even though it might hurt our revenues a little bit here in the beginning. The EBITA margin reached 14.4%, which I think is a really good number for a summer quarter, up from 13.2% last year. We also see the profit after EBT increased by 4%. Important to know is also that we had made a split here of the stock, three out of one. That is also affecting the stock price as well, as I'm sure you noticed. After the split, the earnings per share reached [SEK 1.75 for the moving 12 months, and the profit after tax was up 4%. Cash flows was very good.
I think the summer quarter is usually a little bit weak on cash flows, which I think is normal for most businesses, given the vacation period and stuff like that. Still on a good level with the SEK 80 million from operating activities. If we look at page number seven, we can see a really strong cash flow for the first six months with the SEK 326 million that we see from the bottom on page seven there. Looking a little bit at the six months, we can see that the EBITA reached the same level as last year, basically. We can also, if we compare the six months to the three months period, we can see that the last three months was stronger than the first three months, trend wise. It was, as pointed out, a solid quarter we've had.
Looking at the outcome for division, I pointed out already on page eight that we have our four divisions, and we see the numbers there. To give you a little bit of comment around that, we see clearly now that we have strong performance in two divisions, really. Companies not affected as much and doing it very well on the other hand, while others are more affected. In Electronics, we have some companies more negatively affected by the COVID-19. We saw some decline in the German market here early on this year, and that we are now addressing with some restructuring in that company. We also have made some restructuring in a couple of other companies. Poland is doing a lot better now. The U.K. is doing quite okay.
We also saw that we integrated the company in Norway, which also had a positive effect here within electronics. Electronics is not at the level we would like it, but still better than it has been for the couple of last two quarters or so. You can see that from the EBITA margin here on page eight, that we normally have been at the 11, 12 level earlier on, but then we had a couple of weak quarters with the 7%, and now we're back to 10, or 9.7 here in the last quarter. On the other hand, we have the Mechatronics division. A little bit of comments around that. The EBITA increased by 33% in Mechatronics, which was a really good number. The margin reached 17.6%, which is also a very good level.
Here we have the Elpress and Elkapsling and Norwesco and Elfac, quite a few companies doing really well and improving their performance. We also then had the addition of the Frictape acquisition last year, which has also affected the numbers in a positive way. Mechatronics is an engine for us and continue to be so. Within the Communications area, we saw a little bit of a decline here. I think some of the companies are still doing it very well. The R-CON is delivering a very strong result. Some of the other companies also doing with the ISG Nordic, the COBS and Excidor and Leteng is also doing it very well.
On the other hand, we last year had, within Communications, a couple of companies that did exceptionally well, with the Precimeter and the Radonova, and they still are performing on a good level, but not reaching up to last year. That is affecting the numbers all in all within Communications. We also have a couple of other companies, one that we are more struggling with, but that's a smaller one, so that one is not significant in that sense. Last but not least is the Niche Products division with the EBITA increasing 19% and reaching a good margin of 20% then EBITA margin. Within Niche Products, a lot has happened since last year.
A few companies are really doing it much better than last year with the Tormek as an engine, but also Nikodan doing exceptionally much better than last year, and Dorotea and Wapro is a couple of others doing it very well. On the other hand, we have the Asept, which was negatively affected by the COVID-19, especially with the shutdowns in the U.S. as they are addressing some markets with the fast food and the restaurants markets in the U.S. Of course, you can all imagine that those markets have been affected quite heavily with the COVID-19. Asept is going the wrong way, so to speak, while some of the others are going in the right direction. All in all, the EBITA increased by 19%.
Two divisions doing exceptionally well, Communications still on a good level, while we also see some improvements in Electronics from a slightly lower level. Those are the comments by division. That was what I would like to say on the section two here of the numbers. Looking ahead, when we continue to develop the group, we will still work with case by case and looking at the situation in each company, adjusting everything that we do. You can imagine from my comments here that we have companies which are really struggling with growth issues more than anything, while others are more in the restructuring phase or conducting downsizing. Actions due to the COVID-19 pandemic, we still have some on the way.
We have initiated in a couple of our companies that we still expect some effects to take place here in the next quarter, while others are also growing. We see that Tormek and Elpress are hiring people again, and that they have been hiring and are still hiring. That's also within the numbers here and things are happening there. It's very situation based in each company. We will, along the way, come back to focus on growth. That is, we have not and are not satisfied with our organic growth. We think here that given the pandemic, the 5% is a reasonable figure. All in all, we are pushing for more growth, especially in the more export-oriented companies, the ones are doing it best for us. The continued focus on value add will still remain, and we will also then look at acquisitions.
I'll come back to that in just a minute, looking at what we see in that area. We are constantly looking for four to six acquisitions per year, I think after a pause here during the pandemic, I think we have a lot of good discussions going on at the moment. Hopefully that will pick up here again in just a short period of time. We will then what we do here, looking at page number 11, what we will do along the way here is continue with our strategies and our business concept, which is then to build a strong group with very narrow and specialized companies that are doing it very well in their specific niche. Through that, reach an annual growth of 15% in [profit after] financial items.
We should basically double our profits in every five years, and that we've also been doing here. We have delivered on that one. We should have a high profitability here measured as the return on equity of not less than 25%. We have been close to that. Currently, we have a strong balance sheet, and therefore, I think we also have now currently it was 23, right? Wasn't it? 23 maybe. We had that on a previous page here. We are close in the neighborhood there. Coming back to the focus on value add here on page 12, we could see the very good trend we've had all the way back since 2005, 2006 with the 21.2 there on page 12. We reached a new all-time high here with the 38% here in the moving 12 months period of the 38%.
That's a very good and satisfying trend to look at. How have we done that? Well, we have changed a lot and continuously been restructuring and pruning in our portfolio. We're also then aiming for more and more of proprietary products where we see that the gross margins are higher and we see some greater profitabilities, but also better opportunities for organic growth. Coming back to the focus on proprietary products, we have that on page number 13, and we reach now also the 63% here in the moving 12 months. As we pointed out many times, we are aiming for the 75%, and as you can see there, we are getting there.
I think we have also now with the restructuring we're making, I think that will also continue with both the restructuring we're making in the portfolio, but also with the acquisitions that we see here in the near future. Looking at the acquisitions then, coming back a little bit to that, we're looking at page number 14 then. This is part of our DNA. This is very important to us, and we remain at the target of having four to six acquisitions per year. We took a pause, not only due to ourselves, but to also the market took a pause here in the March, April, May timeframe. Since then, we have resumed quite a number of different discussions, and I think it's exciting. It looks promising here for the future, with more opportunities to look at.
We have made a few smaller acquisitions here in the last year or so. Some of them are more important. The Frictape and the Dorotea and G9 is more important. We plan to resume these activities here now in the near future. I would like to make a little bit of an add-on here to my presentation currently. Looking at the portfolio that we have within Lagercrantz, I also put in a couple of more slides here, the number 15. When we make acquisitions, we try to put together a fact sheet on each of the companies that we acquire. I think it's very satisfying, as I also pointed out in my comment, to see that the portfolio of companies within Lagercrantz is getting stronger and stronger.
Just to give you a highlight on that, I put in two more slides here to see what we have done in the last few years. The most important profit center for us is the Elpress business. They're making some SEK 80 million or so on an EBITA level in Elpress, and they have continued to do well. We have as a number two, we now have R-CON. R-CON is making pumping systems for sprinkler installations and has been doing it very well. We acquired this company some three years ago, something like that, and since then it's been developing very well for us. They're reaching now the SEK 50 million, and you can see where they were when we acquired them. What have we done with R-CON then? Well, we have sort of streamlined the company. We have put some follow-up routines in place.
We have put focus on growth in the company. They have a sales volume of some SEK 190 million currently on the moving 12 months and approaching SEK 50 million in terms of profits as pointed out. I think this is a very good example of how we develop the companies that we acquire. What we've also done with R-CON is we have made an add-on acquisition. The Burenwall providing the tanks is an add-on acquisition that we made here, a smaller one, but still a very fruitful one and has been working very well for R-CON and Lagercrantz along the way. That's one good example of a company coming in. I would like to make another example, and that is the Tormek on page 16. Tormek we acquired here in January of 2018.
It's been with us two years then or something, two and a half years. They are a leader within sharpening systems and edge tools such as knives, chisels, as well as other tools for wood carving. A company in Lindesberg in the midst of Sweden, doing it very well on exports. Here we've also been able to develop the company. They have been focusing quite a lot on digital marketing and changed the scope of that with working quite a lot with social media and that type of thing. What they've also done is decided to restructure their approach in the U.S. They used to work with some layers in between, some middlemen working in the U.S. especially.
We have now taken over that role ourselves as importers and selling through different types of distribution channels and also resellers in the U.S., also pushing volumes not only in the U.S. but other markets. Since we have acquired the company, they're currently up, they have a sales of some SEK 170 million and profits around SEK 50 million there as well. Beside sort of the Elpress engine of the group, we also have two more companies doing exceptionally well here now. The portfolio within Lagercrantz is getting stronger along the way here, which I think is very promising for the future. Last but not least, I would like to take a third example, and that is Frictape. Frictape we acquired only a year ago.
They've been with us for a year, and you can see the exceptionally good margin they have down there to the right on page 17. They're making different types of safety products for helidecks, helicopter decks, mainly offshore, both related to oil platforms, but also in windmill parks offshore and that type of environment, very tough, rough environments and providing good safety products for that market. Here we have this company that has been affected by the COVID-19, but still doing it very well. Addressing a little bit of new markets geographically, but also we have put in some better follow-up routines within the company and integrated it within Lagercrantz structure. They here, during the first year, have been delivering above what they had in the forecast for 2019, a little bit above, which I think is a very strong sign given also the pandemic in that company.
Here is also another company coming in, doing it very well for us, and that is, as pointed out here, part of Mechatronics as of October of 2019. It's been with us for basically one year now, and coming in very nicely for us. A little bit of add on there. I thought even a couple of three examples, and I would round off with the financial overview, that is last year. We have a very strong performance and very strong business concept along the way here, and we plan to continue doing that here. We see some limited effects from the COVID-19, but still, I think we have a very much of a bright future ahead of us. It looks promising, I would say. That was probably around my presentation. Would you like to add something, Kristina? Did I miss something?
I think that was what we had in mind. We will open up for questions then from the audience. Remember that you can do that, unmute by star and six. We will unmute all of you right now.
Anyone would like to start off the Q&A? No questions. Anyone? We usually have a few. Okay. All right.
Jörgen, can you hear me?
Yeah. Now I can.
Hi, this is Robert with Carnegie.
Yeah.
I hear some strange sounding in the background. I have a couple of questions. If you could say something about those restructuring costs in the quarter in Electronics. Were they big at all? That would be my first question.
I think if they had been really significant, we would have commented on it, and we didn't. I think there are a lot of smaller costs in the different entities, and we have not really added an amount. I think we see some lower costs in electronics.
You are now on hold.
That things have an effect. I think we are aiming to, within a quarter or two, I would say, come back to the 10% or 11% EBITA margin that we normally had here a couple of years back. To give you sort of a guideline on what I think would be expected of us.
All right. That sounds good. You also wrote something about an improvement in demand during the quarter in some areas of electronics. Was that a broad trend? Did you feel like a sustainable sort of market improvement, or was it related to very specific things in those subsidiaries?
I think it's related also geography. I think it's a little bit of a better broad demand. We especially saw it in Germany, where we have been struggling with some of the companies, especially early on this year in the spring. For instance, Schmitztechnik, which is an important part for Germany, they saw some better demand here during the quarter. We also saw some better, one important unit we have within Electronics is the Danish one, addressing also the hearing aid cluster of companies or customers there. There we also saw some clear improvements in overall demand. I think it was more broad-based.
All right. That sounds good. A detailed question maybe, on earn-out valuations, they were zero, I think, in this quarter versus SEK 6 million last year. Basically, EBITA cost excluding that was a bit higher than what it looks like when you look at the numbers reported. In that light, the margin development here was very solid. Do you feel that the costs were sort of unsustainably low in this quarter, or you have the target of always improving, I guess, your added value?
Yeah.
How do you feel about margins?
It's a mix. I think we are doing some clear restructuring and also downsizing of some of the units that are not performing well, and that is reducing costs, and that is sustainable. I also think in general terms that we also have what we call positive costs normally. That it's costs of traveling, visiting customers, and attending different fairs and sort of marketing expenses and that type of thing.
I think they are in many companies, not only us, but in most companies, I think they have been unsustainably low here for the last six months. It's been troublesome to even meet customers in some areas, and that is not good long term, but it saves cost in short term. That is unsustainable, I would say. We will probably see some of that, but I think the main thing, and we see where we have lower costs, and that is especially within the [OpEx] is significantly lower in Electronics and also to some extent within Communications.
Sounds good. Thank you. Those were my questions. Thank you.
Thank you. Okay. Someone else who would like to ask a question or two?
Hello?
Hello.
Hi. I was wondering if you can put a bit of color on the acquisitions. You've been positive for a couple of quarters on the outlook for doing that. As it is now, your cash flow position is very strong. Your ambition is to buy four to six companies per year. If you convert that four to six companies to volume instead, looking from turnover, how much firepower do you have right now?
Our aim is to acquire basically 10% of our top- line. Which should be around SEK 400 million then, that should be acquired each year through four to six acquisitions. I think it will go up and down a little bit along the way. It's always very difficult. I think we have a positive position right now. We have firepower. We have a stronger balance sheet than we normally have had in the last few years, because we have at the moment. We are addressing and into some interesting discussions in a number of markets. I expect us to deliver on that four to six.
Okay. The pipeline in general, if you look upon it now compared to last quarter or the quarter before that, what does that look like?
I think it has improved significantly. As it was during the spring, it was a bit silent. I think both sellers and buyers wanted to pause while they have picked up and resumed a lot of the processes now. We had additional coming on. I think it is a positive outlook at the moment.
Okay. Thanks a lot.
Thank you.
Bye.
Someone else? Okay. Me and Kristina are available here if you would like to give us a call, if you have some additional questions and you want to do it one-on-one rather than in a big forum. Please don't hesitate to call us if you'd like. Otherwise, I thank you for listening in, and have a good day