Welcome to Lagercrantz Group Q4 Report 2024-2025. During the Q&A session, participants are able to ask questions by dialing #5 on their telephone keypad. Now, I will hand the conference over to CEO Jörgen Wigh and CFO Peter Thysell. Please go ahead.
Thank you, and welcome everyone to Lagercrantz year-end report for 2024-2025. We released our numbers this morning, and we will conduct an ordinary, like we have done, session here for, yeah, 45 minutes to an hour or so, giving and taking questions at the end. We usually start with a short introduction, go over to the numbers, what we released this morning, and then talk a little bit about how we see the future, and a couple of pointers that we would like for you to have as well along the way. Together with me here is Peter as well, our CFO, right next to me, and we will do this together along the way here.
For those that are new to the group, we usually start with this oversight of the group, where we could see that we are viewing ourselves as a tech group with leading position in expansive niches. That's what we're trying to build. We are one of those serial acquirers that are on the stock market, and we work without an exit horizon. We continuously build our group. We have Northern Europe as our marketplace, where we have most of our companies. Along the way, we've acquired quite a lot of companies with proprietary products that are also along the way doing some exports. You can see all over to the right here on the slide where we have our hubs all over the world.
Our scope is that we are working within B2B tech, mostly hardware, where we find different types of companies that we can add to the group, usually very niche-oriented, with working in expansion niches, building leading positioning in expansive niches, what we're trying to do with our different companies. We have grown over the years, and so we always need to update these numbers. We have now exceeded SEK 9 billion in terms of revenues, and we are 3,100 employees as of the end of March. We are continuously growing the group, both organically and through acquisitions. We are firm believers in decentralization, working with management to buy objectives on all of our 80 profit centers in these five divisions that you can see here on the top.
We also can see our profit centers or our companies, as we view them here, the number that we have in the different divisions, and where we are also present with each of the divisions. You can see up there the number of countries we're in with each of them. Yeah, M&A is a very central part of our business model. We work continuously with making some 8-12 acquisitions per year. That's a really important part, and two-thirds of our growth should come through acquisitions along the way is the ambition that we have. We have been a part of the Bergman & Beving Group up until 2001, but since then, we have been separately listed on the Stockholm Stock Exchange, currently on the large cap. That's a brief introduction.
I think we were very happy with the last quarter and the year-end here, satisfied with reaching a higher growth rate than we had earlier in the year. We posted another good quarter then. You can see here that we have this trajectory and the graph over where we have been doing all the way since 2005 and 2006. We have continuously been growing since then and had a higher growth pace here in the last couple of years, two to three years. We continued that with also yet another strong year, another strong quarter. It's actually the 15th consecutive year of improved earnings per share that we posted here. That is, of course, very satisfying to be able to say that. We have been working hard also this year. We have, along the way, put the ambition that we will grow the business.
When we surpassed the SEK 500 million, we said we would go for a billion. Since then, we surpassed the SEK 1 billion in terms of profits. Now our ambition is towards the SEK 2 billion, growing with some 15% per year, meaning that we will double our profits every five years is sort of the overarching ambition that we have and what we've been doing also for many years. In words of business conditions, we felt that the market situation continued to be stable and somewhat better during the fourth quarter compared to the same period the previous year and along the way here.
We still saw that demand continued to vary across companies and segments, but we saw, especially in Electrify and Niche Products, that had a stronger growth and remaining some weaker customer or volume order intake primarily from the construction sector that we have in the, especially in the Tech Sec division, but also to some extent in the others, and especially the Control division also has some of that. We saw that order intake for comparative unit was in line with or slightly above invoiced sales. We have seen a gradual improvement in the order intake and also in the market conditions along the way, even though it is not moving very fast, it is still in the right direction. Of course, the recent increased geopolitical uncertainty with the trade barriers being introduced is, of course, bringing some uncertainty.
So far, we have not seen any significant impact on our demand, on how we run business. We have some 5% of our group sales directly into the US. Of course, that's a limited number, even though there are much of sort of indirect effects that might happen if that is becoming more of a reality. So far, it looks like it's sobering up a little bit and things are moving along there as well. Hopefully, that will continue in a good direction. You can see down to the below here, we also had a stronger proprietary product of 78% that has gradually been growing. That is a strategic ambition for us, and that we also continue to do here in the last year or so. We also can see the net revenues by geographic market.
We have an ambition to become more international along the way. You can see that we are bringing new countries and volumes outside the Nordics is gradually growing. That is, of course, a good sign for the long term for us as well. We will move into the numbers, and I will hand over to you, Peter, then.
Thank you, Jörgen. It's my pleasure to go through the numbers. We had overall a strong end to another successful year for Lagercrantz. In Q4, we saw the net revenues increase by 16%. We saw most, 11%, from acquisitions, but an improved organic growth of 5% in the quarter and insignificant currency effects. EBITA increased by 24%. That is continuing improvement throughout the year, quarter by quarter. EBITA margin remained at a good level of 17.8%. The 18.1% we had last year was a very high level. That was a tough comparable. The cash flow from operations was SEK 342 million. Also there, we had a very, very high or tough comparable affected by some unrealized currency effects and unrealized revaluation of earnouts in both periods. That is very positive numbers in Q4 last year and some negative numbers, non-cash numbers, that is, in Q4 this year.
Continuing, the profit after financial items increased by 23% to some SEK 368 million. We had some help towards the end from some positive currency translation effects in Q4. The profit after tax increased by 28% to SEK 307 million. During the quarter, we completed four acquisitions, adding some SEK 370 million in annual net sales. The market for acquisitions is still positive. If we sum up the year, it was another successful year for Lagercrantz, where we increased net revenues by 16%. In the full year, we had a little bit higher contributions from acquisitions, 14%. As you can see here, the organic growth was 2%. If you remember, in the beginning of the year, we had some 2-3% negative in the first quarter, but it has gradually improved throughout the year.
EBITA increased by 16%, and the EBITA margin is still on a very, very high or good level, the 17.5% compared to 17.6% last year, which was a very good improvement from the year before. Cash flow from operations is still on a good level, similar to last year. The profit after financial items and after tax increased by 16%. Earnings per share improved to SEK 4.93 per share. The return on equity was 28%, and the equity ratio, similar level as last year, 34%. Profit over working capital improved by 2 percentage points to 79%. In the full financial year, we completed seven acquisitions. That corresponds to roughly 10% of the net sales for the group in the previous year. The board proposes an increased dividend by 16% to SEK 2.2 per share.
If we look in the outcome by division, in the fourth quarter, the Electrify division stands out with very good both acquired and organic growth, and the EBITDA growing by some 52%. Also, the Niche Products, Control, and International division had good performance in EBITDA, while the TecSec division was still struggling with a weaker construction market. I think you plan to go through that development, Jörgen.
Yeah, some comments by division. Looking at some highlights from the by division, then, Electrify is running very well and smoothly at the moment, doing it very well both organically and through acquisitions. Revenues increased by 31% here in the last quarter. A good EBITDA margin of 17%, up some, yeah, a bit here from last year, as you can see here in the top. I think for Electrify, most of those businesses, both the electrification market and also the infrastructure, remained favorable and did very well. We saw that also in some of the companies doing an all-time high in terms of profits, which was ELPress, TicoFlex, and Nordic Road Safety. Those performed very well. Also, ELCapsling, Sweatwire, EFC, Encom Active, and also newly acquired Must System noted some good demand and positive earnings development during the quarter.
It was sort of on a broad base, a good quarter for the Electrify division. The Control division also grew some 16% in the quarter, but are still struggling organically with some of the sort of more construction-related businesses still having a tough market. The EBITDA margin was up to 17.9%, which is a good number. We also have some seasonality, as you know, in the Control division, especially Radenova, this is a strong quarter for them. On a good level also compared to a strong quarter last year. We can also see that some of the companies did it very well in terms of Pressimeter and CP Cases in the U.K., did it very well. We also see that, but again, some of the more construction-related companies, especially the smaller one, are dealing with tougher market conditions.
Here in the quarter, we also closed the He-Man was acquired in the U.K. We'll add some numbers and some volumes to the Control division as we move forward. They were not with us for the full year. They came in during the quarter. The division that is maybe struggling the most is probably the Tech Sec division. Their revenues were up with only 6% then, still on a positive side and good, but not living up to expectations when it comes to some of the companies more in the construction-related type companies. We saw a favorable market situation on other sides. It actually was a decent fourth quarter. Especially Aras, Idesco, Firecon, Freaktape had, and PCP also, the biggest company within that division, had a good quarter.
Doing it very well on a broad base, but still some companies around construction are more struggling with Arcom, CW Lamberg, Doran Joinery, and ISG Nordic continue to be affected by the weak business situation in the market. A bit struggling in the Tech Sec division. The Niche Products division, on the other hand, had a very strong quarter. The revenues were up to 26%, and the EBITDA margin at 22.1%, which is at a very good level and above the 20% which has been we've become accustomed to when it comes to the Niche Products division. The earnings improvement was noticed on the broad front, and especially a couple of companies with ASEPT building their business in the US, doing it very well there. Also, SIP and SIAS in Finland and Sweden are doing it very well for us.
We also noted that Tormek, which is a very important company for the Niche Products division, also posted a strong result in line with previous year, which was a record year last year. Waterproof noted a stronger market. Here we also would like to highlight that Predo, which was acquired in the spring of 2024, posted a record year for the full year. Very strong sort of new company within the Niche Products division along the way. Gladly, we also closed the VLT Business acquisition in the Netherlands, coming in here now as of, yeah, January, right?
February.
February. Adding another EUR 20 million into the strong group in especially the Netherlands and also in the U.K. That will also add to the numbers going forward within the Niche Products division. The International division, last but not least, they posted revenues actually declining. The only one that had declining revenues in the quarter, but only 1% then. The EBITDA was a little bit, yeah, basically on the same level as last year then with an EBITDA margin of 17.6%. Here we are, yeah, trying to grow the business both organically, but also looking at some interesting M&A opportunities going forward. What has been good here with the International division is really what we built in terms of the marine cluster, and especially the Libra company in Norway had an excellent year for us.
Also, DPCs in the U.K. and NST in Denmark posted a very, so a lot of things going in the right direction in the International division, but expecting more in terms of M&A going forward. Last but not least, International has some exposure to the German market. As you all know, Germany is struggling a bit. Therefore, we also see, and we have seen that in some of the companies that we have in Germany, most of them are within the International division, also reflecting those numbers. That was sort of where we are with all the divisions. On an annual basis, we also provide you with some return on working capital, which is our key metric in terms of profitability internally. We would like to highlight some of the things in the different divisions.
Once a year, we provide you with these numbers, and you can see how that's evolved over time. A very stable and good development. You could see that, and we are all struggling to get above the 45% in our businesses. You can see that we have a very strong portfolio and very profitable businesses providing both good margins and good profitability. That is, of course, also then resulting in good cash flows coming out of the business that is fueling our M&A growth going forward. The 79% is a really good number. You can see here that we've been on that level for a number of years now. We have some calendar effects when you look at especially the Tech Sec division.
We have a couple of skewed numbers here when it comes to M&A coming in during the year, and that affects these numbers a little bit. Here we have some calendar effects and M&A effects. Overall, on a very good level, I think with the 79%, something that we feel proud about. We also provide you with, yeah, and going forward then, I mean, we feel strongly that we have a very strong business concept. I write about that in my CEO words in the report. I think we have a very strong concept, a very strong business idea for Lagercrantz. We posted, as I say, the 15th consecutive year with improved earnings per share.
I think we have a very strong concept going forward as well, building this very strong portfolio companies along the way and trying to establish companies that have market-leading positions in their niches and having a group of those type of companies. Our overarching ambition is then to grow EBT or profits by 15% per year. As we've said, at least one third of that should come organically, and the rest through 8-12 acquisitions per year, so two-thirds out of acquisitions. Here in the last year, when we've seen a slower growth in the market, we have compensated the slower growth in the market with more M&A, and then resulting in the 16% for the year in terms of EBT growth. The return on equity should exceed 25%.
We should do this in a very profitable way, taking cash flows out of the sort of existing business and using that for M&A, and through that, getting a good return on capital employed and also a return on equity that exceeds, well exceeds, 25%. As you saw from the numbers initially, it was 28% here for the full year. We have surpassed that also in the year that we just posted. We are building then the five divisions. We set up these structures some four years ago with the new five divisions, and we will continue building that and get Lagercrantz towards the SEK 2 billion.
We feel that we have positioned our divisions in the direction of where we see underlying structural growth with sustainability sort of themes, the green transition, safety and security type products, water treatment within the Niche Products division as an example, and other areas where we see sort of investments and demand for sustainability and those type of products that we try to work with in our companies. Building then position in segments with sustainable structural growth is our ambition over time. Here we also think one key thing to know about us is our strategic ambition to grow with proprietary products. As you can see here, we have gradually, this is the sort of brown area here, you can see over some number of years that we have continuously grown the share of proprietary products within the group.
We started out with having almost none, and then we made the ELPress acquisition in 2006. Since then, we have gradually been growing and set that as a clear target for us to grow with proprietary products. We see proprietary products as companies that have their own products, of course, but also have some stronger margins and also greater opportunities for exports. Also through that, some better opportunities for organic growth as we go forward. We are currently at the 78% you can see there, but the aim in our 2 billion program is to get to the 85%. We should do that in the coming three to four years, something like that. I think it's reasonable to see that we will get there. Another highlight that we do along the way is usually that we continue our focus on value add.
We are very keen on getting companies that are strong and have a pricing power in the market. Therefore, we also measure the focus on value add and the gross margins along the way. You can see that we posted yet another year at a very high level. It is not growing this year, but it is basically on the same level as it was the year before. There are some mixed effects, of course, in this when we acquire companies that also skew these numbers a little bit, but along the way, we would like to see it go up as we. A percentage point here is very important when it comes to making money and having great margins and getting the cash flow out of the businesses. That is also a highlight for you guys.
Last but not least, we will just go over the acquisitions. I think we have along the way built our resources and built our capabilities in terms of doing M&A in a very professional way. I think we have been doing this for many, many years. Still, along the way, we have gradually refined how we do this. Here since a couple of years back, we have raised the bar for ourselves trying to make 8-12 acquisitions per year. That is a reference to really make the 10% sort of or two-thirds of the growth should come from M&A. We have been at that level or above that level here in the last year or so. We will continue doing acquisitions. I think we have a very established acquisition process and gross list for integration.
I mean, an M&A sort of database where we fill it up with opportunities. And we are working with this throughout the whole group from all the companies, but also on a divisional level and more so over time. We were occupied with making good acquisitions along the way. Of course, it's also a highlight that I think we are financing our M&A operations through cash flows from the existing business. Here during the fiscal year 2024-2025, we made some seven acquisitions and SEK 825 million. We are basically at the 10%. We made some acquisitions just at the end of last year. Looking a little bit further back, it was actually a bit higher than this, but still on a good level. You could see over to the right acquisitions.
We tried to make a data sheet for all the acquisitions that we're making so you can follow what we're doing and see what type of companies we're getting into the group. I'd just like to highlight a couple of the bigger ones that we posted here during this fiscal year. We will start with the CP Cases, which is on the next slide, please. The CP Cases is a company in the U.K. with also operations in Delaware, in Frankfurt, in Delaware in the U.S. Especially two sites making these type of cases, protective cases and racks used for mission-critical equipment. It might be for commercial use or for healthcare use, or it might be for, but most of it is for military applications. It is a very strong company.
You can see all down to the right here that it's been growing and it's also been doing well in terms of EBITDA and EBITDA margin. Those are the companies that we'd like to bring to our group. Niche-oriented, very specialized in what they're doing and performing well over time. This company we acquired here last summer and it's been doing well for us along the way. It's a very good company that we brought to the group. Another one that we also concluded here is another U.K. company. It's the Principal Door Sets company. It's an innovative manufacturer of bespoke fire doors in the U.K., especially fire doors with some sales of GBP 9 million with good profitability. It's located on the west coast or southwest in Devon in the U.K.
You can see all the way to the right there again of the size and also the EBITDA margin. We are very keen on finding these companies that are very niche-oriented and also have a proven track record of profitability over some time before we acquired them, that we feel that they could be stable and good companies that we can get to grow a bit, but keeping them at a very profitable level after we have acquired them. They are part of the Tech Sec division as of July 2024. That is a company we acquired during the year. We will go to the next one. Another one, this is slightly bigger in terms of profits and also in EBITDA margin. It is very good here.
The company of Must System is a Finnish company that we acquired and have a sales of some EUR 15 million and doing it very well and had a great start to the group as well. Located in Unso on the east side of Finland and part of the Electrified division as of December 2024. It has been with us for four months basically since year-end here. We take the next one, which is the newly acquired Van Leeuwen Test Group making service robust equipment and testing for testing heavy vehicles, including brake testers and integrated software. A company located in the Netherlands, but also have 50% or so of their business in the U.K. Also with some EUR 20 million in sales and an EBITDA of around EUR 4 million. It is a highly profitable company with an EBITDA margin of close to 20%.
These are exactly the type of companies we're looking for. Had an off to a very good start for the group with some really good order intake here lately, which has been, so it looks promising going forward with that company as well. We'll take the next one. Yeah, that was the ones I'd like to highlight here today. Thank you all for listening in. We usually round off with a financial overview where you could see that we posted yet another good year. Now sales about SEK 9 million. You could see the EBITDA at SEK 1.5 million almost or 17.5% EBITDA margin. You can see the EBITDA. We would like to grow that by 15%.
We have been doing that for the last four years at least, but over a long period of time, it has been in that neighborhood or above that threshold of the 15% growth per year. Return on equity, the bench there or the target there is the 25%. You can see where we have been over the many years that we have here in this trajectory. The earnings per share and earnings per share growth is also sort of hand in hand then with the growth of the EBITDA, of course. The dividend, then the suggestion here was the SEK 2.20 and a dividend growth of 16% here that we could fill in there. You could see how the trajectory there has been as well. A good trajectory for many years and another good year for us. With that, I think we'll round up and open up for Q&A. Please, I do not know how we do that, but that is.
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 Zino Engdalen Ricciuti from Handelsbanken. Please go ahead.
Yes, good day and thanks for taking our questions. Just starting off on the demand side, which seems to then be holding up relatively well given the global uncertainty. I am wondering if you could give some flavor on what kind of, how to say, growth when you look at CapEx versus OpEx related, so to say, products that you are selling. I think we talked a bit about project orders coming back a bit in the last quarter. Are you seeing that in this quarter as well?
You mean the split between OpEx related and CapEx related products? Is that sort of.
From the market side.
Most of what we're doing is more OpEx related, I think, in terms of, I mean, most of our products are mission-critical or important for our customers. So that's, and they usually go into some type of investment, but it's not sort of CapEx related products that we're selling. It's not very expensive products or very high price per item, most of what we're selling. I think what we saw in the sort of, I think we've seen the willingness to invest coming back maybe the last six to nine months.
I think we were in for a bit of a hiccup when it came to Easter and when the trade barriers and the tariffs were launched in the U.S., then everyone had a bit of a hiccup there for a few weeks. We saw also that some of our customers hesitated for a while there, but I think then it's been coming back again. It was a bit of a hiccup that lasted for only a couple of weeks. I don't think it's that sort of connected either, but of course, everyone was a bit sort of reluctant or, yeah, postponed their decision-making just for a while there to see what was actually going to happen.
I think long-term, it will have an effect if there is some significant trade barriers being introduced, but I think that most of what's happening is talking in the other direction at the moment that we will need to find ways to work with international trade going forward and that things will not become as dramatic as they were there for a couple of weeks.
Okay, very good. Just a question on the profitability side. In the quarter, gross margin looks solid, but looking at the admin cost on the SG&A side in relation to sales, comparing that with last year, it looks a bit higher. Is there anything special to highlight there?
I think we've highlighted in the report that we're doing a couple of things here. I mean, we had some extraordinary items in terms of that we made a reservation for a claim that we've had in one of our companies. That happens from time to time, but that is usually coming in there. We also had a couple of acquisition costs related to stamp duty when we acquired some of the bigger companies. We had a couple of issues there. Not significant, I wouldn't say, but we have at least sort of if you're down to that level of detail, then those things might affect that number.
I see. While you're managing just that warranty claim, if there's possibility to give any color on that and which segment it's related to.
No, there is no big thing really. It's a claim that we are dealing with claims sometimes in our companies when we are providing proprietary products. That is sort of part of the business model. That happens from time to time. It's not that significant, but it's still something we made a reservation for. SEK 8 million or so, SEK 10 million, whatever, somewhere there.
Okay. The last question for me, if we're just looking on the profit by working capital, that slide that you highlighted, of course, it's very strong at 79%, but Electrify seems to continue to be a bit behind on that front. Do you see that there is anything that can be done in that segment to bring it closer to the rest of the group?
Yeah, I mean, we are working with those issues company by company. I think structurally that Electrify is having a little bit more of manufacturing, a little bit more of their own in-house manufacturing, and that is, of course, in the long run tying up some inventory. I think we are working with that in all our companies, and I think there is more to do in the Electrify division as well. We are working with sort of metal-related sort of manufacturing, and we normally buy those sort of raw materials from Far East or China or other markets.
There are also some transport or lead time issues related to that. I think that the Electrify has a bit of a different model that is, to some extent, a little bit hard to improve very much better, but still we're working with it, and some improvement we should see there as well. I think given the business they're running, I think the 66 that they posted here is actually very good for them.
Okay, great. Very good. I'll get back in line.
The next question comes from Max Bacco from SEB. Please go ahead.
Yes, hi, Jörgen and Peter. Thank you for taking my question. I don't have much of a voice today, so I will limit myself to just one question, and it's a bit more high level. I think you touched upon this during the presentation, Jörgen, that looking at the relative acquisition pace here during the last four years, it has been slightly higher than your historical average, especially if we go back to 2021 and 2022. Now, when a couple of years have passed, have you noticed any consequences from this, I mean, related to performance post-acquisition or something similar, or is it just business as usual despite the slightly higher acquisition pace recently?
Yeah, I think when we analyze that ourselves, of course, there are some differences along the way. I think most of them are positive. I think we have been able to work more with M&A in the different divisions. We have gradually improved our pipeline, and we feel that we have more and better opportunities to look at higher quality. I think another trend or another sort of observation is also that we've been able to acquire and look at slightly bigger companies.
I think that has to do with that we have become more of a player, that we are more sort of relevant in the market, and we also feel that we are being more and more appreciated by sellers of companies, or they feel that our model is actually working very well for them, and therefore we are an attractive buyer. That has sort of improved our pipeline, I would say, over the years. I think in terms of post-acquisition sort of development, I think also that we've seen a number of cases where we have actually been able to push the growth and the margins in the businesses that we have acquired. Given comparing it to maybe five years ago or ten years ago, I think that's also improved along the way. We see a number of sort of what we call success cases.
I think the Predo is maybe the most recent one. We also see the NRS has been very good for us. We've seen sort of TicoFlex is another one, more of the ones that are more recent and has been doing very well for us post our acquisition. I think we've seen a gradual improvement.
That sounds good.
The next question comes from Karl Bokvist from ABG Sundal Collier. Please go ahead.
Thank you. Good morning. First one is on working capital. When you continue to grow now over the past few years and shifted even more towards proprietary products, I'm just curious if you have a sense of kind of this year and future years normalized working capital levels based on how the current group looks and how you expect it to look if you continue to shift towards even more proprietary products.
We have not done that type of simulation lately, so I don't know really what I don't see a reason why it would change very much. I think that what we've seen in the last couple of years has been sort of where we probably will be with 78% already being proprietary. I think that will I think we have some time lag in terms of still that we have some inventory levels that we'd like to bring down. That is a key sort of strategic objective for us in the coming couple of years, and that might improve the ratio a little bit. Yeah, and then we also have the calendar effects, right? When we acquire a company, we get the working capital in from day one, right? The full amount while we're getting the profits and the sales gradually over a year, right?
It's a bit of a calendar or a bit of an M&A effect there as well that you also need to take into account when you look at sort of quarterly figures. A couple of those things you need to bring into your equation there. Otherwise, I think from a general standpoint, I can't see that it will be a dramatic change either way in terms of the working capital ratio as a percentage of sales, or I don't know how you do your modeling there, but that might be one way of doing it.
Yeah. Understood. The second one is just on a little bit as a follow-up to your order intake comment here. When we think about activity in the order book and lead times in divisions such as Control, TechSec, and International, where the organic sales has been a bit slow lately, how long do you think it can take before you see or are already seeing improving orders, which would therefore also translate into improving sales?
Yeah. I think our order book generally, it varies. First, let's say it varies quite a lot between the companies. We have companies living sort of from day to day, basically, but we also have others that have a very long lead time. On average, we usually have three to four months, yeah, four to five months of order book of sales in the order book on the group level. That is basically the visibility that we generally speaking have.
I think what we've seen is that some of the sort of orders or when orders come in or when we grow in our order books, usually some of those orders are a bit sort of, yeah, further out normally. It takes a while before it materializes in sales. It's not a huge difference between the divisions. It's basically the same pattern on the divisional level as we have on the group level there when it comes to the four to five months.
Understood. That's all from my side. Thank you.
Thank you.
The next question comes from Christian Binder from Redeye. Please go ahead.
Hi, and thanks so much for taking my questions. To start off with, we already discussed it a little bit, but if I understand it correctly, your M&A prospects remain quite unchanged and positive. Could you elaborate in any way when it comes to the recent uncertainty? Has that made sellers more cautious, or have you not noticed any effect yet?
Sorry, you need to repeat that. I did not hear you quite well there. Can you please maybe—sorry.
It was about M&A. When it comes to the recent uncertainty around tariffs, etc., if I understand correctly, you mentioned that your M&A prospects remain unchanged, but have you noticed sellers becoming more cautious in any way, and they want to wait until the uncertainty has resolved? Have you not noticed any such change?
I think everyone sort of in business is, of course, concerned and has a sort of a view on tariffs and what they would mean. Of course, some processes might be delayed, but I also feel that some processes might speed up.
From a general perspective, I think the hiccup that we had there for a couple of weeks around Easter, right? I think those hiccups, they passed, right? Now it's back to where we used to be. You can see that from the stock market and everything, right? It's normalizing again. I don't think we've seen any sort of real sort of major changes here related to that sellers might be more concerned or more reluctant to close deals. That we haven't seen. I think if the tariff war there or whatever, trade war continues for a long period of time, then it might have an effect. But so far, none, basically.
All right. Perfect. My second question is around these subsidiaries exposed to construction. Do you think there's anything operationally that they can do to, over time, tackle weaker markets? Do you think these cycles are just part of being exposed to that market, so to speak?
Yeah, I think that, of course, we deal with in the different companies. Of course, we try to find other opportunities. What we normally have done already is that we have downsized or sort of adjusted costs in the companies. Before the market comes back, it might take another sort of couple of quarters or whatever. We'll see. It's gradually been improvement. We've been seeing some improvements, but still on a very low level. Of course, these companies try to find other opportunities. It might be in other sectors or finding other sort of agencies or suppliers that provide other stuff because some of these companies are also more sort of distribution-based.
They could probably enter into other areas if that's necessary. It is a bit of a struggle, and it takes some time. Of course, we try to find other opportunities if the original market is a bit slow.
All right. Perfect. That was all from my side. Thank you so much.
Thank you.
The next question comes from Jakob Marken from DNB Bank. Please go ahead.
Yes. Hello, guys. Thank you for taking my question. Two questions on the cash flow. First of all, on the adjustment side, I mean, Peter touched upon it a little in the presentation, but I'm just wondering if we can get some more details. What are the big drivers here? Can you give us the magnitude of that? Because SEK 160 million in delta year over year here is quite big. What's the big drivers, and how much are the big things?
As I mentioned, there are some unrealized effects in the adjustment items not included in the cash flow. Literally, what it means is things that have affected the P&L positively or negatively in the previous year and positively in this quarter, but are not realized. They are not affected or included in the cash flow. We had some effects that negatively affected the fourth quarter last year, and then we have to adjust for those here that is included in the SEK 194 million and vice versa in the fourth quarter this year. We had some negative effects. If you can see the full year numbers, we have between SEK 100 million or SEK 120 million in a sort of normal quarter. It's mainly two things. It's currency effects and also revaluation of earnouts related to our acquisitions. I believe they are of equal size. Those are the two main explanatory factors.
Okay. Wasn't earnouts positive last year as well?
Yeah. It's a combination of those.
I don't think everyone follows this, so maybe we could take this.
Yeah. We can talk a little bit more offline, but it's unrealized effects that we have to adjust for in the cash flow.
Okay. We can take this after. Just a quick one on the working capital. Release, even though a good organic growth, is there anything we should have in mind there coming to the next quarter?
The free up of cash flows in terms of working capital in the quarters, that's what you're referring to, or?
Yeah. Exactly. With 5% organic growth. It varies over the quarter. Yeah.
It varies over the quarters. It's a bit of how it ends up at that exact date, right? It's hard really to, but there's nothing structural that you should be aware of for the next quarter. There's nothing that you're aware of that you should take into account or so. These numbers vary a little bit over time, and I think you need to look at it from a, yeah, for more than a quarter to really understand the cash generation for a company like Lagercrantz.
Yeah. Thank you. I'll get back in line.
Okay. Thank you.
The next question comes from Gustav Berneblad from Nordea. Please go ahead.
Yes. Good morning. It's Gustav here from Nordea. I just had one question here on one of the slides you presented. It sort of looks like we've seen an increase in sort of companies that are sort of underperforming in terms of ROS, where the number of companies that are in the red and the yellow area has sort of doubled from last year. I was just wondering if you could comment anything on that.
Yeah. I decided not to comment on it because it's not significant. It's a couple of smaller companies that have added to that number. Looking at the volumes there, it's reasonable. I think we will always struggle. I mean, it's fair to say also, I mean, the year that we have behind us is sort of, yeah, organically, we have been going, we have been struggling with the markets in some areas. And we've had a few companies that are struggling given the market conditions.
It looks good on the total because we have compensated quite a lot with M&A instead. Actually, I think we will see some of those companies bounce back. Some of the companies we are really working with, and we have closed one or two businesses during the year. We are dealing with them, and it will pick up and get better as long as we are, but I do not think from an overall perspective, it is significant.
Yeah. Okay. That is clear. Just one comment here also on the strong organic growth here in Electrify and Niche Products. Would you say that this is mainly driven by the EasyComps and also support from Easter? Is this more volume-driven, or are you also seeing a significant portion of price increases also coming through?
I don't think price has been very important here in this quarter. It is mostly other effects. I think that we see some markets that are growing for us. We see the infrastructure market growing. We see some investments in electrification coming to sort of growing, coming to a new level. We also see some of the companies doing a better job in their exports. It is actually a number of things. I don't think it is very price-driven at this point in time. We have been doing most of that already before, and we will continue doing it, but it is not like we have had hefty price increases here in this last quarter or in the last six months.
Okay. Perfect. Just, sorry, the last one here. I mean, you comment on the warranty cost, and it sounds like it is sort of the regulatory business, etc. But still, I mean, you highlighted it, and it sticks out. I was just wondering if you can say anything if it's related to one specific product category, or is it for one specific customer, and also if we should expect any of this sort of going forward in this sort of magnitude.
No, I don't. It's a reservation we made for a worst-case scenario in a specific, it's a number of, it's one company, and it's, but it's multiple customers. So it's a product generation that we need to fix, and that might cost us that amount of money. So it's the worst-case sort of type scenario that we have there. When we're doing this type of business, it's part of the business, but it was a little bit more significant this time, and therefore we decided to put it out in the report.
Yeah. Okay. Perfect. That's very clear. That was all for me. Thanks.
Thank you.
Thank you, everyone.
As a reminder, if you wish to ask a question, please dial Poundkey 5 on your telephone keypad.
We have a written question here as well. How should investors think about group's long-term EBITDA margin? During the last 10 years, you improved from 10% to 17.5%.
I think that is a question I get sometimes or we get sometimes. Of course, we have the ambition to have the EBITDA margin at a very high level going forward as well. I think what really is sort of to that end, it is important to highlight. I think we have a very much stronger portfolio of companies now. It's not like we have significant sort of one-offs or very good trends in a specific company providing a lot of good profits for us.
It's very broad-based. I think we have the group at this EBITDA margin level going forward, or that we try to improve it even a little bit further. I think what might sort of change the thing is really what type of acquisitions we find. If we find companies like Must System, for instance, having almost a 40% EBITDA margin, of course, that would improve or bring up the margin for the full group, and especially for the Electrify division, which it is part of. That is sort of a structural change over time. Otherwise, I think a good level at the 17.5%. Of course, we have the ambitions to eventually get to the 20%, so we're pushing that. That's part of running the business every day here. There was another question here. Let's see what it is.
Number of M&A, and they concluded that we did five M&A in the calendar year 2024, and will volumes increase as total business grows? That is the M&A volume.
When we grow, I think one key question is, of course, how we will scale M&A. Because if we say that we're going to grow 10% of ourselves every year, I think that's a good ambition, and that's where we basically are and should be. As the base and the company then grows or the group grows, of course, the 10% means more volume along the way. We've said that we would probably do a little bit more. Will you do bigger acquisitions, or will you do more of acquisitions? I think most, we will do more of acquisitions.
I think we still have our sweet spot where we find the acquisitions in terms of size, but we will also then try to also improve and gradually also make slightly bigger acquisitions along the way. Most of it will come from more acquisitions. The number of acquisitions will need to raise along the way. Therefore, we have also set the bar for ourselves higher. We should acquire some 8-12 businesses per year in order to bring in at least the 10% that we talked about. Of course, as we grow, the number of acquisitions will need to increase for us to keep up and have the growth pace that we are having.
Given that we're doing this in a decentralized fashion, we're having many people involved, I think we have a better pipeline and more opportunities to look at right now than we've ever had. We are managing that growth, sort of, yeah, growth challenge very well, I would say. Maybe I hope that gives some flavor to your written question here.
Okay. I think that's it. Thank you, everyone. Thank you for listening in, and thank you for following us and being part of our journey. Hope to talk to you soon. Of course, Peter and I are available here during the day if you have some additional sort of discussions you would like to have or details you would like to discuss. Thank you, everyone, for listening in, and have a good day.