Thank you, and welcome everyone to the Lifco Q1 presentation. I'd like to start directly by going into page number two and give a short overview of the overall performance in the quarter. As you can see from the numbers, we are quite satisfied. It was a solid quarter across the board. We can conclude now that the first quarter of this year had not the same effects of COVID-19 that we were experienced during 2020, especially in the second quarter, and we had some of these effects also remaining in the fall. Now in this first quarter, we are overall very limited impacted by COVID-19. I'd like also on this high- level summary to just pinpoint the operating cash flow, which is the only number that maybe stands out. All the others are all very good.
Here I would like to highlight that the numbers from last year are extraordinarily good. We had a good cash flow in quarter one 2020, partly due to release of inventories, but also the fact that COVID-19 came in in early March had an effect on extraordinary good cash flow. It's also important to acknowledge that normally Lifco has the weakest cash flow quarter in the first quarter. What typically happens is that we have a release of special receivables and also to some extent inventory in Q4, and then we build that up in Q1. You can look back in historical numbers, for example, in 2019, 2018 as a reference and conclude that also the cash flow in this year was stronger than historical numbers. Also to summarize the high- level, we had an organic growth of around 2% in the first quarter.
We had a negative effect from exchange rates of about 3%, and then acquisitions contributed with about 7% for the quarter. With that, we can go into page number three and talk a little bit about each business area. Yes, the Dental area came back quite strongly in the first quarter, and we now see that, I would say most or all of our markets in Dental are back to more normal levels. We are then helped by acquisitions that we've been carrying out in the Dental field that also contributes to the growth. We have a very strong margin expansion in the quarter, partly due to acquisitions, but also due to the fact that we have lower sales and marketing activities because basically it's not possible to carry out the normal activities.
This is the same trend we have now for the last couple of quarters that remains in the Dental field. If we move over to the Demolition & Tools area, we are experience better market conditions. They were quite good in the first quarter, and here I would like to highlight that the numbers from Q1 2020 actually included some special projects that we didn't have in this year. That's important to understand. It has not a huge impact, but it has an impact on that. There with that. Also we are helped here by better margins. It's the strong market conditions and then the continuous work on trying to improve margins at Lifco is coming out well here. Also in this area, of course, we have some lower sales and marketing activities as many companies are experienced during the COVID-19 times.
In Systems Solutions, the same story. We have good market conditions, and the reason we are not growing top line here is more related to specific companies. For example, we have a project business that is volatile, and they had a fairly weak quarter that is dragging down the overall sales numbers. For the most part, most of our companies in these areas are performing well in the first quarter. Also here we are improving our margins due to acquisitions, due to organic improvements. Then on top of that, we also have some effect of the lockdowns that we are carrying out lower sales and marketing activities also in this area.
With that, we can move over to page number four, and this is just a reminder for everyone who's listening that Lifco, what we're trying to do is to grow Lifco on a continuous basis from acquisitions. Historically, we've been generating around 9%-14% every year from acquisition in EBITDA growth. Of course, we are striving to also improve our organic performance in our EBITDA, and for the most part, we've been successful historically. With the exception of last year where we had a lot of difficulties during the COVID-19 times. That's just a reminder that acquisition is extremely important for us. Also on this slide, we can highlight that we have been able to do this type of growth from acquisitions without stretching our balance sheet, which is an indication that our cash flows from operations are very strong over time.
We can go to page five and just continue on the cash flow and balance sheet. We are at the end of this quarter, despite quite a few acquisitions, we are having a very strong financial position. Our interest bearing net debt to EBITDA is 1.2x , which is very low. It gives us good room to continue to try to buy good high margin companies that are very strong in their niches also going forward. I can also highlight that the 1.2x EBITDA in this quarter should be compared to the 1.6x one year ago. We are actually in a better position now than one year ago. We can go into page six, and normally I don't talk much about this slide, but I just would like to remind everyone that Lifco, we are striving for profits and for margins.
It's in our DNA to continuously make all our companies even more niche, so that they become even stronger in the more profitable part of their business. As you can see on the bottom of this slide, Lifco has been growing our margins continuously over the last six, seven years, and we are now standing at an EBITDA margin on rolling 12 months at 20.5% compared to 14.2% in 2014. This is a continuous work that we're doing in all our companies. It's also being, of course, helped by acquisitions that we've been making over the last seven years, that they have been on a higher margin level than the portfolio we had going into the stock exchange in 2014.
We can go to page number seven and just to conclude that our focus on strong margins and trying to buy asset-light companies leads to a situation where our return on capital employed, excluding goodwill in o ur operations, is very strong. We are now standing at 151%, if you take the rolling 12 months data. This is a key criteria in our acquisition work. We want all our companies to be very cash generative so we can continue to build Lifco through acquisitions for many years to come. After that, I would like to go to page 28, all the way back in the presentation, and just highlight that we had a very strong period in acquisitions in the last few months or last few quarters.
We have actually now from the 1st of January this year consolidated in roughly SEK 1.2 billion of businesses into Lifco. It's a good mix of Dental, Systems Solutions, and Demolition & Tools companies that we've been able to acquire. It's also a good mix of geographic spread. I can come into page 29 and just highlight that we have, during the last four years on the right-hand side of this slide, we can see that we have now a very broad hunting grounds for companies to acquire. As you can see, the period from 2017 to 2021, we've been pretty broadly spread out between Sweden, Germany, Norway, Italy, and U.K., and then added complementing geographies from time to time.
Now, this is continuous work to expand our acquisition opportunities in as many markets as possible because we're looking for really good companies that we hopefully can acquire at reasonable valuations. To do that, we need a huge or enormously big funnel to be able to source these deals. That's not an easy job, but we work very hard on improving that and get as many good opportunities as possible. That was my last point here in this presentation. With that, I'd like to open up for any questions.
Thank you. If you do wish to ask a question, please press zero one on your telephone keypad. If you wish to withdraw your question, you may do so by pressing zero two to cancel. There will be a brief pause while questions are being registered. Our first question comes from the line of Carl Ragnerstam from Nordea. Please go ahead. Your line is open.
Good morning. It's Carl here from Nordea. In Demolition & Tools, obviously quite strong margin for a Q1. Could you please help us bridge the 460 basis points year-over-year margin uplift, especially as you guide that you have fewer special orders today compared to last year? Thank you.
Thank you. It's a combination of a few things. We have been lifting our margins in a few of the companies. We've been doing some work during the last, I would say, 12-18 months that now generates the effect. Some of these started actually pre-COVID, and some of these effects came in the COVID phase, that we basically went through our companies and made some restructuring during last year that now is paying off. On top of that, we have acquisitions that is helping on the margin and then basically solid performance and across the board. It's pretty solid in this area right now.
Okay, perfect. On that note also, would you say that the low or the lower level of special orders is due to somewhat cautious end market still for CapEx-driven demand? Is it just that it is fluctuating between the quarters?
The special projects, they like our project business. They don't really correlate with underlying market conditions. They are typically a very long process to get sold. It's in cases where we have one customer, very specific need that can take years in discussions and planning of the project. It can materialize at any point in time. It's not so correlated with market conditions at all. As I'm trying to explain in the presentation, the underlying market conditions are better now in Demolition & Tools than it was in last year. We had also to highlight that given our sales numbers, we also want to show that in Q1 last year, we had this positive effect of a special project delivery.
Okay, perfect. On Dental, when I look at utilization rates for practices in different parts of Europe as well as U.S., we could see that they are down quite a bit compared to normal levels, but you're guiding for a quite normal level during the quarter. Is it fair to assume that the somewhat lower utilization rate is fully compensated by a higher degree of consumables? Also, if so, would you say that you have more favorable margin on the consumable side?
I don't think the margins are much different there. I think you're right, that for the markets where steel is a little bit lower utilization rate, there's a higher use of what I call disposable material in the Dental offices still. It's difficult to exactly guide you in this effect, but there is some effect around that.
Yeah. I guess the prosthetics business is still quite low- levels, I guess, or?
No, I think we tried to write that in our comments that overall the markets are back to more normal conditions now.
Okay, perfect. Also you're talking a bit about lower selling, traveling, marketing expenses and so on. When I look at the gross margins up 60 basis points year-over-year, EBITDA margin expanded, I think 300 basis points year-over-year, meaning that the delta comes from SG&A contraction, or the main delta at least. Would you say that the long-term sustainable margin uplift is the gross margin uplift? Or how much of the SG&A reduction or estimated sales reduction, rather, is long-term sustainable?
It's very difficult to say, because I can say that some of it are more sustainable activities that we have been carrying out during the last 18 months. When COVID came also, a lot of companies took the opportunity to review their organization, their setup and everything around that. Some of it will be sustainable, but also a substantial part that could be non-sustainable given that if things go back to normal, which you can debate if that will happen, if things go back to pre-COVID activities, of course, quite a big part will come back. It's not clear when that will happen and how quickly it will happen, if at all it will happen to a normal way. I think it's very difficult to say. I think it's clear that we strive in Lifco for a good margin, good profitability all the time.
When COVID came also, a lot of our companies took the chance to review if there are things they could shave on it. Some of that will remain, some will not remain. Exactly how and when, I cannot tell you.
Okay, perfect. The final one from my side is that we could obviously see that Contract Manufacturing is still growing quite nicely in the quarter. I guess it's medtech related still. How should we look at that coming quarters? Do you expect facing more shares in comparisons when you go into Q2 or H2? Also I guess that have a lower margin on the medtech side, so you should, in that case, have a more positive margin mix in the second half.
We don't communicate margins into different industries in that segment. I can only conclude that after quarter one, we see no major changes from the trends so far. It's still holding up well in that area.
Okay.
We don't do margins by industry.
Okay, thank you.
Thank you.
Thank you. Our next question comes from the line of [Jacob Alder ] from Handelsbanken. Please go ahead. Your line is open.
Good morning. Thank you for taking my questions. I only have two ones. Carl touched upon a few of my questions already. If we start off by looking at the margins within Dental, it's obviously stronger. Should we interpret this as a cost effect or a mixed effect from more software income? How does that look?
The margin expansion Dental is partly acquisition related and mainly related to lower sales and marketing costs.
Okay. That's clear. If we just touch upon the Systems Solutions, it seems like the project-d riven business, or some of the project driven business has been underperforming in relation to the rest. Are you able to elaborate a bit on that? How is it looking for the project- driven businesses here ahead? Yeah.
The project- driven business has always been very volatile in Lifco. They come and go different quarters and they are a little bit the same as the special orders in Demolition & Tools. You can't really plan it. It comes when it comes, and it's not always correlated with underlying market conditions. It's even for us, very difficult to know what's going to happen in any given quarter for this business. Some of them might have a solid backlog, but that doesn't mean that there will be good result in next quarter because you know how you generate the accounting for that, it depends really what's happening now, how much step-up you make in each project, et cetera. That is a very difficult business to forecast, even for me sitting in the head of Lifco. Yeah, it's been for many years a very volatile area. I can only conclude that.
Okay. That's very clear. That was all for me, just two quick ones there. Thank you.
Thank you.
Thank you. I remind you that if you want to ask a question, you have to press 01 on your telephone keypad. As we have no further questions, I'll hand it back for closing remarks.
Okay. Thank you everyone for listening in, and I wish everyone a good day. Thank you.