Ladies and gentlemen, welcome to QleanAir Q1 report presentation for 2022. To ask a question during the Q&A, please press zero one. Now I'm pleased to present CEO Christina Lindstedt and CFO Henrik Resmark. Speakers, please begin.
Thank you very much for that, and very welcome to the presentation of our first quarter results. Next page, please. Starting with page number four, I would like to start by summarizing the highlights of the first quarter. I'm very happy to say that we continue to develop our business in Europe, one of our important growth areas, and we increase both our sales level and our order income in Europe.
This growth is happening both on the air cleaner side and on the clean room side. We are executing our growth strategy. In Japan, society continued to partly be closed, linked to the COVID pandemic in the quarter. Towards the end of the quarter, the state of emergency was lifted, which opens up for good growth opportunities for us going forward.
In the quarter in APAC, we delivered a stable business development both in terms of sales and in terms of order intake. In Americas, we continue to have a weak development in the quarter. We entered the year with a low order book, and consequently it impacted also the sales level in the first quarter in a negative way.
Our underlying profitability level in our business continues to be very strong. We deliver strong and increasing gross profit levels, and this in spite of a very turbulent quarter due to the war going on in Ukraine and its impact on material prices and so on. We continue in the quarter to invest in growth. We invest in marketing and business development and sales resources to cater for future growth.
We continue also to generate growth in our installed base, which also means that we continue to deliver growth in Clean air delivery. Next page, please. A snapshot of our financial key data in the first quarter, we saw an increase of overall sales by 4% arriving at SEK 115.4 million. Order intake is up by 15% to SEK 117 million. Very strong gross profit level and increasing, arriving at 72.5%.
We have recurring revenues amounting to 60% of our revenues and SEK 69 million in value. We deliver EBIT margin of 15.2% compared to 18% last year, and we deliver an increase in Clean air delivery of 27% compared to the first quarter last year. Next page, please.
Looking at our European part of the business, we deliver sales growth of 16% compared to last year and an order intake growth of 19%, meaning that Europe represented 55% of our total sales and 59% of our order intake. We saw strong growth in Air Cleaners, and we saw growth on our Cleanrooms business.
We saw growth in Sweden and continued growth in the German market, but also in some of our smaller markets like Belgium and Finland. On the Cabin Solutions side, we deliver important renewal contracts, and we announced in the quarter a big renewal contract with Porsche, one of our major customers, of the value of SEK 20.5 million in order value.
In the quarter, we continue to increase our sales resources to build further capabilities for growth both in Germany and in France. We also continue to invest in our capabilities and capacity on the Cleanroom business side, where we see great opportunities for growth in the future and an opportunity to cover additional geographical areas.
Next page, please. One example of a new customer case, in the first quarter in one of our smaller markets, in Belgium, where we have a very successful sales resource who, since long have a well-established position when it comes to Cabin Solutions and where we are step by step growing our installed base of Air Cleaners.
One of the areas that we are supplying with the healthy working environments and protecting from the spreading of virus during the pandemic is the public sector, and there we supply Air Cleaners to a municipality in the French part of Belgium. Next page, please. Looking a bit more in detail in our development in APAC, we saw a slight increase on the order intake and a slight decrease when it comes to sales.
Overall, it's a very stable quarter, and Japan continues to contribute in a very strong way to the overall group profitability level, and we deliver very strong renewal quarters in the country. Sales from APAC represented 41% of our total sales and 35% of our total order increase.
After the end of the quarter, we continued to add sales resources in Japan. With the opening up of society towards the end of the quarter, we see very strong opportunities for continued growth in the Japanese market. The office segment remains our most important customer segment. With the opening up of society, people coming back to work in the office, the investment willingness in healthy working environments in the office are increasing.
We see great opportunities for us to increase our market coverage both on Cabin Solutions and on Air Cleaners. We are introducing more solutions, and we are addressing new customer segments. We are very happy that we a few days ago announced our first major orders on the Air Cleaners side towards the industrial segment.
This is very strategically important strategic move for us, where we develop our business in Japan and address new customer segments and solve problems that we have been addressing for some time in Europe. We see very good continued strong growth opportunities in APAC. Next page, please.
America continues to be a small part of our business, and in the quarter, sales in the U.S. amounted to 4% of our total sales, 6% of our total order intake. Order intake was up compared to last year, but towards the small or low level first quarter last year. Sales were down linked to the reasons as we explained before.
We entered the year with a fairly weak order stock having a negative impact on our sales in the first quarter, and Americas overall having a negative impact on the overall profitability of the company. We have a new leadership in place locally. We are focusing very strongly on stepping up in terms of sales. We have a number of good assets locally. We have a very strong customer base.
We have good solutions. We have satisfied customers that are returning and that are scalable. We have a solution that is relevant for additional customer segments, and we have a strong focus on increasing our market coverage to cover more of the customer segments that we are already addressing in Europe when it comes to our clean room business. Next page, please.
When it comes to our progress, on a quarter-by-quarter basis, after the first two record quarters early 2020 linked to the new legislation coming into play in Japan, after the first dip into the coronavirus pandemic, we have step by step delivered a stable increase both in terms of sales level and a steady trend upwards on the order intake side. We deliver stable recurring revenues, with an increase in the last quarter.
Looking at the same data on a rolling 12-month basis, we see an upward trend both when it comes to sales and when it comes to order intake, and a very strong, stable contribution from our recurring revenues, which is a very strong element of our business model. Next page, please. Page 11.
To summarize QleanAir as an investment, we are a unique premium provider of indoor air cleaning solutions. We have a service-based circular business model, where we rent out our equipment on long-term rental contracts, and we have our solutions remaining on site with our customers for a very long time, on average more than six years.
Globally, we have more than 3,000 customers, and we operate mainly in markets in Europe, in APAC, and in Americas. We are pioneers in air cleaning technology with high barriers to entry. We have an asset-light business model where we cooperate with external partners for manufacturing and for service, and we have an increasing installed base of air cleaning units. Next page, please. I would like to hand over to our CFO, Henrik Resmark.
Thank you very much. Moving to page 13, please, first quarter financial summary. Order intake is up by 15% in the first quarter. All three geographies contributed, Europe, Japan, and U.S. Sales is up by 4%. We have a 2% growth for Air Cleaners, and we continue to see a clear traction for Air Cleaners in primarily Germany and Sweden.
Further, we are up 26% for Cleanrooms, and here Sweden is the clear driver. The operating margin of 15.2%, that's a decrease from 18%. We are investing in measures for future growth, such as marketing, sales promotion, product management, and business development. Moving to page 14, please. In the quarter recurring revenues increased by 6%. Last 12 months, the recurring revenues are now at SEK 266 million and at an increasing trend.
This is a solid foundation for continued profitability. The gross margins remained at a high level, 72.5% in the quarter, and the EBIT margin again decreased to 15.2%. We are above our financial target. Page 15, please. This slide, the graph to the left illustrates the relation between the book values, and on March, it was around SEK 49 million of all the units that we have in our own balance sheet.
The revenue stemming from such units, including service, is approximately SEK 266 million the last 12 months. This is important to understand, and this is a contributor to our gross margins. Page 16, please. Quarter- by- quarter, we continue to increase the installed base. We see a growth in Air Cleaners in Europe, while cabin solutions in Europe is a mature market for us.
The number of installations is increasing more than the revenues. This is partly because of the fact that an average price for a cabin solution is considerably higher than for an air cleaner. Again, we see the growth within air cleaner. Page 17, please. Operating profit, EBIT and cash conversion. In the first quarter, the operative cash flow was zero.
The working capital differs quarter to quarter, and in the first quarter, we had an increase in accounts receivables in primarily Sweden and an increase of inventories related to larger clean rooms in Sweden. However, full year 2022, we estimate the operative cash flow to be positive. Last 12 months, we still see strong operative cash flow and EBIT margin of approximately 18%.
All this while we continue to invest in marketing, sales promotions, business development, and product management, all to try to achieve future growth. Finally, from my point, page 18, please. We continue to amortize every quarter. The net debt equity ratio is down to 0.8, it's down from 1.0. Equity ratio is above 32%, and a dividend of SEK 1.5 is proposed. If that happens, the full amount to be paid out is SEK 22 million, and the shareholders meeting is later today. Handing over to Christina again.
Next page, please. Page 19. For us, very important measurement that we measure since 2015 is the amount of clean air that we deliver through our installed base of different air cleaning units. This is one of our biggest impacts on society in terms of sustainability. Our mission is to reach more and more people with clean air on an ongoing basis.
I'm very pleased to confirm that we continue to do that. At the end of March, we delivered a volume of clean air delivered 5.66 billion cu m per month, and that amounted to an increase of 27% compared to the same period last year. Next page, please. Page 20. To summarize the next steps of our growth strategy going forward.
In Europe, we have a strong focus to continue to grow our Air Cleaner business, both by increasing our market presence in the customer segments where we already have a strong presence, and also develop further the newer customer segments we entered during the pandemic. We also see an opportunity to increase our geographic expansion beyond the core markets where we are strong today in Germany and in Sweden.
Also, on the Cleanroom side, we see great opportunities to increase our presence in the customer segment and geographies where we already are present in Sweden. We also invest in our capabilities to increase our coverage outside of Sweden and see great opportunities for growth there. We are also focusing on maintaining our leadership position on our Cabin Solutions.
In APAC, we see strong opportunities to continue our growth opportunities and our growth journey when the society is now opening up after the period of pandemic. We see these opportunities both within our Cabin Solutions business and on our Air Cleaners business within new and existing customer segments.
In the U.S., we are focusing on stepping up our sales activities, and we are focusing on expanding our market coverage to address additional customer segments we know from other parts of the world here in Europe. Overall, we will continue to invest in our growth journey. We will continue to invest in our product roadmap in innovation, in sales resources, and in marketing activities. With that being said, I would like to hand over for Q&A.
Thank you, Christina. Ladies and gentlemen, if you want to ask a question, please press zero one on your telephone keypad. Our first question comes from the line of Anders Roslund from Pareto Securities. Please go ahead. The line is open.
Yes. Good morning. I would like to start with a question regarding the recovery in Japan in Cabin Solutions. Is this a sort of first sign of recovery from the COVID-related lockdowns and will you see a further increase also, or have you come back to the level you were before the COVID? How do you see upon this Japanese recovery?
Well, we see the fact that society is opening up and the fact that our key segment is the office segment. When more and more people now are coming back to work, we see that also the investment willingness is coming back and that demand will go up. Where we were just before this pandemic were the two strongest quarters we've ever had in Japan linked to the implementation of the new legislation. We are not back to that level yet, but we see that we will be back into a growth scenario in Japan from where we are now.
Okay. More in Japan, you just recently announced orders in the industrial segment that you started already last year to market the HEPA 14 for cleaning viruses. How is those two areas progressing in Japan now?
Yes, we launched our Air Cleaners late 2020 in Japan and then primarily towards the customer segment where we already had the presence. We saw a strong demand linked to the pandemic. That is one position and one business where we are established in Japan when it comes to Air Cleaners.
What we have done now more recently is to enter the space where we are present in Europe to solve air cleaning challenges in a industrial context. That requires addressing totally different customers than the ones we have had from before in Japan and solving problems that we are used to solving in Europe, but that have been new to us in Japan.
That takes a little bit longer to develop that business, but we are very satisfied that we are taking the first steps to unlock that business opportunity in the market space.
Also coming back to the Cleanroom area, you're talking about some hesitation remaining in the U.S. and now you start to open up for other market segments where you've had been relatively strong in Europe.
Uh-
... how do you see? Is it difficult to sell Cleanrooms to the historic market segments, pharmacies, hospitals, et cetera? Or should we see it as a-
Well, I mean.
Yeah.
No, I think you should see it as an extension of our market coverage. Our main focus is still with our traditional segment in the U.S. within the pharmacy, where we are very strong and where we have a strong customer base and returning customers. We've also faced long decision processes, and the pharmacies are found within the big hospital system, and during the pandemic, they were negatively impacted by that.
We faced long decision processes. What we have experienced, for example, in Europe is often faster decision cycles when it's linked to more commercial businesses with deadlines in terms of getting started with production and so on. We think it would benefit us to have a mix of different customer segments, also in the U.S..
Finally coming to Air Cleaners, it was a strong year-over-year growth there, but it's sequentially coming down a little bit. Is that anything to worry about, or should we look more on the year-over-year development? How is the post-COVID now in Europe developing for Air Cleaners? When I mean the post-COVID-
Yeah
... is how is the new, market potential?
No, we see that we are continuing to develop strongly within our traditional segments on the industrial side. We also saw good sales towards the office segment linked to a major order coming in in the last quarter last year. We do not see the same order uptake from the school sector as we saw last year, that has been linked to subvention programs in Germany.
We are very, very happy to see that, compared to the first quarter 2021, the uplift in the newer segments more than compensates for where we were then when it comes to the school segment. Some parts of the business we see will continue to grow, whereas other parts are like the school segment that is more linked to subvention.
Okay. Finally, I would like to comment about your costs. Gross margins were better than expected, while costs were significantly higher, and it's other external costs, not the staff costs. You say you launch new market initiatives in sales and marketing, but you do not increase the staff costs. How should we see upon those other external costs? Are they now on a higher level, or are they coming down in coming quarters? Are they a one-off characters, or how should we see upon this area?
Yes, it's a little bit of a mix. We have a number of one-off investments in terms of marketing activities. We launched a new website here in February, which is an important platform for our digital marketing going forward, as one example.
We are participating in exhibitions to a larger extent here in the first quarter than we have done before. We were also conducting a number of business development initiatives. All of these initiatives are variable. We are bringing on board salespeople, and that of course we see as an investment that will also in the short term lead to revenue generation.
The overall staff cost did not increase in the first quarter, and that was partly linked also to vacancies in some other areas. We had a few sales resources joining. We had a couple of vacancies leading to an overall stable personnel cost in the first quarter.
Should we then expect personal costs to increase while those other external costs to come down? Is that how we should see it?
Yes.
Or...
Yes. Of course, we will continue to invest in marketing. That is an important driver for us to generate growth. Exhibitions, things like that, they are more into certain quarters. Variable expenses will go down to some extent and salary, personnel costs go up to some extent.
Okay, thank you. I go back to the line and come back later.
As a reminder, please press zero one on your telephone keypad to ask a question. There will be a brief pause while questions are being registered. I think we have a follow-up from Anders. Please go ahead. Or maybe not. We don't have any more questions at this time, so I hand the word back to you, Christina, for some concluding remarks.
Thank you very much for your attention, and we wish you a continued very good day. Bye-bye.