Good morning. Good morning and welcome.
Welcome to the Röko Q4 2025 Report Presentation. For the first part of the conference call, the participants will be in listen-only mode. During the questions-and-answers session, participants are able to ask questions by dialing pound key 5 on their telephone keypad. Now I will hand the conference over to the speakers, CEO Fredrik Karlsson and CFO Johan Bladh. Please go ahead.
Good morning and welcome. To summarize Röko in 2025: we are not satisfied with the profit growth in the year, in particular due to the slower second half. 2025 was a challenging year with political uncertainty impacting operating companies, currency markets, and of course M&A. Organically, the main issues have been company-specific and partly related to political decisions in the U.K. and in the U.S. that have had a negative impact on demand for some companies. In the U.K., an introduced tax increase on pickup trucks has had a negative impact on the demand for 4x4s products, and the U.S. trade tariffs, not the least on goods manufactured in China, have impacted demand negatively for some of our companies, and in particular DAN-FORM. Both of these companies have had a negative profit development in the year.
On the positive side, we can see that many of our companies have worked well with improving or protecting their margins, and three companies stand out with strong improvements in the year: Renovotec, Rocket Medical, and Brownell. All of them are based in the U.K. Total EBITDA growth for the year was 9%, mainly driven by acquisitions and with 4% organic EBITDA growth. On acquisitions, there is a mixed picture. We still see plenty of opportunities, more quality companies than we have done in recent years. I'm happy that we have completed our first acquisition in Italy in December. However, we would have liked to achieve higher organic and higher acquired growth for the year. Going forward, we continue to see a strong inflow of opportunities across markets. We remain optimistic in our efforts to complete attractive acquisitions.
In the year, we acquired three companies with an aggregate SEK 465 million of net sales, which represent 8% growth for acquisitions if they would have been consolidated 1st of January. The companies have above-average EBITDA margin for the group, evidencing their attractive operating models and strong market positions. Leverage continued to decrease and decreased with 0.1x turns, compared to one year ago and amounted to 2x EBITDA. It's important to note here that in the 12-month period since the end of 2024, we have invested SEK 946 million in acquisitions. If we continue to page 3, start to look at the quarter. Net sales was flat but with significant exchange rate headwinds. Organic net sales was flat. EBITDA grew 5%, with improved margins and also coming from a pretty strong fourth quarter in 2024.
The slower EBITDA growth can really be attributed to exchange rate difference, differences and some political challenges, that have impacted some companies, as mentioned before. Operating cash flow grew ahead of EBITDA, evidencing margin improvement and focus on working capital across companies. As mentioned, we acquired one company in the quarter and similar to in Q4 last year when we entered France, this was our first acquisition in Italy. It's not a requirement to buy companies in new markets, but when we find niche companies with good margins and strong market positions who also happen to be in new geographies, this is icing on the cake. For the full year, EBITDA increased 9%, with sales growth of 4%. The higher growth in EBITDA relates to margin improvement and recent acquisitions being margin accretive.
As seen, the margin improvement of approximately one percentage point was driven by higher margin acquisitions. So this was the main driver. And that's then acquisitions completed both during 2024 and 2025, the 2024 ones having full year impact first in 2025. And EBITDA margin improvement in the companies on a like-for-like basis. Margin was partly offset due to negative mix effect as well as some increased HQ costs, largely following the IPO. Operating cash flow decreased versus last year on a full year basis. But if we exclude the costs relating to the IPO, cash flow grew with 2%. Since we have the lion's share of our business outside of Sweden, I want to mention currency. The Swedish krona has appreciated quite significantly during 2025 and have actually continued to do so in the beginning of 2026.
We don't have a view as to where the krona will go, but we can recognize that the current development is negative for us on a reported basis. If the current foreign exchange rates will last for the remaining part of 2026 and all else being equal, we will continue to have negative exchange rate differences in line with what they were in Q4 for the beginning and then tapering off towards the end of the year. If we then continue to page four, we can see the highlights of the group's financial performance over a longer period of time. We start this period in 2022 as that was the last full year when we still had equity commitments from our original investors.
Similarly to 2024, we had organic sales growth of 2% in local currency, EBITDA margin improvement of one percentage point to now reaching 21%, and we reduced the leverage with 0.1x turns to 2x EBITDA. Over the long term, we have achieved continuous margin improvement. Return on capital employed has improved year-over-year, and we have reduced our leverage. The reduced leverage is not only positive, I should say, as it means that we could have had a higher pace on acquisitions. We're not stressed to be less disciplined in our acquisitions. It's important to note, but we are a little bit stressed to work harder to find good companies to acquire.
Turning to page 5, we go through cash flow and return rates. Cash flow declined 2% in the year. As mentioned before, cash conversion was 75%. If we exclude the transaction costs relating to the IPO, cash flow increased 2% and cash conversion was 78%. Last year, we had a high release of working capital, which has not really been the same in 2025. And on top of that, our paid tax has increased slightly. We monitor the development of inventory and trade receivables closely and are always working with our local management teams to improve cash flows. Return on capital employed improved, as mentioned, from 14.4% last year to 14.8%. And while not mentioned on this slide but mentioned before, this was the fourth consecutive year with increased return on capital employed for Röko, up more than two percentage points since 2022.
However, it still remains relatively low compared with peers as we are a younger company. And the acquisition of ITIB in Italy was completed towards the end of the year. The timing effect of such an acquisition on return on capital employed is adverse. Return on capital employed excluding intangibles from acquisitions was 186%, evidencing our asset- light group of companies. Moving on to page 6, this is a little bit of a summary on acquisitions that we have done. We continue to grow through acquisitions. Since we started in 2019, I should say, we have completed more than 30 acquisitions, at an average EBITDA multiple below 8x. EBITDA growth was 17% in 2024, driven by strong organic EBITDA growth of 9% with acquired growth of 8%. In 2025, the companies achieved an organic EBITDA growth of 4% and acquisitions contributed with 10% growth. However, we had negative exchange rate differences in 2025, as mentioned, of 4% on EBITDA.
With that, I will hand the conference back to Eetu, who will moderate the Q&A session if there are any questions. I just want to say at the last interim report, we had some issues with the chat. Just in case we experience the same today, I would urge you to ask your questions verbally. Thank you.
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 Jakob Marken from Danske Bank. Please go ahead.
Hello. Good morning. Thank you for taking my question. I'll start on the margin in the different segments. You talked about it briefly. What I mean, could you talk a bit more about, you know, the Q4 and, you know, how we should think about that going into 2026? I mean, of course, a very, you know, good profit development in B2B and quite weak one in the B2C segment. And of course, as you said, you know, you had acquired companies with better margins. So I guess, you know, if you can help us, especially in B2C, you know, what's happening there? Is that, you know, some Q4 related stuff that we shouldn't extrapolate or should we, you know, that will continue into 2026?
Yes. Thank you, Jakob, for that question. I think, you know, I start with the easy one then just to say something on B2B. And if we focus on the quarter, I mean, it was largely good in terms of margin development driven really by strong performance of these good companies or well-performing businesses that we mentioned also on the full year, that had a good performance. If we then focus in on B2C, as a little bit of a reminder, our B2C segment in particular has some seasonality to it, which makes it more challenging to look at, purely on a quarterly basis. I just want to emphasize that, so that that's clear.
And then specifically, I mean, these things that we have mentioned, the U.S. tariffs in particular having a significant impact in particular on one of the B2C companies, that was really the main driver in the slow development in the fourth quarter coupled with some seasonality. And then I think we mentioned as well very briefly in the report, just in the text on the segments, that there are some company-specific events, but in reality, they're more seasonal changes than anything else. So nothing apart from the U.S. tariffs that we can point to, which is alarming.
Okay, perfect. Thank you for that. And then, my second--
Maybe sorry. Maybe I just want to add one more thing. I mean, I would really urge as well to look in particular at the B2C segment with a longer time frame. And if you look at it on the full year reported number, the margin was flat.
Yep, sure. Thank you for that. Then my second question on M&A. And as you alluded to, you know, you have room in the balance sheet and you want to have a higher M&A pace. And I guess if you can just talk about, you know, the reason for the pace being slower, is it, you know, hard to find the right companies, hard to get the right multiple, or what's the, you know, the main driver for the slower than, you know, sort of expected or maybe what you want in terms of an M&A pace?
Yeah, but I think it's a combination of factors. We remain very disciplined in what we're doing. We acquired SEK 116 million of EBITDA during 2025, which, you know, still is sort of 9% versus the starting EBITDA of the year. So it's not dramatically off from sort of our internal ambition at least. And that came from three acquisitions. So it's a little binary. If we would have done one more, we would have probably looked at last year's acquisition pace as being very good. There is no clear issue that I can point to, which led us to land at that number. We did participate in a few transactions last year that we were not able to close. Some of them have not closed at all.
So there's a bit of timing difference and delay in the processes. And I think that could be partly driven also by the political uncertainty in general that I alluded to. We still see plenty of opportunities across markets and we believe that well, I remain optimistic that we can pick up the pace on M&A.
Okay, perfect. That was all from me. I'll get back in line.
Thank you, Jakob.
The next question comes from Dan Heimer from SEB. Please go ahead.
Good morning, Johan. Thanks for taking my questions. I think I had two follow-ups. I mean, if we look a little bit beyond the company specifics here in the quarter, how would you say the general demand situation is now in Q4 versus Q2 and Q3? Do you see any improvements? Is it worse or pretty much on the same level if we look beyond this, yeah, U.S. tariff situation and other stuff that impact you a bit here?
I think in general it is very we have a group of very diversified businesses, 30, call it subsidiaries operating in different markets, selling different kinds of products and services. It's quite difficult to give an overall picture, which is not the same that we report in the numbers. I, yeah, I think that's basically what I can comment. The diversified group of businesses make it challenging to give any additional color and flavor to that.
Yeah, fully understood. And maybe a little bit on cash flow as well. You released a little bit of working capital here in Q4. I guess you typically do that in Q4, but are you on working capital levels? Are you on good levels or do you see a need to increase working capital levels if organic growth comes up here? And also on the higher tax paid here, is it more of a temporary blip and timing effect or something we should be mindful of? Thank you.
Yeah, thank you. No, so take working capital. I think in general the cash conversion is at a reasonably good level here, call it between 75%-80%, given that we on a full year basis actually also have organic growth in local currency. So I think there's not too much to do, but we continue to monitor and work with working capital through our local management teams, of course, to make sure that we have an efficient capital allocation. On tax, I would say that there is a little bit of mix effect in the tax. So some companies that are in higher tax regions of the world have grown a little bit faster than others. That's basically the main driver.
I think, you know, if you think about it sort of on an ongoing basis or going forward, I would normally just assume that the tax rate that we have in the most recent period is the one that will last going forward.
Yeah, makes sense. Thanks for those clarifications. I think that was all from my side right now. So thank you very much.
Thank you.
The next question comes from Anton Brink from Zuiver Kapitaal. Please go ahead.
Yes. Good morning, gentlemen. It's three questions from my side. Firstly, I guess two on, yeah, let's say deal momentum. We've seen, well, I guess 2025 was disappointing to some extent, but we've seen net debt to EBITDA levels come down three years in a row now. Whilst some of your peers seem to be very active M&A wise, it's still reasonable valuations, I believe. So where would you attribute the delta to? And as a follow-up also, how would you describe the current M&A environment? So early 2026 versus, let's say, 2023, 2024, 2025. Is it a better environment? Is it a worse environment? Is it a similar environment?
Thanks, Anton. I think good good questions. If we start on net debt, there is no ambition for us to reduce the leverage level over time, but rather to make sure that it's on a reasonable and stable level. That being said, it's at least positive to see that the leverage level decreases when we are not doing M&A in the same pace as we would have wanted to, because it at least tells us that the cash generation in the group is sufficient. But I think we have a reasonably strong market situation or a reasonably good market situation now. I feel that I've said this basically every call for the last four months at least, that the M&A market is better than it was 12 months ago. I think that still holds.
We have more opportunities to look at currently than we did 12 months ago. 12 months ago, we had more opportunities to look at than we did 12 months before that. In the end, we just need to make sure that we complete the transactions that we have in front of us as well. From time to time, things can happen in transactions that cause them to be posted or delayed or not going through. We remain very, very focused on our acquisition efforts in terms of what the peers are doing and not doing. It's difficult for me to comment too much, but I think it's just important to bear with you. We operate a very decentralized governance model in our group. We want to buy strong niche market companies with good market positions and with good management teams.
We put quite a lot of effort into making sure that we are making the right acquisitions. So the discipline for us is very important. Sometimes that can result in less deals being done in a period of time, but we want to do the best that we can to make sure that we're not buying into problems. And I feel that the companies we acquired in 2025 were strong niche market leaders in their respective niches with attractive financial profiles and with good management teams. So I feel that that is at least that was good. And I hope that we can continue to find these businesses going into 2026 and obviously beyond.
As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. There are no more phone questions at this time, so I hand the conference back to the speakers for any closing comments.
Okay, I think that was it. Thank you all for listening in.
Actually, there's one more phone question just came, so.
Okay, sorry. Then we take that, of course.
Yes.
The next question comes from Anton Brink from Zuiver Kapitaal. Please go ahead.
Yes. I'm not sure what happened. I was kicked out of the call. Apologies.
Sorry.
But let's say, I guess, to rephrase or to conclude a bit on the M&A topic. I mean, I presume your target for EBITDA growth per year is 15%-20%. 15% is the base. And I know you guys are ambitious men, so maybe close to 20% should be the target for you. And then that would imply that you need a step up in that sense from recent years levels. Is that then also the target for 2026?
Yeah. So I think, Anton, I will refer back to what we have-- I think what we have always communicated, which is that we believe for a business like ours to be successful, the idea is that you should double the business in terms of EBITDA over five years. And that comes out with a 15% CAGR year-over-year, which can be driven both organically and through acquisitions. We think, given the fact that we are a very diversified group of businesses, we want to continue to do that. We want to have some organic growth, of course, in the companies, but we don't bank on too high of an organic growth continuously over a cycle across all companies. So say that that would be maybe 5% and 10% then coming from acquisitions.
Yeah. I think that's more or less how we think about it. But it's important to say we think about that not in a short-term perspective. We think about that really over a longer-term cycle. So call it sort of five years. But of course, I mean, you need to hold on to something in a shorter period than that. And then something along the lines of 15% per year is fair. But if you look at it, I mean, we did 17% growth in EBITDA in 2024, and it was 9% in 2025 with 4% of negative FX headwinds that we can never really forecast or say anything about. So we're working hard to make sure that we grow going forward. That's what I can mention on that.
Yeah. And then maybe last question is on the B2B margins, which are obviously very impressive. Where, let's say, in future acquisitions, where do you see sort of the margin potential of the current B2B portfolio? And are you, I mean, is there room for more margin improvement or are you, yeah, getting to a certain level where it's more about defending the current margin?
So I think once again, just coming back here, we, on a total level, we actually had negative mix effect on the EBITDA margin on a group level in 2025. Why I'm bringing that up is I just want to highlight that the margin development between periods in segments or for the group can move up or down due to the respective growth rates of specific subsidiaries. And we are a group of 30 diversified businesses. So the margin profile obviously differs between the subsidiaries. We always strive to improve the margin in each respective subsidiary. We work together with the management teams of all companies to think about how to strengthen their respective company.
But it can be a little bit difficult to comment on the sort of full EBITDA margin for the group or even for a segment as there are more things that can impact the development of it just on, you know, organically improved margins on a like-for-like basis.
Yeah, fair enough. But would it be, for example, one of your holding companies, Renovotec, is probably one of the biggest with a maybe above average margin potential? So are the, let's say, higher margin businesses growing faster than the lower margin businesses or not necessarily?
We're not commenting that on a company by company level. As mentioned, we had negative mix effect in 2025. Actually in 2025, the below average margin companies grew faster than the above average. Many companies lifted their respective margins, driving the organic margin development in a positive way. That's what we can comment on.
Very clear. Then I won't hold you to do the M&A work. Thank you very much.
Thanks a lot, Anton. Thank you.
There is also some written questions.
I think the written questions are, from what I can see, they tend to be focused on the M&A pipeline. And I think we have covered that pretty well. So unless there is anyone else having a verbal question, I think that would be all.
There are no more phone questions at this time, so I hand the conference back to the speakers for any closing comments.
All right. Thank you all for listening in. Have a good day.