Welcome to the Röko Q1 2026 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 five on their telephone keypad. Now I will hand the conference over to the speakers. Please go ahead.
Good morning and welcome. In the first quarter of 2026, we had organic growth of 6% and we completed three acquisitions. We expected to have continued negative comparison effects from, among others, the introduction of the U.S. trade tariffs in 2025, but additional uncertainty has been added to the global trade following the situation in the Middle East predominantly. Net sales grew 9% and the EBITDA grew 5% in the quarter, resulting in slightly lower margins, driven by negative mix effects and new acquisitions with a low margin in the quarter. Operating cash flow increased versus last year, but it's important to highlight that quarterly cash flows can be difficult to assess as we have some seasonality in the group.
The Swedish krona has appreciated against other currencies, and since 29 of the vertical subsidiaries report in another currency than Swedish krona, this has a negative translational impact with -6% in the first quarter. Note that exchange rate differences have a negative impact on net income as well, with an additional SEK 26 million due to exchange rate effects on financial items. The organic net sales growth was 6% in the quarter, which however indicated some companies in the group handled the ongoing situation well. We work with all the companies to improve their financial performance and strengthen their positions. There are no specific sectors or markets with structural issues apart from the sales in the U.S., which accounted for 5% of group net sales in the first quarter of 2026 compared with 7% one year ago.
We believe that the M&A market has improved, and we see more and more deals with good quality. There are also larger deals available than what was the case in 2023 and 2024. We look back at the first quarter where we were able to acquire three companies in different niches and geographic markets. The acquisitions have a combined annual turnover of SEK 552 million, adding circa 8% growth in net sales for the group on an annual basis. However, they have been consolidated towards the end of the quarter, so the impact in the quarterly numbers are very small. The timing of acquisitions is not a straight line, and some of the opportunities from 2025 spilled over into this first quarter. We have also experienced a good inflow of new acquisition opportunities, boding for a strong pipeline for the rest of the year.
A good pipeline gives us a good opportunity to make qualitative investment decisions. Turning to page three, growth in EBITDA was, as mentioned, 5% in the quarter. Exchange rate differences impacted net sales negatively with 6% and had a similar impact on EBITDA. The net debt to EBITDA ratio increased to 2.4x, which is explained by the three acquisitions completed towards the end of the quarter, with net investments totaling SEK 723 million, but having virtually no impact on EBITDA. While the reported net debt to EBITDA is now 2.4x, it's important to highlight that the phasing of acquisitions will have a de-leveraging effect going forward, and we are comfortable up to 3x leverage over the long term. We have a modest leverage in relation to bank covenants in our agreements with circa 55% of the covenant threshold currently.
If we then look at page four, we see the longer-term development, which has indicated margin improvement and reduction of net debt, an increase in return on capital employed over a long period of time. Organic growth has been relatively stable here in the last two— full years, and acquisitions have been shy of 10% on average for the same years. In the first quarter, the organic growth was, as in 6%. The pace of M&A has been stronger, which results in an increased net debt to EBITDA ratio and lower return on capital employed. It's important here to note that the acquisitions have a direct impact on the balance sheet, but not on the P&L, which result in an increase in the net debt to EBITDA short term and a reduction in return on capital employed. Turning to page five, looking at cash flow and return rates.
Free cash flow increased in the quarter and cash conversion was in line with last year, excluding the IPO-related costs. We're always working with our management teams to improve cash flows, and currently, we monitor potential extensions and delivery times closely, in particular as we have seen an increase in inventory levels during the first quarter. Return on capital employed declined from 14.5% last year to 14.1%, solely driven by acquisitions that were completed towards the end of the quarter. We can also highlight that the acquisition in Q4 2025 was completed in the end of that quarter. The return on capital employed excluding intangibles remained at a high level, evidencing the asset light group of companies. The ratio can fluctuate between quarters due to timing of acquisitions, but we strive to improve yearly and over a cycle. With that, I want to turn to page six.
As has been seen, we continue to grow through acquisitions and have acquired more than 33 companies since we started in 2019 at an average EBITDA multiple below 8x . EBITDA growth was strong in 2024, with 17% driven by a particularly strong organic EBITDA growth of 9%. In 2025, the EBITDA growth reported was 9%, and it's important here to mention that we had a negative exchange rate in that year of -4%. We don't show the exact table for the first quarter, but the negative exchange rate differences that we saw in the full year of 2025 has continued, as noted in the first quarter, with -6% on net sales and something similar on EBITDA. We have, as mentioned, completed three acquisitions in the first quarter. If we look briefly at the next page, we can see them on the bottom.
It's Lambda in Italy, Golfshopen in Norway, and Access Building Products in the U.K., who all hold strong positions in their niche markets and together have approximately SEK 550 million in net sales yearly. The deal flow is also in good shape currently with attractive opportunities across many markets. With that, I will hand back to Sabina, who will moderate the Q&A session, if there are any questions. We ask that you please ask questions verbally.
The next question comes from Dan Heimer from SEB. Please go ahead.
Good morning, Johan. A couple of questions from my side. Starting a little bit on the organic sales growth in the quarter of 6%. Is it mainly due to you being successful with pricing, given that we have the global uncertainty out there, or is there a positive volume effect here as well in this quarter? Thank you.
Thanks, Dan. I think, in general, it's a bit difficult to comment too much on volume versus price across the group because there's the diversification among the subsidiaries. We can mention that we believe that the work we have done through the last couple of years of continuing to educate our local management teams on the importance of continuous price increases means that some of them, at least, have benefited and captured the opportunity that exists in the current market by raising prices.
Yeah. Understood. Thank you. Looking at profitability, I think the EBITDA margin dropped close to a percentage point here compared to last year. How much would you say is a sales mix that maybe your lower margin companies are growing a bit more here, and how much is the M&A effect, if it's possible to get the sense of that split between those two factors here?
If you take the 1 percentage point drop, 1/3 of it, approximately, relates to acquisitions that have been completed, and the other relates solely to seasonal, to mix effects. There is no comparable like for like difference in the margin of the companies. It's only a mix. Basically, companies with lower margin growing faster than the others.
Perfect. Got it. Sticking on the three acquisitions you made there in Q1. They seem to average margin around 12%-14% there in Q1. I guess on a full year basis, it looks a bit different. Would you say that profitability on the acquisitions you made there in Q1 is about in line with your group average? Meaning we should have a positive margin impact now in Q2 going on?
Yeah. I would say that the average margin across those companies is in line with the group average. It's a little bit of a weak first quarter, not because of poor performance of the companies, but partly because of seasonality in some of them.
Yeah. Great. The final one from my side. You mentioned a strong M&A pipeline, and you've been quite active here already by end of last year and also beginning of this year. Can you manage to continue on this trajectory given the pipeline you have? Or do you anticipate a little bit slower here in the next two quarters in terms of M&A, given that you've done quite a lot already here?
Yeah. From a team perspective, I think we have a very strong team capable of executing opportunities. I think from our perspective, we are very happy to see the strong deal flow. We continue to assess opportunities continuously and try to make sure that we make good and well-informed investment decisions. Of course, we don't want to over-invest, you could say, in a short period of time, but I think there is still room for us to complete additional acquisitions in the near term.
Perfect. Sounds encouraging. I think that was all from my side, so thanks for taking my questions.
Thank you very much, Dan.
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. I hand the conference back to the speakers for any written questions and closing comments.
We have gotten a couple of questions through the chat. One question was on the margin development. I think we covered that in the question from Dan. There was a question on additional elaboration of the M&A environment having improved. I think the only thing that we can say on that is that we continue to see a strong development in terms of, I think both our activities in many markets where we are considered a good acquirer of companies, but we also see a general loosening maybe of acquisitions. Basically more companies coming to market than we have done before. In particular, larger businesses, which have started to come back. I think with that we have covered the questions that were in the chat. Thank you all for listening in. Have a good day.