Today, I'm pleased to present CEO Jakob Holm. Please go ahead with your meeting.
Thank you very much, hello everybody to Sdiptech's Report For The First Quarter. I would like to start off to say that we are very happy to present the results. It's a strong quarter for the company, and among other things, we are very proud to present the 12% organic profit growth. We will get back to more around those details. You can move forward to the next page. My name is Jakob Holm, CEO for the company, and as always, I also have Bengt Lejdström with me, our CFO. Move over to next page number three. Just the updated basic facts around Sdiptech. We are an infrastructure technology group with 32 business units across Europe. Our largest main markets are Sweden and the U.K. The last 12 months have been updated as of this quarter and approximately SEK 1.9 billion in net sales.
Our operating profit margin is still growing, currently in the last 12 months at 14.9%. If we look at our growth, the profit growth is of course the most important, and over the past 12 months, we've grown those profits at 44%. Moving forward to the next page, number four. The agenda today, the first two points around the infrastructure challenge and business areas is just a brief introduction of Sdiptech. The third point, market situation, we will dig in a little bit deeper into the situation around the COVID-19 pandemic and what the effects are on Sdiptech as a company, and then sum up, as always, with the current trading and the first quarter results. Moving forward to the next page, number five. This is the normal introduction we always do. It's an important page.
Societies across the world have a very important task to take care and develop infrastructures. We are part of this mission, if you say so. It's something that is important to us, but it's also a business opportunity, the challenge as such. The infrastructure is aging. There's a need to rebuild it, to repair it, to modernize it. Consumption of water, electricity, traffic volumes continue to grow, so the capacity requirements also need to be developed and expanded. In the urban areas, the concentration of population and economy, of course, increases shortage and strain, but it also creates more challenging situations and also adds upon the demand and future growth. The first three points, they are all around volume demand, and will provide a growth over foreseeable future within the infrastructure sector.
The fourth point is very much around the technology research and development that is required to always improve the infrastructure to increasing standards, stricter regulations, and development as such. This calls for that a lot of the development is suited to be done in specialized and niche businesses, and this is really the market for Sdiptech. This is the overall infrastructure challenge and the long-term market situation for our company. Moving forward to the next page, six. Our strategic position is, of course, we are focused on products and services to critical needs in the infrastructure sector. This is our focus. Our business model is similar to companies like Indutrade, Addtech, and Lagercrantz, where we acquire and develop small and medium-sized companies. We differ from these companies from a few things, and one thing is, of course, our industry focus on infrastructure.
The fourth point is important. We have a decentralized structure so that the business-oriented decisions around proposals, customers, employees, and so on, are made at a decentralized local level. This means that we can always be very highly adapted to changing market situations as, for instance, we are experienced now during the COVID-19 pandemic. Moving forward to next page, number seven, and then also to our business areas on page number eight. Our business areas, we have three business areas. Water & Energy. Water & Energy, we provide products and services for wastewater treatment, fresh water purification, also products and services to the growing power grids and distribution systems, but also technologies closer to the power consumptions, for instance, automation. Special Infrastructure Solutions, a couple of sub-segments there. Important products and services for indoor climate, heating, ventilation, and energy efficiency, very important.
We also provide solutions for public safety, but also a very important product to protect against cyber threats in mobile communication. transportation technologies are highly important to develop the transportation infrastructure, and there, for instance, we have a product for traffic monitoring. Property Technical Services, this was our first business area. Technical services to property owners. Elevators is the largest sub-segment there, but we also provide services within shell completion and roof maintenance. The first two business areas are our largest if we focus on the profit levels, which is always the most important. These business areas also are most profitable based on highly specialized products and services that have strong market positions with less competition, and an ability to also price our products at a higher level. That's the reason behind the high profit margins there. Our third business area, we have a profitability focus.
We see over the past quarters that the levels in terms of revenue and EBITDA margin, they are stable. We continue to focus on the area. It's important to us, and as I said, we focus there on profitability, whereas on the first two business areas, we do our acquisitions in Water & Energy and Special Infrastructure Solutions. Moving forward to page number nine. We dig into the market situation and move forward to page number 10. We would like to be as transparent as we can around the coronavirus pandemic, and I will walk you through two slides related to that. To start off, we could say that the first quarter, it was stable for us. On the demand side, still stable. We did some early actions in the beginning of the quarter to build inventory in late January, early February.
It has served us well. We've also experienced some increased sales in some areas. For instance, the encrypted communication solution that we have has seen some increased sales due to more remote working. Our Water Treatment Products company in Wales deal with chemicals, and they have been able to produce disinfectants to the U.K. market, and we've seen some substantial increase in sales there. Also cooling solutions for grocery stores has been very important due to the higher volumes in those stores. We've also seen some expanded sales during the first quarter related to cooling there. The effect in the first quarter, but this is also related to this current situation, is very much around delays. The demand for our products and services are stable.
We must remember that the products that we have towards water treatment, power, transportation systems, safety and security, and so on, but also elevators are things that always need to work. The demand is solid as we speak. Of course, we have field workers that need to be able to get to their working sites, and the restrictions in society towards mobility and social distancing in some cases prevents us to be able to deliver, and this causes delays. However, it builds up a backlog as well, and we are preparing to deliver on that backlog that to some extent is being built up. Right now, the situation is very much as I described. We have since March monitored all our business units in a specific way. We have introduced new KPIs to monitor the development specifically related to the coronavirus pandemic.
One of them is a delivery KPI. The delivery KPI measures the percentage of the planned orders, that how much of our planned orders are we actually able to deliver. The overall KPI right now for the group of companies, we are at 85% this week. In Sweden, the number is just over 90%, in U.K. 70%, Germany and Austria at 85%. It has improved over the past two weeks in those markets. In Norway, it's actually at 100%. If we look further ahead, we are preparing to deliver and catch up on the backlog of delayed work, because there is a fundamental need for improved infrastructure. We are really very cautious about our production capacity, and preparing to be able to scale up so that we can deliver upon the backlog. We do have a flexible organizational model, a decentralized model. It's very important.
All our business units, they are in different situations, different countries, different restrictions, but also local market effects. Each business unit is able to act swiftly on the specifics of that business unit, so that we can really do precise actions that are very effective, but they are not generic actions across the entire group of companies, because this is important. They are precise, and the actions do not hurt us in the long- run. Based on our knowledge of the current situation, where we also see that the restrictions are being eased going forward, we have a good first quarter. We do have effects, but they are more characterized by delays. We see no reason really to revise our growth targets for our organic profit growth target for 2020. This is also an important message.
Of course, I must also say that this is the current situation. It's impossible for us to predict when politicians might change restrictions, in which case they will ease them, or if they might later in the year increase the restrictions. We do not know this, but we want to be very transparent about our current situation and current status. Moving forward to the next page, number 11. We want to develop the situation in our different markets. The restrictions, they are implemented on a national basis. Of course, we see our effects not so much around our business areas, but rather around our geographics. Our sales distribution, half of our sales are in Sweden, 28% in U.K., and then we have four smaller markets, Germany, Austria, and Norway, each at 4% of our sales.
We would like to share a little bit more on what is going on in those markets specifically related to Sdiptech. Starting off with Sweden, we have a delivery KPI just over 90%, and the impact is small in Sweden. The restrictions have been easier in Sweden as opposed to other markets. The impact is also smaller. We have a slightly higher sickness absence in some of our units. Sickness as such, or staying home because of sickness or taking care of children, so on, has not been a big problem to us anywhere really, but to some extent, it is affecting us. We do have some partial delays due to some extraordinary circumstances. For instance, it's difficult for us to come to hospitals and do the service on our equipment there.
Hospitals, they have focused on really treating the pandemic, so it's quite understandable that those type of works, they are delayed or postponed. Another example is the project Roslagsbanan which is also delayed. We have some important piece of works to do there. It will be picked up, but currently during the virus, the politicians have prioritized to keep the Roslagsbanan open. They have delayed that project. That's just two examples of the delays that we see in Sweden, but a good state at just over 90%. Moving over to the U.K., which is probably the most difficult market for us. The underlying demand is very stable, but the restrictions are stronger there compared to Sweden. We do have some short-term leave of staff. It's called furlough in the U.K. About approximately 100 people on furlough.
That number has come down from approximately 130, so it's a positive sign. This week, we do see small steps that we can scale up in line with the politicians are easing restrictions for prioritized workers. We are very happy to see that our British companies, they are among the prioritized workers. This is also typically an effect of that we are focusing on infrastructure. Okay. When opening up, it's still an uncertainty how to do this. There are still rules of distancing, new ways of working needs to be implemented on working sites and so on. There's still some complications, and we are at the 70% of our expected delivery in the U.K. currently. Moving over to Germany and Austria.
We have actually recalled all our staff that have been away on short-term leave after the restrictions have been released in especially Austria, but also to some extent in Germany. We do see in both markets some partial delays due to some uncertainty in the market. For instance, when working sites open up, it's still complicated to some extent to comply with some specific rules, and some customers are reluctant to do this because they really need to be sure to do it in the right way. Gradually things are opening up for us, and we are at a delivery percentage of 85% in Germany and Austria. Moving over to Norway, we have a full delivery there, and it's really one company there, and it's predominantly customers within water treatment.
That type of delivery has been unaffected really throughout the entire pandemic, so it's very positive for us. All in all, we are approximately delivering at 85% of our planned orders. I would like to state it once again, this is the current situation this week. We do expect, although, a gradual catch-up of our backlog. It's impossible to predict the details about this, when it will happen and to what extent, but we are confident about the long-term outlook. With that said, I move forward to page number 12 and then page number 13, and I hand over to Bengt to walk us through the first quarter and current trading.
Thank you, Jakob. Yes, on this slide number 13, we can see our financial development since 2016 and especially the last four quarters where you can see the sales numbers and also our EBITA* profit on a last 12-month basis for each quarter. As you can see it's a very steady growth. We have had around 20% growth during last 12 months for a number of quarters now in a row, and for this quarter it was 19%. Of those there were 1% that was organic growth, so the other one was from acquisitions. The profit growth has been 44% during these last 12 months. As I mentioned, the 1% sales growth was for the last quarter, and for this last quarter we had the 12% of profit growth for the quarter stand alone.
It's very stable profit growth and sales growth, Since the profit growth is higher than the sales growth, you of course see an increased margin which has been growing and increasing steadily throughout the years and is now almost 15%, the EBITDA margin. If we go to next slide 14, we see a summary of some KPIs. We talked about the net sales and the EBITA*. The net sales was 15% up in the quarter, of which 1% was organic and the EBITA* was 37% up, of which organic was 12%. A little bit lower than the last 12 months, but still a very good and high pace I believe.
Looking at the margins, we're right now for the quarter at 14.6%, a little bit lower than the last 12 months. It's been stable around those numbers and we will come back to where they come from those margins from the different business areas. Looking at the earnings per share, that's the profit then after taxes and also after dilution and deduction of dividends to preference shareholders. We see a very big improvement from last year. You may remember that last year we had some major acquisition costs which hurt the results during the quarter. We have changed our way of working. Now we don't use so much external resources for acquisition work. We have our internal resources instead. They cost less, they are more efficient, they then are shown in the costs for our central unit.
That means also that more of the EBITA* results go all the way down to the earnings per share. That's one explanation to this very big leap from about SEK 0.50 to SEK 1.60 in earnings per share during the quarter. For the last 12 months we're almost at SEK 6 per share. Looking at the cash flow, we were at the same level during quarter one as last year, even though we had a higher turnover in profit, and that's because we were building up some inventories, as Jakob was mentioning during the January, February, if we would have problems with the delivery of supplies from some markets like Italy and China. It has proven that didn't become a very big problem, so now we have inventories that we are delivering and using up, delivering from, which is good.
We also because of the increased sales also then of course got some build-up of accounts receivable and so on. Overall, the cash conversion percentage of the result was 72%. Last year we were all the way up to 110, but on average over the last 12 months we are on about 100%-104% cash conversion still. Looking at our debt, we have two measurements. We have two KPIs, one for the actual bank debt that we owe to the financial institutions. We have for our total net debt where we also include our debt related to so-called conditional or contingent considerations for acquisitions. For example, now for this last quarter when we paid out some contingent considerations, that debt was of course, the total debt was reduced because we were paying off those considerations. At the same time, we borrowed more money from the bank.
All in all, the debt level was the same, even though the bank debt actually increased because of paying out that debt. At the moment, about a little bit less than half of our net debt is related to these contingent considerations. We are happy with this debt level. It's according to plan, so that's under control. If we then turn to next slide, number 15. We will then have a look at each business area, and I'm starting off with Water & Energy. We had a small sales increase, about 4%, but the organic increase was actually a decrease with 3% because we had some effects, primarily in the U.K. for this business area, where parts of the staff had difficulties getting to their workplace.
If we look on the left-hand side of this slide on the chart, you can see that we had a slowly but securely increase in turnover, and also the margins are stepping up on the last 12 months basis. In the table below this chart, you can see the actual number for the quarter and the last 12 months. We have an EBITDA margin at almost 19% during the quarter, which is a little bit less than the last 12 months, but the first quarter is typically not the best quarter for this business area, so we are actually quite satisfied with increasing the margins compared to last year. Looking on the right side of the slide, you have some bullet points, and I mentioned the first ones with some effects from the COVID pandemic. We could see the EBITDA increased with 13%.
That was mainly from acquired companies. The organic was flat. As Jakob mentioned, we had some businesses that was actually increasing their profits during this quarter. For example, the water treatment and disinfectant manufacturing and selling. We have earlier guided about the profit margin of our business areas. Of course, right now in the current situation, it's a bit difficult. We believe that the situation will normalize sooner or later, we then still believe and guide that our margin for this Business Area will be somewhere between 17% and 20% on a full- year basis, and that's also where we are right now. We didn't make any acquisitions during the last 12 months for this Business Area. The last one we did in February 2019. That's older sort of thing. The total number is 13. Let's go to the next Business Area on slide 16.
It's the Special Infrastructure Solutions. Looking at the left-hand side of the slide, you see the chart where you can see a very steep actual increase in sales during the last quarters. As you know, we acquired two companies during the last 12 months, and one a little bit smaller, the Cryptify, which deals with the secure mobile communication that Jakob also mentioned has seen an increased sales right now. Also the Auger Site Investigations that work with the maintenance and repairing of different kind of damages to water and sewage supplies to the properties. The margin is increasing because these acquired companies have had higher margins than the average before they were acquired. It's now from a last 12 months basis, almost 24%. During the quarter, as you can see in the table below the chart, was 26.3%, which is quite extraordinary.
We had some businesses that had historically high profit margins during this quarter due to their scalable business model. We could also see some of the units had some one-off orders which they delivered upon during this quarter, so that contributed to the strong growth. As you can see on the bullet points to the right side, we had a growth of 65%, of which organic was 18%. Looking at the profit, the profit increased with 111% of an organic was 49% of that. That was, of course, quite exceptional. We will have, of course, some effects from the pandemic of the U.K.-based, primarily the U.K.-based units within this business area, but they are dealing with this in different ways.
For example, one company selling camera surveillance equipment, they are redirecting their resources and activities from areas where there are restrictions, for example, construction sites into non-restricted areas as, for example, railway stations where they can still continue their work. That's an example of how each unit deals with a very specific situation in this pandemic. We will then probably see some effects during the near future as well, and also with the guidance as for the other business area, it's of course hard to tell, but in the normalized situation, we still think this will be between 20%-22% profit margin on the EBITDA margin on a full- year basis. Turning to the last business area on slide 17. We have the Property Technical Services that are mainly elevator service and modernization business and the shell completion, but also some roof security and the maintenance business.
Looking at the chart, I think Jakob mentioned earlier that this business area has been quite flat for a long time now in turnover. We have shifted turnover from not so profitable customers to more profitable customers, but also have had some effects from the demand side. As you see, the margins are more or less the same as the turnover also are more or less the same throughout these last couple of years. Looking at the table below the chart, you see that the EBITDA actually decreased some 40% this quarter compared to last year. The EBITDA margin was only a little bit above 3%. We haven't done any acquisition in this business area for a couple of years, so it's all organic, these developments. The sale decreased actually then 35%, sorry.
That's mainly due to the impact then from the restrictions that Jakob mentioned. That also then of course goes with the results since these are quite staff intensive business. If they can't do their work, it of course hits the profit. It's mainly delayed projects, so we expect the business volumes to come back. As Jakob mentioned already, we work on the backlog to be prepared to deliver on that as soon as we can. We don't think there will happen any big leaps in either direction here. In a normalized situation, we think the EBITDA margin will still be around this 8%-10%, as it has been for quite some time. Right, we can turn to slide 18, which is then acquisitions. As mentioned, we haven't done any acquisitions during this year.
We did four acquisitions last year. We still have a target that's unchanged when it comes to how much profit we should acquire per year. We acquired SEK 93 million EBITDA last year. Of course we have some to catch up here. It's always hard to tell and foresee the timing when the actual acquisitions are closed. We have a good pipeline, a strong pipeline. We are selective in our review on what company to acquire. We have a number of requirements on each prospect. We have a strong pipeline. It's not any problems with that. As I mentioned, we have a very good internal team working with this pipeline and going through the different steps in our acquisition process.
The demand and these companies we look at, it's infrastructure companies, the demand for those services that they deliver are strong as for our own group of existing companies, even in a recession. We don't have to wait with acquisitions just because of the current situation. We're working with the activities as usual. We have a strong financial position with a good cash flow, and we also have solid and good credit facilities still to use. We don't see any problems with that either. Right, turning to slide 19. It's really the same as we started off with. Jakob and I now hand over for 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. Our first question comes from the line of Fredrik Nilsson from Redeye. Please go ahead.
Good morning. Fredrik Nilsson from Redeye here. Is the 85% delivery rate figure representative for April as a whole?
Okay, Jakob here. I can answer that. You should view this as the current situation. Of course, you could also see that the effects of the pandemic were slightly higher, let's say in the beginning of the quarter. Sorry, the beginning of the month. Now as restrictions are being eased up, we have a positive trend. I think I would answer it in that way, and then you would have to make your own interpretation of that.
Okay. I think that's a reasonable answer. So far, movement restrictions seems to be the main issue, but have you noticed any decline in demand in any of the segments or geographies due to the corona crisis?
On a general basis, we don't see a decrease in demand. In that sense, the demand is stable. Of course, we have perhaps a few units where demand might decrease, but it's more an exception from the rule, and it's not significant either. I can give you one example is, of course, Stockholm Radio that provide radio communication to commercial air flights. There we have a lot of subscriptions, which of course provide a solid underlying revenue flow. The traffic has, of course, gone down due to that there are less aircrafts in the air. That's a small company in the group, so it's not really significant. On a general basis, the demand is solid.
Okay. Could you give us some information about the performance in Property Technical Services outside of the DACH area?
Yes. I think if you have a look at the KPIs that we provided for the different geographies. In Sweden, it is just over 90%, and it is more or less representative for all of our business areas in Sweden.
Okay. One last question. Has the corona crisis affected your M&A discussions in any way?
No, as Bengt said, our targets that we look upon, their products and services of those companies, they are more or less unaffected by recession. We're still active around that. Of course, when we look at companies, it's a positive thing that we finally are in something that more looks like recession, because this is an opportunity for a company like Sdiptech where we are quite resilient towards recessions. When we look at acquisition targets, then finally we could actually see what are the effects from recession. That's actually clarifying to us. It's a way for us to get fact-based answers.
Okay. One follow-up there. What about the actual discussions? Due to the movement restrictions, there could possibly be some delays and problems related to that part of an acquisition.
Yes. Of course, we dig into those questions. We have 32 business units in different markets, different characteristics. We have good visibility on what type of effects it has on infrastructures related to companies. I think we are well-suited to take those kind of discussions, and we really understand the situation of those target acquisitions.
That's all for me. Thanks.
The next question comes from the line of Jon Hyltner from Enter Fonder. Please go ahead.
Hello. I'd like to start off with some margin questions. If you look at Water & Energy, organic growth down some 3%. Your margins are up. Could you say something more what's behind the increase? Is it just acquisitions coming in with higher margins, or have you cut costs or initiated price hikes or something else?
Well, I can answer that. As you say, it is also from the acquired companies that has been rolling in. It is actually one from last year, Water Treatment Products have good margins, and they have actually had very good margins this quarter since, as I mentioned, they have increased part of their business and their profits. It is not one single effect from one single company really, but it is an increase to some of the units, actually. Yes.
You still have negative organic growth. How has the margins developed in those units where organic growth is down? Have margins declined there, or have you been able to defend them anyway?
No, we have been able to defend them. As you say, the sales was down a couple of percent, but the profit was flat. The [like-for-like ]companies have been able to increase their profits a little bit margin-wise.
Has that been through some layoffs or any cost cuts that might affect growth potential going forward?
No, I cannot say that it's any special, but that's always hard work in the companies to improve their profitability. It's not any single type of activity that causes.
Okay.
I think the main effect is from the acquired company, Water Treatment Products, which have a higher profit margin than the average that is rolling in fully now.
Okay.
We could also mention there that we have, of course, used the opportunity from the government in terms of short-term leads, in U.K. it's called furloughs. Where we have people that are not able to deliver, they have been on furlough in U.K., for instance, and that of course bring down our costs for those specific units. To some extent, the offers from the government, if you say so, enables us to have a more flexible cost structure as well.
Got it. The exact same question, but for Special Infrastructure. Here you had 18% organic growth. I guess some of the improvement is operational leverage here.
Exactly. The business models are in a number of companies such that increased sales then goes to very high so say the margin that fits the profit very good. As we said, there have been some one-off orders in some companies that was very specific to this quarter that made this margin even higher. This is an exceptionally high margin level of 26% this quarter.
Okay. The third area, I would assume that the decline here, given that you come from a low level organic growth hits pretty hard, probably. You mentioned also fixed cost in staff. Is this decline just an effect of the negative organic growth, or is there something else here as well?
No, it's from the effects from the pandemic that we cannot get the people out to work. The delay of deliveries here.
Great. Got it. A more general question. If you look at your whole group, how much of your business is working from an order book that might be, I don't know, six to eight weeks? How much of your business is I don't know the good English word for it, but are just calling off goods from the shelf, so to speak, with very short- lead times?
Can't give you any exact numbers of that. We have very little off-the-shelf selling, some say, typically. We have some of that type of business, especially in the chemicals for water treatment, for example. That's an off-the-shelf business typically, where customers call in every day and want deliveries of these treatment products. Otherwise, typically, it's not that kind of business. It differs from a couple of days a week delivery time to up to many months in the longer projects. I'm sorry, I cannot give you a really good indication on that.
Okay.
20% of our business is mainly service related, that you service different types of whether it's products or buildings or what kind of maintenance you are doing.
Has that business been more affected now from the lockdowns than your order business?
Yeah, the restrictions on movement or mobility, as you say, that of course affects the possibility for our technicians and maintenance people to do their work. Our companies, our units are working to get around that as good as possible. It's not all locked down, but it's affected, of course.
Okay, great. Well, thank you very much.
As there are no further questions, I will hand it back to the speakers.
Okay. Well, we thank you everybody for your attention, we will get back to a similar call in three months from now. Okay. Thank you everybody. Bye bye.
This now concludes our conference call. Thank you all for attending. You may now disconnect your lines.