Hello everyone, welcome to the Sdiptech Q4 Report 2019. Today, I am pleased to present CEO Jakob Holm and CFO Bengt Lejdström. For the first part of this call, all participants will be in listen-only mode, and afterwards, there will be a question and answer session. I will now hand you over to Jakob Holm. Please go ahead.
Thank you very much. Hello, welcome everybody to Sdiptech Year-End Report 2019. To start off, we're very happy to present a strong report summing up the numbers for 2019 and our business. We are really improving on many KPIs. A few of them I would like to start off by also mentioning. We'll come back to them, but our operating profit growth has been 48% over 2019, of which 8% was organic and 39% driven by acquisitions. We've also improved our operating profit margin significantly from 11.8% up to 14.4% at the year-end. We're very happy about that. Our cash flow generation is above 100%, very positive, and also we're very happy to say that our earnings per share grew 88% over the year. We're very happy to present this report. With that said, we can move on to the next page.
As always, I have Bengt Lejdström, our CFO, with me on this presentation, Bengt Lejdström has been with us since 2018, as you all know. We move forward to page 3. A brief introduction about some data points on Sdiptech. Our business is decentralized in 32 business units. The fresh numbers that we are able to present today are net sales at approximately SEK 1.8 billion. Our profit margin, EBITDA, has been rising steadily throughout the year, and as I said, is over the past 12 months at 14.4%, very important to us. Our growth in EBITDA, we've already mentioned that, but we're very happy to present that number as well, 48% up. We will come back to the more details in numbers lately when Bengt will take you through that.
We can move to the next page four. The brief agenda today, I will just start off by talking about the infrastructure challenge. Why is this important? It's important to us because it really drives the growth in our business segments, market segments. One slide on our business areas, and then over to current trading piece of the presentation. Move to the next slide number 5, please. The drivers behind the infrastructure challenge, they are worth mentioning and repeating. One important aspect is that the infrastructure surrounding us is aging, and there is a need to rebuild it. The capacity requirements continue to grow. Our consumption of water, energy, transportation volumes, and so on, continue to grow. In the urban areas, the strain increases. All in all, there's a growing investment gap, which really drives the solid underlying growth in our market segments.
Finally, I always want to also mention that the human drive for increased sustainability, efficiency, safety is really also imperative to the characteristics of our markets. This drives stricter regulations. Just to mention two examples, one thing from Sdiptech, one thing is that we are working hard to upgrade cooling systems to meet lower emissions and reduce global warming potential. That's one example. Another example is our power quality monitoring systems, where there's an increasing demand for those because they are an important enabler to shift to more renewable sources of energy. With that said, we can move on to next page, number 6. Here we present three examples of the infrastructure challenges. We start off by the left one. 23% of the fresh water networks, there's a loss in distribution because of leaking pipes.
The second example in the middle is a positive data point indicating the reduction of car crashes after speed camera installation, about 20% reduction there. The third example on the right-hand side is related to an increasing cyber threat that is moving into our mobile cell phones. We have companies that are addressing these challenges and opportunities. If we start off on the left-hand side with Auger, whose clients are in the insurance industry. Auger's core business is to fix leaking pipes and wastewater systems. The driver in that market is really a slow, steady, but inevitable growth due to aging infrastructures. RedSpeed International develops traffic monitoring and safety systems, and the driver there for growth is really the increased regulations for safer traffic and transportation.
Cryptify, the third example, delivers software for encrypted mobile communication, and the driver there for the underlying growth is really the increasing cyber threat that, as I said, is moving into our cell phones, and Cryptify has a great solution to ensure encrypted mobile communication. We move forward to page number 8. It says nine actually on the slide here, but the next page. Since we are focusing on U.K. as a growth market for us, we think it's important also to share our views on how Brexit is expected to impact Sdiptech, and the impact is expected to be small and definitely manageable from our point of view. Starting off with the export to U.K., which is the normal concern with regards to Brexit. Our exporting companies, they have low share of revenue of export to U.K., so we don't expect any significant impact there at all.
We have our U.K.-based companies. They do purchases from outside U.K. We have built up our inventories. Once again, we've done it a couple of times. We've also done it this time. We built up our inventories just to ensure that we have a buffer in case there would be some disturbances at the border customs. We've also redirected our routes. Instead of having shipping go through the European mainland and Rotterdam, we are redirecting the routes directly to the U.K. just to avoid the potential problems. We are comfortably prepared for any negative Brexit impact. On the other hand, in the future, we expect some positive impact due to increased infrastructure investments by the U.K. government, but we'll see more about that in the future. With that said, we move forward to the next page, number 10. Number 8. Sorry. Bengt, help me.
I have some problems with my page number. It's actually page number 8. We move forward then also to page number 9 about our business areas. I will just briefly mention what I think is most important at this stage in the presentation. Our two leftmost business areas, water and energy, special infrastructure solutions. These are our two largest business areas. If we look at the profit levels, which is of course the most important KPI in terms of value. These are our growth areas in terms of which areas we do acquisitions. Both of the areas have delivered a strong organic growth in 2019 and also in the fourth quarter. As a result, we've seen profitability improvements due to that, and we've also had acquisitions with profit levels above our average level in the business areas. We have a positive trend with growing margins.
We actually ended up above our expectations, which we didn't expect actually. Q4 was above our targets. Bengt will come back more to that. Our third business area, Property Technical Services, which is our smallest business area in terms of profits. We've had a clear profitability focus there since 2017, and we are very happy to announce that the elevator business, which we've had challenges in terms of profitability throughout 2017 and 2018, our profitability improvement program that we started to launch in late 2017 has really paid off. 2019, we've really been reaping the benefits and effect of that program, and the profit levels in this business area, or actually in the elevator business to be specific, the profit levels in 2019 are significantly above the profit levels of 2016, which was the year before we listed our B share.
We're very happy to say that the results are very good there. With that said, I move on to page number 10, which is the final page for me before I hand over to Bengt. Just to sum up our acquisitions over the year. We did four acquisitions I think that all of you know. Our target for acquisitions is to acquire totaling SEK 90 million EBITA per year, and we ended up more or less spot on that target. That target continues for 2020 as well, and I think you should all expect acquisitions. They don't come as steady as you would like and expect. We do acquisitions when we see that we have a good business opportunity, and with that said, the acquisitions can occur infrequently. Our target, we are very comfortable with, and it still remains. With that said, we move on to page number 7.
Seven.
I hand over to Bengt.
Yes, I will guide you through a little bit more of the numbers for the current trading. We can turn to page number 12. Here you can see the development of our group sales and our profit, our EBITDA, our profit measured excluding the effects from adjustments in the balance sheet relating to acquisitions. This is the true profit from our operations. As you see, we have increased our sales very steadily through 2019, quarter- by- quarter. I think it's actually around 22% every quarter, year-on-year, more or less. We ended up 22% eventually for the full year. Of that, it was only a little bit above 0 in the organic, and excluding currency effects, it was actually a little bit below 0%, the organic growth. That's because of what Jakob mentioned about the Property Technical Services program for profitability.
The other two business areas have had a positive organic sales growth throughout the year. Looking at the profit, you see that the profit has increased even further, 48%, and of that through the year, we have an organic profit growth of 8%, as mentioned, and that has been mainly done in the two business areas, water and energy and special infrastructure, but also Property Technical Services had a positive growth in the last quarter. As the profit growth has been higher than the sales growth, we have had an increase in our operating margin, so it's now at 14.4%. If we look to the right in the picture, we see the distribution of our sales. That is where our customers are. Infrastructure business is typically quite local or regional, so most of our companies do not have any major exports. Of course, there are some exceptions.
The distribution of sales are more or less related to where we have our companies. 55% of revenue come from Swedish customer and 25% from U.K. You will see that number increase a little bit further the next two quarters since we have the Auger acquisitions, which we made in August, and that one will be rolling in with our customer base in the near future. Apart from Sweden and U.K., we also have turnover in Europe, mainly Germany, Austria, and also Norway. We have a spread of different countries in our export business. If we turn to the next slide, number 13, we have some quarterly highlights. As said, the sales growth was good. It was actually a little bit beyond our expectation since we had a pretty strong end of 2018.
We increased sales altogether with the quarter as well as for the full year with 22%. We had good performance throughout the organization, especially positive to see that Property Technical Services had a growth organically of 5%, which we think completes and concludes the action program within the elevator operations. Looking at the profit, we had also a very strong organic profit growth in the quarter, 21% if we look in fixed currencies, and in total, an increase of 48% of EBITDA. The margin was actually up to 16%, but the quarter four is typically a strong quarter for Sdiptech. As you can see, last year it was also 14%. Looking at the cash flow, we have had a good performance throughout the year, and we ended also the quarter strong with above 100%, which is our goal, to have a positive cash generation.
Perhaps that cannot go on forever, but at least for now, that's our goal. We actually had a cash generation of 128% during the quarter. Mainly for having the accounts receivables coming in, and we also had some positive cash flow from taxes, getting a tax, shall we say, repayment. Could add to this picture, which is not in the text, is that the central cost for quarter four was a little bit higher than it usually is. We have had some extra costs for some projects and also with our IT activities. We also have increased our staff at the headquarters, building up our internal acquisition team for margins and acquisitions. That team is now in place, and the costs for that team is perhaps also rolling in a few more quarters since the staff has been joining during the 2019.
You will see a little bit higher level of central cost, perhaps not in the range of SEK 10 million, because that was a little bit extra during this quarter. On the other hand, we do not have external acquisition costs as high as previously, since we don't have that external team any longer. Looking at the outlook, it's still positive. As Jakob had mentioned, the infrastructure segment has a very strong underlying long-term demand with a lot of investments needed. We don't see any real signs of a downturn in the near future. The coming quarters, we have an unchanged positive view. Let's turn to the next slide. That's a little bit more details about water and energy. As said, they had a strong growth in sales in the quarter, and also had some acquisitions then compared to last year.
As you can see in the diagram on the left, have had a steady increase both in the sales and in the margin levels. The profit for the business area, water and energy, increased with 33% in the quarter, of which 4% was organic. The EBITDA margin continued to increase and was nearly 23%. We have made a revisit of the guidance we make on the margins, since now we have had a number of acquisitions rolling in through the year, so we have increased the guidance for this business area from the 16%-18%, which we had during 2019, to be 17%-20% for the full year 2020. The spread in the margin there is more related to that our companies or our company's customers have business which is a bit project-related, so the order intake can be varying between quarter by quarter.
It could vary a little bit in the margin quarter to quarter. All in all, between 17%-20%, we expect for the full year. Right now we are 13 units, and the Water Treatment Products, which was acquired last year, will then have been joining us for a full year from now in February. If we turn to the next slide, we have the special infrastructure solutions. Also there, we see a continued strong growth in sales, was 49% in Q4, 6% of which was organic. We have made three acquisitions to this business area throughout the year, that also, of course, explain the very strong growth in sales. The margins, however, have been quite steady, between 21%-22% throughout the year.
We have also increased our guidance for this business area to 20%-22% for the full year of 2020. It was 18%-20% last year. Due to the acquisitions, we have increased that guidance a little bit. We had good profit growth, not the least from our acquisitions, but also very strong organic profit growth in the quarter, in total 20%, and a very strong margin then concluded the year. As I said, the quarter four is typically a little bit stronger margin-wise than the other quarters. Let's take the next slide 16, which is our third and last business area, the Property Technical Services. Jakob has mentioned that the elevator program and the profitability program for the elevator operations have concluded with very positive effects.
The sales have been coming back, we had a 5% organic increase during the quarter. That, of course, is very nice to see. The margin levels have been quite steady around 7.5%-8.5% throughout the year, that's also our guidance. It's a little bit higher. It's 8%-10%, which has been for the full year of 2019. We haven't really been in the upper part of that due to that our business with Shell completion has had a bit lower activity during 2019, we expect that one to have a better performance during 2020. The margin should be in that area between 8%-10%, really. We had a very strong organic profit growth in the quarter, mainly due to the elevator business. It was 72%, making the profit to SEK 16 million.
Right now we are nine business units, which is the same as 2019 and 2018. We haven't done any acquisitions there for the last more than two years. That is also our ambition, not to make any further acquisitions within this area. With that, I hand over back to Jakob.
Thank you, Bengt. Well, I think it's time to open up for questions while we have this final slide.
Thank you. Ladies and gentlemen, 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. And once again, that is zero one if you would like to ask a question. Our first question comes to the line of Fredrik Nilsson from Redeye. Please go ahead. Your line is now open.
Hello. Fredrik Nilsson from Redeye here. Nice report. One question regarding the increased guidance. You claim that the reason is acquisitions. However, your last acquisition was made in August.
Why do you raise the guidance at this point? Do you see an underlying improvement in margins as well?
Well, yes, it's true that our acquisitions were made during the first half of 2019. Of course, we want to see that they are coming into the group as we expect. We don't change guidance from one quarter to the other. It could be a little bit volatile then, depending on our acquired companies. We prefer to let's see how it develops and perhaps change the guidance once a year. As you say, it's also not only because of acquisitions, we have had some good development in other companies as well.
I think, Fredrik, we had the tough comparable numbers in especially Q4, especially for water and energy. It was actually above our expectations that we managed to meet those comparable numbers. The end result was above our expectations and above our guidance as well.
Okay, thanks. One more question, if I may. The organic growth in both water and energy and infrastructure solutions was strong in the beginning of last year. Would it be too aggressive to assume an organic growth in line with your target for the beginning of this year?
So our target is regarding profit. We have a target of 5%-10% organic profit growth, which is still our target. Of course, it could be up and down through the quarters, but that's our long-term target. We intend to try to reach that, of course.
Okay. One last question from me. The margin in Property Technical Services decreased relative to Q2 and Q3, despite good growth. Is that mainly because of seasonality?
Well, perhaps two things. You have the seasonality that the third quarter is typically very strong for this business area, since some of their business is not so hectic during the winter months in the building sector. It's also because of this Shell completion business that didn't meet the expectations during the fourth quarter, really. We think that it will be a better situation now for 2020. It's a little bit lower than we expected.
Okay, thanks. That's all for me.
Thank you. Just as a reminder, if you would like to ask a question, please press zero one on your telephone keypad now. Our next question comes to the line of Robert Redin from Carnegie. Please go ahead. Your line is now open.
Yeah, hi. Something on acquisitions. You clearly state that SEK 90 million is still your target, and acquisitions come and go. Could you say something about the pipeline now going into 2020, maybe comparing to what it was like going into 2019, say? Secondly, on multiples paid, are they still around the 6x level you've been in the past when you sum up 2019?
Okay. Well, as you know, we closed a number of acquisitions starting off 2019. At that stage, we had a pipeline that was where our cases were in the final stage. From that point of view, it was a very strong pipeline. It was stronger than normal, and it goes up and down, as I said. On an overall basis, our pipeline is equally strong as it always has been if we have a look at all the stages in our acquisition process. We have a good number of candidates. We are working on them in a very structured fashion, and we are very comfortable to reach our target for the year. The pipeline right now is not at the same level as it was last year, but as I said, it goes up and down. On a long-term basis, it is steady.
When it comes to multiples, it has been throughout the year 2019 on the level between 6x-6.5x operating profit, EBIT.
Perfect. Thanks. That's all questions. Thanks.
Thank you. As there are no further questions registered at the moment, I will hand the word back to the speakers for any final comments. Please go ahead.
Well, thank you, everyone, for listening, and we say thank you for this time, and we will meet up again in three months from now. Thank you, everyone.
This now concludes today's call. Thank you all for attending. You may now disconnect your lines.