Welcome back, everyone, to ABG Investor Days. My name is Henric Hintze, and I'm an equity research analyst here at ABG. With me now, I have the CEO of Seafire, Johan Bennarsten, here to present the company. Please go ahead.
Thank you, Henric. Nice to be here again. Seafire, we're a company specialized on acquisition of SMEs, SEK 50 to 200 million in revenue. We're operating in niche markets. We have two business segments. It's products and industrial components. We have an industrial approach, where we focus on growth and improved profits.
It's with more private equity-like business model, with key financial target, business plan, and steady improvement in Sales Academy. We also have a clear view on succession plans, and that's meaning that we recruit new CEOs after the succession of the entrepreneur, from which we buy the company from, and that's more to how to adapt our model on the companies we own.
We have made 14 acquisitions so far, 12 still in portfolio. EV/EBITDA multiple of less than six. If you see down to the left here, we have quite high CAGR of almost 10% over the years. It's prior our acquisition, but also during our holding time. W e're a bit above SEK 1 billion in sales.
Our EBITDA margin is a bit higher than 10%. This year, we have a -4% organic growth, last year, 12%, so we have had some negative impact of tougher market conditions in some companies. This year, we have sold or liquidated two companies, is Linguacom and Hedén.
Now we are 12 companies in the portfolio. I will come back to that in a moment. The team, I'm the CEO and founder of Seafire. I founded this in 2016, and take it from there. My background is from private equity within CapMan. Jacob Persson has been there almost three years as CFO.
He has experience from Ambea and PwC. Anders Martinsson joined in September. He has background from Indutrade and BE Group, a very good recruitment, taking care of the industrial components business segment.
N ow we have a full fresh team for taking Seafire to the next level. 2023 has been a quite busy year. On top of this, we have made one acquisition in January, February, Borö Pannan
If you look at the financial performance, we have a negative growth of -4%. We had a very strong Q1 with 14% growth, and then two quarters with negative growth. We see this as a result from decreased demand in three subsidiaries, mainly within building, construction, and consumer-related products. N ow we see a clear positive trend in the Q3 this year. Come back to that.
Generally, we can see that we have increased cost in the organization, and both the salaries, but also inflation, and it's also that we are having negative dependence on currencies. W e see that exchange rate really hit us margin-wise.
Those days, with strong dollar and euro, it's quite hard to still increase the prices. W e working quite hard now to reduce the pushing pricing, but also getting more, well, grow the business a bit more, so we can take care of the reduced profits. This year, we also made a restatement of the Solid Engineer acquisitions.
It's an IFRS effect that had a negative effect 1 year ago, -SEK 30 million in EBITDA. Now, we added back 2/3 of that in this restatement. A lso, we made a liquidation of Hedén. We sold the assets. This is the first company I acquired when I started Seafire seven years ago. Sold that to a Canadian partner.
A lso we unfortunately had to put LinguaCom in liquidation due to a fraud. T his have a negative effect of -SEK 35 million. Actually, the plan this year was to divest those companies. Hedén was as planned, but of course, LinguaCom was not as planned, as it happened.
I think the most important for us was the balance sheet restructuring. Last year, we made an issue of SEK 300 million, issue of shares to replace a bond, very costly bond with a bank financing. We had interest rates or interest, interest cost of about SEK 75 million a year with the bond.
Now we're less or about SEK 20 million with a bank financing. So I think that that's the most important, so we can take care of the cash flow and invest that in the business, and also make acquisition from it. Also, we made a tax defer, tax deferral in September in order to increase our available cash.
Now we have SEK 150 million, and also that will also mean that we decrease the net debt/EBITDA to about 2x. Those tax deferrals shall be paid in four years. I think we have time to take care of those, this debt as well.
N ow, I believe this was my plan to get the platform in place. SEK 1 billion in sales, about 10% EBITDA margin, so we can actually grow the business with the cash flow we have, with making acquisition from the cash flow we have. A lso made the Nasdaq listing.
That's quite costly and time-consuming, so I think we spent SEK 50 million on this, and now I think we have time to really focus on the business and develop the companies. If you look at the Q3, we had last year adjusted EBITDA of 21. Borö Pannan added SEK 3 million, and then we have -SEK 5 million from the subsidiaries.
As mainly building constructions where we see a softer market, and that's not just for us, it's total market, I think. W e ended up in SEK 19 million. Also, we have always very intense programs in our portfolio companies where we transform sales teams and digital strategy in a handful of companies.
Very many companies, when we acquire them, they, especially in the industrial components, they don't really have the sales team in place. For example, Åkerstedts, when we acquired that company four years ago, they had not a full FTE on sales. Now, we have three, and we're taking market share, growing more than 40% this year, very profitable company.
It takes time to get the results from it, and the COVID, of course, has not helped us to get that in place, but I think we're now full set for the coming years. Also, ISO certification, digitalization projects we have done in a number of companies which didn't have this in the past.
And also succession from owners, that we actually have made succession in all companies except from one. W e have the team we would like to build the companies with in place. If you look at the industrial component, we saw a -7% organic growth, -7%.
It's mainly two companies, Kenpo and DOFAB, building construction. Two companies growing more than 20%, Åkerstedts and Bara Mineraler. It's stable gross margin. We see in the different companies a landscaping market, that's Bara Mineraler. Very strong development. I will come back to that the next slide. Very long-term, strong outlook due to sustainability and climate change.
Electrification market, which is Borö Pannan and Pexymek, they're doing very well. And also, we see a strong long-term outlook, even though, as NIBE pointed out last week, we see those government grants that come and go really disturb the market in the long, but in the long term, we see a very positive market condition in this segment.
Building supplies, it's DOFAB and Färg-In. Färg-In is a supplier of industrial paint. They have mainly industrial companies like VCE and Epiroc as customers, but also some to buildings or building supplies, and that's a very soft market, -60% year to date. We see also there, where interest rates reduce the short-term investments from households and also real estate owners.
This is compared to the solar panel market, where it has been a very strong order book, but now it's very empty. So we see the same pattern, actually, for those companies. Long term, strong outlook. Industrial components, and that's automotive, like Thor Ahlgren and also, Färg-In. Stable development. We have Scania for Thor Ahlgren as the main customer.
They had a good Q3 and also a 12-month forecast, which is quite strong, for Scania. I think this is stable business. Bara Mineraler is, I believe, our top, or our best acquisition so far. This, I think, we have potential to grow it to SEK 500 million in a number of years.
We grow in this year with about 35%, double the profit level, EBIT margin of 20%. This company has been around for more than 30 years, focusing on sustainable products, and of course, with the climate change and sustainability focus, this is of course a very strong market out there for this company, and we are mainly only focused on the Swedish market.
It's based in Bara, southern part of Sweden. We have very unique products. It's clay for horticulture and that is pumice, Hekla Pumice, which is used for rain beds. On top of that, the company has a number of products for city planning and landscaping.
It's bricks for the ground, and other kind of prefab brick products like, and that it is sold for the Swedish market, and we see a growing demand for these kind of products, where you actually leave the concrete kind of material that you use, instead using bricks, which has, of course, a high cost, but long term, it's more sustainable, and lifetime cost is also lower.
V ery strong development in this company, and we will take it to develop it further, increase the sales, and also the products, and the knowledge base that we have created so far. If you look at the product companies, there are five companies in this.
Four companies remaining in this segment. We saw almost 0% to -1% in organic growth. We had a quite early impact last year in this segment, when we saw the interest rate cut, the customer demand. Nordbutiker has now, during 15 weeks, growing business.
Compared to last year, more than 50% to 20% is electrical vehicles. A lso Luda. Farm and OPO also see a growing demand. We see that last year, the customers put on hold, especially resellers and distributors. I t was a slowdown because they reduced the stock, and now we are going to a more positive sign of improvement of sales, also for those companies.
We have done quite a lot of cost-effective measures in those companies, so we're still having the same profit as last year, even though the sales are a bit down. I believe that we actually could increase the profits the coming year. Hopefully, the SEK value for USD and also euro will be a bit better, because those companies import in dollar, especially.
N ow the dollar is a bit weaker, so I think we could actually have a better improved margins from a weaker dollar. As right now, it's the case, but hope to get it a bit more next year. Also, we work, of course, with reductions from pricing from vendors.
We see that China vendors reduce the prices 15%, 10%, 10% to 15%, but it's mitigated a bit by the weak exchange rate, but I think we can do even more there. If you look at the share, we are down significantly, -68%, and that's of course very sad to see, to see.
S till, I think the most important that is that we have made a refinancing of the debt, so we have had a good cash flow in the Q3, and it's still improving in Q4 so far. I believe that we are self-funded on this level. A lso, we have a very good headroom for the covenant for the bank.
Also, we see that Creades is the biggest owner, and Protector Forsikring has is number two, increased to 16%, so I believe that we have a, how to say, wash out from investors that came in, especially in the new issue of shares a year ago.
I believe it's we have a good owner list, even though we are quite small company. Some outlook. I said a very busy year. A lot of projects have been accomplished. We closed the refinancing, minus SEK 50 million in interest rates in cost for interest. We have listed on the stock exchange, the main market, that was quite, quite.
I think it's really great value, but it's costly and, of course, takes a lot of time. We saw that 2022 was a very good market for very many companies. We had low costs, inflation hadn't really hit us, and still, there were some bottlenecks that were released, so the Q2 last year was fantastic.
Now we are more of a run rate of about SEK 10 million in EBITDA level each month. N ow we have done quite a lot of work in our companies with transformation of the sales teams, ISO certification, and also some cost measures. We see quite good level on the market side, and that was seen in the Q3, even though the building materials are a bit soft.
Focus now, the coming year is stabilization of sales and improve profits, and gradually reduce the leverage to establish headroom for more acquisitions. Okay. Thank you.
Thank you very much for that. Let's move on to some questions. If we start off by looking at the current portfolio of companies that you have, what would you say are some of the biggest opportunities to improve operational efficiencies in the current portfolio?
I believe that, I mean, we have, since our first investment and all the investments, we have added about 25 sales reps in the total group, if you look at prior acquisition and what we have today. T hat's really, I think we hope to get some leverage on that investment that we made, that we have more front-end personnel that work with sales and taking market share and also business development.
I think that, that's the most important. F or example, Nordbutiker, they had one guy working with e-commerce prior acquisition, now we are six. T he organization is down from 42 to 27, so we really made a transformation. Also, that's Oppo, Solid Engineer, Luda.Farm, we have made all kind of this transformation.
I think that's the most important for us. O f course, in a tougher market, you can say, okay, if we, if we hadn't done that kind of transformation, what had the sales been then? And I think that has been a more negative impact, but it's hard to say.
I think it's really to drive the sales, and we see Åkerstedt, for example, that we recruited now three sales reps, and now we see a growth of 35% this year. It's a small company, but 25% EBITDA margin, so it has a very profit, well, all the way down. I believe we will see more of that, so I think that's the best opportunity. If you look at the total group, we see Bara Mineraler, for example.
It's, the market potential is perhaps some billions SEK for that company in Sweden. I f we have just SEK 100 million or SEK 120 million this year in sales, I think we, of course, that could be a very strong contributor to our performance, this year o r next year or the coming years.
All right. L ooking on the M&A side of things then, Seafire is fundamentally an M&A-driven company.
Right. W hat are your thoughts going forward there? You've obviously gone a bit slower on the acquisitions lately, worked down the debt a bit. What's the outlook there?
What we're looking for, I mean, I think that the two main things is one, that we are looking more for add-ons, to add businesses, close to the companies we have and making cluster out of it, so we get more synergies or market knowledge, I would say. W e can actually take advantage of that.
The other thing is the industrial components in our industrial side. I think we will grow. They have more in common, and that's, I think, our focus to find niched industrial companies with not sub-suppliers or like perhaps Thor Ahlgen, it's actually the only sub-supplier we have. The other are more of own products or systems.
That they sell to customers. I think it's that that's also, I think, a fundamental part for us, is to have a really added value to the customer. A niche, niched player with own products, rather than a well, sub-supplier that we actually can be exchanged every day, so to say.
I think it's the focus and when it comes to pace, I think we're looking to add two-three companies a year, on top of our, hopefully, organic growth and improved profits. I think that will be a very well, fuel the profits and hopefully also the share price over time.
You mentioned that you're maybe focusing a bit more on the industrial components segment. What does that mean for the companies in the product segment? You've lost two companies in that segment this year. Do you plan on divesting any other businesses, or is that it?
The companies we divested, it is more of a hidden, was very small, SEK 5 million in sales. I t's to take care of a problem that isn't a problem, but could be a problem, and then that will be more costly. LinguaCom, we didn't see any.
With AI and fewer immigrants, we didn't see that business model, well, could be a part because we don't believe in the company or that market. I think that that was also the two companies we acquired very early. We hadn't done them today. I t's more of a streamlining portfolio to see, okay, the companies we have is what we would like to have.
At the product side, it's harder to find good companies with, I think one out of ten is in the deal flow we have, is a product company, and nine out of ten are industrial.
I think it's also that to find those niche companies that have an added value and well a final product to the customer is of course interesting when you can find those, but it's harder. I mean, Oppo is, which within eyewear, it's almost 80% gross margin, quite good footprint, good footprint in the Nordic area.
I f we grow that company, of course, we're quite a well very profitable business. I would say that it is more of the deals we see, and also but also our competence and knowhow. I think industrial businesses are more Swedish-like companies, also.
All right. Thank you very much for that. That's all we have time for today. Thank you all for listening.