Good morning, very warm welcome to Teqnion's year-end report 2022. I'm sitting here in a fantastic studio that we borrowed from our friends at Kanalgratis. I'm sitting here with my CFO, Carina Strid, and my CXO, Daniel Zhang. We're gonna try to... Can you please turn off the sound? I hear myself in an echo chamber. Thanks. Thanks. Well, we are gonna talk to you about the report that was released this morning. We have had a pretty hardworking last quarter of 2022, where the turbulent times in the world has made us fight in many different niches of our company group. We struggled in some parts, we've been really prosperous in other parts.
In total, it feels really great to have a very diversified portfolio of companies that once again shows that it's a good way of doing business. It makes the group in whole a robust entity that somehow withstands the turbulent times in the economy. First, I'm gonna leave the microphone to Carina, and she's gonna talk a little bit about the figures in our report.
Okay. Hey, hey, everyone. Carina Strid is my name, and I'm started as a CFO just before year-end I joined the group. I've been spending the last months with the year-end closing and this interim report. It's an honor to present this report since I've not been part of the group during 2022, and it's the best year ever for Teqnion, where the net sales is up for the full year, and the EBITDA is up, and everything is up for the full year. When we look at the last quarter, the fourth quarter, the net sales is up and also EBITDA is up. We are kind of flat when it comes to earnings before tax.
Thanks to the diversity of the group, we are still flat, but we have been hit, some of our companies has been hit by the inflation and the raising prices. We are proud that we are still flat. Some of our companies have tougher times. When it comes to our financial goals, we have... If you look at page, I see the page 10 in our interim report, where you can find our financial goals, and we have three of them. The first one is that we would like to keep down the net debt to EBITDA below 2.5x, now the net debt to EBITDA is 1.2x, we have met that goal. We have a headroom to the, to our goal.
When it comes to the second one, we have an EBITDA margin of 9%. We would like to be above 9%. For the full year, now we have an EBITDA margin of 11%, so that financial goal is met. It's a little bit less than 2021. The last one, which is a really long-term goal, is that we would like to double the earnings per share every 5 year. That, as you can see, we have really fulfilled. We have changed this diagram a bit compared to last quarter. It's. We try to make it a little bit more easy. I don't know if we have succeeded with that, so you can give us in the input of it.
The red dotted lines shows where the level of where we have met the goal. That is our aim to make it more simple. That was the short version of what I had planned to say about the interim report. I hand over to Daniel, who is going to monitor question that has come to him and us before we started to present the report.
Great. Thanks a lot. Yes, so we have received quite a lot of questions, and if you have any further questions, please just write them in the live chat or on Twitter. We'll start off directly with one live question from Martin, who is wondering: What is the plan to handle MarkisCity , Kema, and the other companies that are not doing so well on the bottom line today? Maybe I'll hand over that to you, Johan.
Yeah, please do. I mean, we can talk for all our companies. We always try to help the companies that need in our subsidiaries that needs help.
When it comes to the mentioned companies, not all of them are struggling anymore because when we came out of the pandemic, MarkisCit y, for example, their demand was striving again, and they are doing fairly good at the moment. Hopefully, they will continue doing so. Of course, we have companies that needs more attention from us, and we try to give them as much as they need. We are very, as you know, hopefully, very long-term and resilient when it comes to that.
Yeah. We have a question, two questions from Kip in the United States. He's wondering, how will Teqnion scale up the ability to acquire companies? Over the last four years, Teqnion has acquired on average SEK 22.4 million of EBITDA per year. If we assume a similar level going forward, that means EBITDA growth would fall below the +15% year-over-year by 2024, ignoring organic improvements. Will you hire additional people to focus on acquisition, look at larger acquisitions or something else?
Very interesting topic. It pinpoints somewhat what we always try to think about, which is scale what we're doing. We constantly learning and we have to have that mindset because we haven't done Teqnion at this size before as it is today. Last year it was the same. We are constantly growing. That's what we want to do, and that's in our DNA, and we have to adapt to that growth all the time. It's a really, really clever question, and I don't have the answer because we haven't, we haven't done it yet, so we don't know. We have to see and we have to learn, and we have to iterate towards something that is better than today.
Yeah. None of us has seen this movie before, and as you all say, we're trying to learn all the time. We've seen some peers do things differently. Some have brought in more people in M&A and done more and more deals. Some have gone up in size, and some have done other things. Right now we don't feel that we need to solve this question today, but of course we need to solve it, and therefore we iterate towards something that will feel good for us.
I think we could talk about this all day, so we better move on. We gonna solve it, but we gonna solve it in baby steps as we always do.
Yes. Kip is also wondering, I know that last quarter, Q3 , inventories were a bit higher than you like. Yes, indeed. Have you thought of including a return on capital metric to your goals and maybe replacing the EBITDA margin goal? I know that you include that metric in your summary KPIs already. Any thoughts on that? Carina, maybe?
Yes. actually we have
You want me to talk to you.
Actually, we have excluded the KPI for working capital. We have discussed internally now another working capital KPI maybe. We like to keep it simple, and what we are talking about and what we would like to work with is, you know, inventory, trade payables and trade receivables. It's as simple as that, and that is easy to communicate. Each company should know about their inventories and the trade receivables and trade payables, and that is important to work with. We've also seen that since last quarter, we have reduced the working capital when it comes to those three items. Mainly some companies have reduced their inventories, and mainly we have reduced the trade receivables. That is a continuously work we have to do going forward.
Great. Another YouTube question we received here from Mark. He's wondering what the impact on higher interest rates are on the profitabilities. Can we keep up the EBIT margins? Thank you.
Um-
I want to say yes. I don't know.
I don't know how high the rates are gonna go. If you, if we look at... I was just about to give the mic to Carina again, but I can maybe answer it. I mean, if you just look at the last quarter, we had the cost of interest for us was approximately SEK 5 million more than the quarter in 2020, last quarter of 2021. Of course, money is more expensive now, and we have to. As we are always very cautious what we put where we lay our money, and we are even more cautious at this stage of course. And I.
I mean, when we started out doing this in 2006, interest rates were higher than it's been for the last 10 years or so. We're a little bit, we know a little bit how it is to work in a little bit higher interest environment. I don't know. We'll see. We are more cautious, and since we're cautious from the beginning it should be okay.
Yeah. Maybe two points to add to that is that we have been keeping and will be keeping the same discipline when it comes to valuation. When interest rates were low, we did not go up in multiples. Now that interest rates are, let's call it higher or more normal, we do not go down in valuation either. We stick to this because we do this over a long, long, long term. Secondly on that, I mean, what we try to find are companies that are resilient to different environmental impacts. Of course things will happen. Everything equal, interest rate goes up, that is a higher cost. That is the reality for us as well. All right. Another question we received from Gorna Films maybe on YouTube.
He's wondering, specifically regarding Teltek, which is a checkweigh company in Örebro, in Sweden. He's wondering what's going on there, basically. They seem to have a lot of job vacancies, including CEO. Can we say something about that?
Fantastic company with their own products in Örebro, middle of Sweden. We bought the company almost a year ago from a couple of fantastic guys, entrepreneurs, Thomas and Anders. They were very clear with us that they didn't want to see opposition after a while, we are helping them to find someone that will take the company to the future together with them. They are both staying on board and they don't want that type of responsibility. It was clear from the beginning, everything is as it should be. Now we're looking for the right type of individual that can, together with the guys in Örebro, take Teltek to the next level.
Regarding the vacancies, the company's growing there a lot, actually more than what they've done historically. They do not see a recession at the horizon, which is the basically the answers why they have so many vacancies there as well. They have a lot of things to do.
Can you say that they have too much-
They have too much to do.
Too much to do.
We have still a lot of pricing power untapped.
Yeah
... we'll leave it at that.
Yeah, I think so.
Uh-
Please apply for the positions. It's a fantastic company and a fantastic team.
Yes. You'll receive a Teqnion cap if you find the right candidate. Johan from Sweden has sent in a mail and is writing, "For me, it seems like there's a lot of keyman risk in Teqnion, and that a lot of the future value creation is the belief that you and Johan will continue to do a great job." Thank you for thinking that. "Lifco, one of the arguably best peers out there, among others, has been known to very aggressively incentivize management to stay and create value. Why don't you do that given the big risk of key persons leaving?
Don't we do that? I don't. No, no, I mean, for us, it's of course key to attract the best people. We want to work with the best. We want to build the best teams. We want to be the best company to work at. It's a variety of things that has to be in place. Of course, the monetary incentives has to be there as well. Also it's a lot of other things. I don't know. We don't, as we mentioned before in this little Q&A, we don't compare ourselves very much to others or to peers. We try to do our own thing, and I think that so far we've been lucky. We attracted the best people.
We are the best team. I believe, and I have to believe that we can continue doing so in the future.
Yeah. We like to keep things simple, and if things work, we try to do more of that. If one day it stops working, of course, we need to reevaluate and do something differently. Great. Another question from YouTube from Cristoforo. He says, "Hello. What are your thoughts about vertical software businesses? On a long-term basis, it is possible to see Teqnion expanding in the industrial footprint within VMS." Question comes from a Constellation Software and Topicus holder.
Didn't you say just a few seconds ago we try to keep things simple? We try to focus on things we understand, and we have practiced a lot of the type of company that we own today. We never know what's gonna happen in the future, but we stick to things that we understand and that we believe that we can develop for the future and. We're constantly learning, and we're constantly reevaluating things. We'll see. For now and for as far as I, for as far as I can see, we are not changing that we'll be focusing on physical product companies.
A lot of that also comes down to our own competence. We are a very small head office, seven people, and none of us are, you know, real VMS AI experts. I mean, if that changes, that maybe changes what we're looking for, but probably not in the near future because this is working. Good. A Twitter question from Dean. He says, "Great that you scrapped the dividend. Why didn't you do that earlier?
You have to ask the annual meeting about that. That's a topic for the annual meeting.
Jeremy from YouTube is wondering, "How big is the Swedish market for M&A?" He's wondering, "Are there more opportunities in other countries?
Oh. We just started, which means, maybe for 12 months or so, we started looking abroad for acquisitions as well. It seems like we have so many opportunities both inside the borders of Sweden and outside. We have to limit where we look now because we see many fun opportunities and I don't know where... It's our pipeline of prospects is deep and fun. I don't really know how to... I mean, it seems like we have many years of work to do.
We have actually never done that analysis because it feels like it's just too big. If we talk about TAM, the total addressable market in Sweden, I think even without doing the analysis, we would be able to hit our financial targets if we do a good job for the next decade, decades, plural, even if we only stay in Sweden. Of course, we found two companies, one in Ireland, one in the Great Britain, and we might find others outside as well because of course that increases the market and reduces our risk as well.
Yeah. I also think if we try now to focus our efforts a little bit towards GB and to Ireland, and then maybe also to the other Scandinavian countries, and we're not looking further into the European continent or something at the moment because we don't want to. We want to put some more flagpoles down in the geographical areas where we are at the moment. Yeah, we'll see.
Yeah. Pengabollen from Twitter is wondering: "Pretty sure that you've talked about this before, but what's your view on buying companies with stock instead of cash? All against it or is it a timing issue?
All against it. Always all against it. We I think that we have. It's also one aspect of this is to keep it simple. We buy the shares for cash. It's a simple way of doing business with the entrepreneur. The seller comes out if he wants. If he wants to come in and buy Teqnion shares with his cash, we become happy, but no one has to do that. I believe you also have a very good answer to that you normally-
I mean, for us, if we would pay with stock when we think that it's undervalued, we would never do that because we are owners of this company as well. We don't want to give away that value. It would make sense financially to do it when it's overvalued, but we don't want to do that either because the people that we pay become our partners, and if the stock one day goes to fair value and it crashes with, I don't know, 85%, 50%, which we've seen some companies do now during the last one, two years, they're gonna get upset. Even though they did not get tricked, of course, it's not a fun position to be in. The only reason to do it is if it's in fair value, whatever that means in this regard.
It becomes just more complex. It would be easier for everyone and more direct if we take in that money from the stock exchange, and then we give that person money, and that person, if he wants to or she wants to, can just buy our share on the market. Simple.
Keep it simple.
Yes. Revd on Sweden, of Sweden of Twitter is wondering: "How recession-proof is Teqnion?
Yeah. I don't know. I think Carina?
Yeah.
Yeah.
It's a hard question. If we look at the year that just has passed, we have had a tougher, economic, environment, we can see that we have handled that quite well. We have seen the Q4 maybe slow down a bit, but we have this diverse group. Because it is diverse, we have met the tougher, economic environment in a good manner, I think. How it also depends on how tough the recession will be. I mean, we have ordinary companies, so they will meet it as other companies, I would say.
Yeah.
Yeah. Maybe to add to that as an anecdote, we've had some people wondering about our exposure to the construction or housing market, which as you know, we have two companies, Hem1 and Grimstorp, that are exposed to that. Historically, they've been less than 10% of the turnover, and I think that Hem1 has sold close to 0 houses for the last quarter or two. That is of course reflected in the numbers and maybe also gives a little bit of a hint regarding how recession-proof we are. I mean, this thing called Teqnion is built on that we will never be the ones that grow the fastest. Not all companies will be performing at top at the same time. We will hopefully also never fall apart because we have things that goes better in recessions as well. Yeah.
Christoffer at YouTube is wondering: "How is the feeling about lending at the banks lately when you have met them?
The feeling is, I can, as soon as I hear that question, I think about how it was 15 years ago when we started, we were not so interested as a customer for the banks. Nowadays we are. I have not seen, I don't feel that we have a very good dialogue with our bank, and it seems like it's gonna be so going forward as well.
Yeah. Of course, the language has changed, to use some investor language. The banks before, they always wanted, more or less everyone to, put it bluntly, to borrow more money. Now they focus more on how the balance sheet looks and how the cash flow profile is looking. We can say that we've been happy that we've been conservative with, and stuck to what we believe in. I received a few questions on Twitter. Have Daniel stopped buying shares? Three questions, plural. No, I have not. Only when I'm not allowed to.
Since we had this CFO change, because Carina Strid is much better at doing the CFO thing than what I am, I am not obliged to report anymore, and that saves a little bit of time, and we like to save time and keep things simple. I am continue to buy shares, and I will most likely continue to do that as long as I'm at Teqnion, and if I stop doing that, I will let you know. Another question from YouTube. Christopher is wondering, "How is the conversation with the subsidiaries going about lending money, borrowing money?
I try to understand the question, but maybe we do a budget for each subsidiary in the fall of every year, where we look through any type of investments that they need to do for the upcoming year and what type of money they tend to be needing. If it's something falls out of that plan during a year, then we have a discussion about them, and if we all believe that it's the right thing to do, then we help them finance that idea, whatever need they have. If it's a stupid idea, we don't lend them the money. I don't know how to answer it in any other way.
Yeah. I mean, we try to do it in a very decentralized manner, so it feels like they're running their own company. What we do, just as one example, apart from the soft values Johan is mentioning, is that when we lend out money to the subsidiaries, it's not for free. They need to pay an interest on that as well. Hopefully, if we recruit the right people, they understand that it costs money because it actually does for a subsidiary. Maybe that's part of the question as well, or the answer. We have a person called The Galatian Investor in Spain. He has sent in a number of questions. One of the question is, "There are very many serial acquirers in Sweden, Nordics, Lifco, Instalco, Addtech, Lagercrantz, to mention a few.
How and why is Teqnion different, and how can we protect ourselves from these bigger companies?
How are we different? We're a lot smaller than the ones you mentioned there. We are earlier in our journey. We don't have to hide ourselves or protect ourself from these companies. They are fantastic companies. We do things maybe, I don't know, but I think we do things a little bit similar, but we don't know that. We do it our way. We know for sure that there's so many potential companies for us to acquire. There are so many business opportunities for us to grab. We don't see the peers as competition. We see them as big brothers and big sisters that we can hopefully learn one of the things.
We can look at them and learn things, we can look at them and see what we not want to do or what we don't want to become. Yeah.
The market is actually surprisingly big when it comes to acquisitions. When we go through brokers, of course, we sometimes meet these persons. They're also bidding for the same companies, but that is also the reason why we very, very seldom go through brokers. A little bit more compared to a year ago because competition dynamics have changed, and there are fewer buyers. When we find our own companies, I mean, it's very seldom that they talk to other companies at the same time.
Yeah.
Maybe one, but that's it. The Galatian Investor from Twitter is also wondering, "How has the acquisition process and decisions changed since Daniel joined the company?
Oh, it changed. I mean, a lot of things are the same. The speed, the drive, and the efficiency has gone up a whole lot because Daniel is a very good man and a very good commander of acquisitions. But I mean, as he mentioned here earlier, we value the companies in the same way we did before. We approach the entrepreneurs and the owners the same way we did before, but we do it much more frequently. I think we meet a bit over 100 companies in meetings every year, and most of them we do together...
Yeah
... because we have different experiences and knowledges, and together we become so much more than the when we sit alone. Yeah. It's. What's changed is that it's more fun to do things together than do it solo. It's, I mean, it's fun also to meet entrepreneurs when you do it yourself. When you do it with a friend, it's much more dynamic, and you can debrief on the journey when you go home, and it's so much more fun to do it together.
Yeah. I wasn't here before, so I don't know.
It was much more boring when you weren't here.
Good that I came.
Very good. Good decision.
Pedro Leon from Spain is wondering, "Have you achieved to pivot the construction companies from house building to other activities like public houses, schools, et cetera?" Also saying, "We do not like dividend. You can buy fantastic companies with the cash." Thank you, Pedro.
Yeah, let's hope that we can. Yeah, we try to diversify the customer base in these times, of course. We have to. That's one of our strength, I believe, that we are very fast in both in what we do and in decisions. During the fall or from the summer going forward, we have definitely looked at all type of wooden projects, both near and far from our construction factories.
Yeah. We have Etienne Blok from YouTube is wondering, "What businesses inside of Teqnion will benefit most from a recessionary environment, in your opinion?
I don't really understand that.
It's a really, really interesting question.
Maybe tools?
Maybe tools. Maybe it also depends a little bit because, of course, a recession is painting a little bit with a broad brush. One of the reasons of the recession, I'm thinking of is also because energy prices have gone up so much.
Mm-hmm.
We have absolutely a couple of companies at least, maybe Injab is the clearest example that sells transformers to the ongoing electrification of the society. Injab has been a great company for 10+ years, but of course, when the demand for electrification goes up so much, it becomes great plus luck, and that's even better.
We have a, of course, we have a few of those, selling mainly components but also systems for different type of electrification projects. If that's something.
Yeah
... those are gonna have a lot to do for the upcoming years. I also believe that the Walmec Tools guys is gonna have prosperous years because all these merge. All these merge, but because to keeping the vehicles rolling and on, and not only buying new vehicles all the time, I think, is gonna be important. There we also I mentioned a little bit in the CEO comments in the report that we have opened up a very, very small project in the U.S. to start to be more present there when it comes to sales and marketing, and we'll see what happens with that.
I mean, we believe that we, in a few years, have a lot of customers in the U.S. We will see. Walmec is one of those companies that see a lot of potential on the U.S. market, of course, because there's a lot of vehicles rolling around.
Yeah, they're mostly focused on the aftermarket, if you didn't say that.
Sorry. Yeah.
Maybe just to add to that, we also have two companies that are exposed to the defense industry, and that is, maybe it's not counter-cyclical, but it's not cyclical. They have their own.
They have their own world.
Yeah.
Yeah.
Exactly. Delpo19 on YouTube, "Good morning from Spain. Thinking in the long term, what percentage of the growth will come from organic growth? Thank you.
That is a question that we receive every once in a while, and now we've been having pretty good organic growth for a few years. When you look at the big peers that we have that's been around for a very long time with 100+ companies, they tend to have single-digit organic growth over a year, maybe sometimes around 5%, if you look historically. I just pulled these numbers out of my memory, so don't shoot me for it. That's what has always been my answer, that I believe that we, when we grow, the organic growth is gonna be single digit organic.
It's, in these times when we still are small, we have 20+ companies, some of them grow really rapidly, and, yeah, we'll see. I mean, we're really happy with these numbers, of course, but we have to be realistic as well. The main, I shouldn't be this long in the answer. I mean, the main growth for us in the future is gonna be acquisitions. That's the truth.
Yeah. Continuing on YouTube, Cristoforo is wondering, "Could you provide a historic perspective on organic growth? Recession versus non-recession periods, price versus volume." That's a big question.
Mm-hmm. I must have touched it.
Yeah
in the last answer.
Yeah.
I it's extremely hard to answer. Depending on in what market niches the recession is gonna hit the hardest and how well prepared, how well diversified we are, I'm pessimistic when it comes to the economic situation in the world. I'm very optimistic when it comes to our resilient towards that. We've proven it several times. We love to work, and we work hard when we need to, and we have fantastic subsidiaries that do their best to always earn money.
Yeah. Regarding price versus volume, I can't answer that numerically. What we try to find when we acquire new companies is, among others, untapped pricing power. That is a core of our DNA, that we want companies to become better at pricing, and that doesn't necessarily always mean increased prices on everything, but becoming more sophisticated and increasing prices to a level that is benefiting. If you look at companies that we've had in our group for a long time, you can see expanding gross margins. There's a mix of price and volume, but can't give you the exact share between them. Etienne is wondering, have you noticed less competition from financial buyers, for example, private equity, versus perpetual buyers such as yourself?
Do you, do you wanna answer it, or?
Yeah, I can maybe start.
Yeah, please. Yeah.
Yeah. Yes is the answer. I mean, we have never really been in competition with private equity. They tend to look at cases that are much bigger, maybe five, six times bigger or something like that. There we've never really had real competition. If we look at, let's call it perpetual buyers, what we've seen is that, one, some perpetual buyers or perpetual owners are maybe not perpetual. Some of them have stopped buying or at least reduced their pace, and some of them have actually, as you've probably seen if you followed our serial acquirers, started to sell off some companies.
Yes, we have seen less competition. Maybe just to give a little bit nuance to that, is that when we, historically, maybe during 2021 and 2022, were going through brokers, a lot of the cases were going at prices that were maybe twice what we wanted to pay for. Those prices are still higher usually than what we want to pay for, but it's not 100% higher. Maybe it's 50%. Please take these numbers with a big scoop of salt. Competition has come down, but we still prefer to hunt ourselves. Want to add to that?
Very good answer. Now it's more fun. Let's keep it fun.
Jerry is wondering, someday Teqnion will be much bigger than today. What if competition of M&A becomes much more intense then? Any upfront thoughts about our durable competitive advantage?
I want Carina to answer a few questions, but these are tough for you. In the half year or something, you... I think one of our competitive advantages when it comes to acquisition is our relationship building with the potential sellers, with the entrepreneurs. They, I think they see after a while that we understand them and how tough it has been to build that company that they are trying to sell. That is maybe soft values, but those soft values is still values and we...
Since we tend to be very honest in what we see and what we gonna demand from them after a transaction, if the people that likes what we do and likes Teqnion and want Teqnion to be a harbor for their life's work, they sell to us, and they sell to us at the price that and our, the valuation that we like and that we stick to. Then they get the money that they that they seem to. I'm struggling with words here.
They, I mean, they get what they feel they deserve when it comes to money, but also they feel that the company that they have built and their employees and their coworkers get what they deserve when it comes to a good future culture and a solid harbor for their company. I mean, it's also, to do the transaction is one thing, but I mean, that's nothing when it comes to the lifespan of a company. It's just a blink, and then we continue owning it forever, and we continue with those people employed there as our new coworkers and our new friends.
That's the people that the sellers that understand that, they are sellers that we that get that attracts us and that we want to be those companies we really want to buy.
Thanks for that. This is maybe a question that we can send over to the CFO. In an interview, you joke when you talked about EBITDA, like you don't give it importance. However, it is a metric that you mention in the report, even more than return on invested capital. Why?
Do you wanna take it?
Why? you-
Is it okay?
I don't know.
Yeah.
Maybe you start.
I'm guessing that the question is, why... Either it's why do we joke about EBITDA or why...
We still have it in our report.
We still have it.
Yes. We don't have it on the first page. We have it, like, page 15 or something. We use it when it comes to net debt EBITDA, because that is a KPI that you follow when it comes to lending money. We use it there in that context. Of course, we want the operations to something to follow the operations, and then you can use EBITDA or EBITDA. Of course, we focus on EBITDA, and we need to focus on some kind of measure for the operations. I don't know if that is a good answer.
Yeah, I think it is.
Yeah.
The banks like that, so that is also.
Yeah, yeah
... also
When it comes to lending.
Yeah, sorry.
yes, when it comes to lending, yeah.
Sorry, I was reading while you were talking, and it was a very fun question here, also to you.
Oh, okay.
Carina, how has your onboarding been, and also, do you like those two guys to your left?
Yes, I like them a lot. The onboarding has been very focused on, as I started on with this year-end closing and this year-end report. I have been too much at the headquarter, I think, and I hope that the coming next week or month, I will meet the people behind the figures so that I get to know. Now I have get to know the figures, the company, so I really, really would like to meet all the peoples in the company now.
Yeah.
I like these guys.
I love that Carina joined. I feel both that we have strengthened the team a lot, and also I feel like, you know, this, I don't know the race, this Dobby's free guy from Harry Potter, now I can focus on doing the CXO things instead.
Very good.
We have a question regarding how much equity we use for acquisitions and about new dividend policy. Can we expect 10% net profit payout?
I don't like dividend. I like buying good companies and grow the group. Again, we, the question about dividend is something for the annual meeting. As long as we can, allocate the capital and have this growth, I think we should do that.
Yeah. We should allocate capital to wherever it makes most use. If we cannot do that, of course you should look at exchanging us for someone that you believe in, if that doesn't work, please pay out the money. We have another financial question. Why did you raise the debt target below, to below 2.5x instead of 2x like in previous years? I'd rather see it go to 1.5x.
We'd rather see it low as well. We have this financial target because it's the same as the bank puts on us, so it fits in that way, and it fits also peers' targets as well. It's a little bit that we don't wanna look too very strange in that area. I think that we're gonna stay way below that target, hopefully, and if we're gonna get close to it's gonna be momentarily because we buy something big that is really, really good. I agree with this question.
Yeah, me too. I mean, we won't try to be smart and hit 2.47x or whatever, and also just keep in mind that what we're reporting here is on a rolling 12-month basis, it's not on a pro forma. If we acquire something, we get a net debt increase directly, and we get zero of the earnings in that metric. This is a great question from The Galatian Investor, which also is very difficult. How have the companies we own responded to the high inflation? What percentage of them have pricing power?
Hm.
Hm.
Percentage. Shall I stumble with this answer?
Please start.
Okay. Okay. We have a few companies that own their own brand. Normally they tend to have better pricing power. We have a few companies that sell other brands, but they are very niche and very specialized, and they have the application knowledge, so they also have pretty good pricing power. We have a few factories supplying big, global companies such as Scania and Volvo. Those, in those factories we don't have the same pricing power, of course. Even when it comes to this, the topic of pricing power, we are diversified even though that we're striving towards becoming better in the whole of the group.
We, and how we do that is that we slowly tend to strengthen the relationships with customers where we both can benefit from high margins and that we, in niches where we can grow with high margins and with products where we can grow with high margins. It's a constant battle, and we love that battle, and we tend to be better and better at it.
Yeah. It's impossible, I would say, to say the percentage of pricing power because it's not a yes or no. It's on a scale, of course. When we look for new companies, we want to look for companies that have pricing power. That is important for us. Also what we think is quite interesting is that of course some companies are very affected by the overall industry. For example, housing stops, it's very difficult to sell houses. Most of our companies are in very, very small niches, so the pricing power comes maybe not directly because of the industry dynamics, but more from the culture. Do you dare to charge prices? Do you have a culture of doing cost-plus? We hate that. Do you have a culture of value-based pricing?
Don't swear in the studio.
That is super important and something that we as owners try to help people to think that it's fun to be good at pricing.
Yeah.
A question here from Jerry. "Hi, Daniel. You said on Twitter you wish Teqnion stock price to drop so you can buy more. At what price range will you do that?" "Any thoughts on tax, Teqnion's reasonable valuation?" Yes, privately I think it's good, because I will be a net buyer of the Teqnion stock for as long as I am in Teqnion. Of course we have this financial target where we want to grow at, and at least double every five years. If you double every five years and do that for 50 years, that's 1,000X. That's math. We want to do this forever. Of course, it would be... I know that you understand that it's not a forecast or a guidance that we'll do 1,000X.
Due to that, I mean, I buy every month with the salary that I have, because I think it's fun and that we will become worth more in the future because hopefully we do good things. Basically all prices are just dollar-cost average it up and down.
my friend, I think we have time for one more question, then we have to say goodbye.
Yes.
Yeah.
Uh-
Take a good one.
Take a good one.
Pick the best one. Shouldn't didn't our friends at Kanalgratis tell us that they're gonna give out a lure to someone that gave us the best question today?
Yes. We'll reach out to one of you after today, so you can get, It's called a lure? A hook?
I think it's. Is it, Johan? It's called a lure.
Yeah.
A sport fishing lure.
Yes.
Yeah.
Great. Do you plan to acquire companies that provide you with float in the same way that Berkshire do with insurance companies?
I feel this is. You have to, you read the question and you also tell the answer.
Uh-
I heard Warren Buffett in there somewhere.
Yeah.
Yeah.
We love what Berkshire does. I love Berkshire. Maybe just to not answer the question, I think it's not really fair to compare us to Berkshire, because we are different. We love companies with float. We do not have any of those. We are not specifically looking for companies with float. If we find companies that are within our circle of competence, that we believe would be a great fit for us, and where we get a valuation that we, both parties will be happy about, and they have float, I mean, that's maybe a little plus in the margin, but it's not one of the key criteria.
Yeah. Thanks.
Great. Are we done?
Are you happy?
I'm happy.
Good. Are you happy?
Yeah.
Yeah. Good.
Are you?
Yeah, yeah. It was fantastic to sit in this very fashionable studio to do this.
Yeah
for the first time. We thank Kanalgratis again for letting us be here. Thank you so much everyone that listened in and asked all of these question. We're very happy to do this. Looking forward to see you again soon and until then, have a good time. Bye.
Bye.
Bye-bye.