Interim Report 1 April–31 December 2023

Third quarter (1 October–31 December 2023)

• Revenue amounted to MSEK 1,187 (1,239).
• EBITA increased by 7 percent to MSEK 110 (103) and the EBITA margin improved to 9.3 percent (8.3).
• Net profit totalled MSEK 55 (56).
• Cash flow from operating activities increased by 251 percent to MSEK 207 (59).
• Two acquisitions have been carried out, with total annual revenue of approximately MSEK 230.

Nine months (1 April–31 December 2023)

• Revenue amounted to MSEK 3,509 (3,512).
• EBITA increased by 16 percent to MSEK 322 (278) and the EBITA margin improved to 9.2 percent (7.9).
• Net profit totalled MSEK 152 (160).
• Earnings per share for the most recent 12-month period amounted to SEK 7.30 (7.90) before dilution and SEK 7.30 (7.90) after dilution.
• Six acquisitions have been carried out, with total annual revenue of approximately MSEK 450.

CEO’s comments

Bergman & Beving’s positive earnings trend continues
Our focus on earnings growth and profitability improvement are continuing to yield results, and we have now increased our earnings for 16 consecutive quarters. In the third quarter, EBITA amounted to MSEK 110, up 7 percent compared with the year-earlier period. Also, gross margin increased by almost 4 percentage points in the quarter, primarily driven by an improved organic product mix along with highly profitable acquisitions. Combined with lower costs for comparable units, this meant that the EBITA margin improved to 9.3 percent (8.3). Cash flow from operating activities increased, mainly due to reduced inventories and our positive earnings trend.

During the quarter, we experienced a decline in demand in some segments of the construction sector and a slowdown in industry. Together with our continued efforts to phase out low-margin business, weaker demand contributed to a 4 percent decrease in revenue compared with the same period last year and a 12 percent decrease in organic revenue.

Strong performance in two of three divisions
The Building Materials and Tools & Consumables divisions both reported solid earnings and margin improvements in the quarter. Tools & Consumables achieved a record-breaking operating margin of 12.9 percent as a result of acquisitions as well as margin-enhancing measures in existing companies. The Workplace Safety division, on the other hand, reported unsatisfactory earnings, mainly due to its large exposure to Nordic resellers that experienced declining demand in the construction and manufacturing sectors. We have already initiated cost-saving measures in response to the weaker demand and will take further action if profitability does not recover.

Continued acquisitions of highly profitable niche companies with growth potential
In line with our acquisition strategy, we acquired eight companies during the 2023 calendar year, with combined revenue of approximately MSEK 600 and an operating margin above 15 percent, including the third quarter acquisitions of Ateco and Orbital Fabrications. Atecois market leader in systems and products for fire alarm installations in both public and commercial properties in Sweden. The acquisition of Orbital Fabrications in the UK means that we have established a position in the niche of gas handling systems with high demands on cleanliness. Combined, these acquisitions will contribute annual revenue of approximately MSEK 230 with healthy profitability, and we look forward to supporting the companies in their continued journeys of growth.

Increased focus on operations with the prerequisites to achieve established profitability targets
We will continue to prioritise earnings growth ahead of volume growth and stand firm on our ambition to reach MSEK 500 in operating profit by the 2025/2026 operating year. During the quarter, we also established supplementary financial targets that state that the operations are to achieve an EBIT margin over 10 percent by 2025/2026 and profitability (P/WC) of at least 45 percent by 2026/2027. To enable this, we will apply more stringent capital allocation to those of our 29 Group companies that have P/WC of at least 45 percent and the best growth prospects, and acquire highly profitable companies each year with combined earnings of MSEK 50–80. Our aim is to continue to broaden our acquisition approach, with a focus on niche B2B technology companies with proprietary products.

In conclusion, I am confident that we are well equipped to continue our positive earnings trend and improve our profitability, despite challenging market conditions.

Stockholm, February 2024

Magnus Söderlind
President & CEO