SUMMARY OF FINANCIAL PERFORMANCE

INTERIM PERIOD 1 JANUARY – 31 MARCH

• The Group’s net revenue amounted to SEK 231.6 million (217.2), adjusted EBITDA amounted to SEK 23.7 million (22.6) corresponding to an adjusted EBITDA margin of 10.2% (10.4), and adjusted EBITA amounted to SEK 9.5 million (10.6) corresponding to an adjusted EBITA margin of 4.1% (4.9). For comparable entities net revenue was negative -4.4% (19.9).
• Caution remained the dominant factor in the market through the start of the year and impacted contracting services in pipe relining, which have been subject to price pressure that has gradually affected project margins.
• Operating profit (EBIT) amounted to SEK 5.7 million (3.3). Items affecting comparability during the period totalled SEK 0.8 million (4.4) and primarily pertained to restructuring costs, costs related to the change of name, transaction costs and costs for system change and implementation.
• The Group’s net earnings amounted to SEK 4.2 million (-27.2).
• The Group’s basic and diluted earnings per share amounted to SEK 0.30 (-1.99).

SIGNIFICANT EVENTS DURING THE QUARTER

• Joachim Welin took over as Managing Director and CEO of Wall to Wall Group AB on 1 January 2024.
• During the quarter, the company repurchased its own shares and as of 31 March 2024, treasury shares amounted to 64,357.

SIGNIFICANT EVENTS AFTER THE PERIOD

• The company has appointed André Strömgren as the new CFO and member of the company management. André will assume his role no later than 1 September 2024. The company’s current acting CFO, Linus Marmstedt, will remain in his current role until André takes over.
• At the Annual General Meeting, Anders Böös was elected as new chairman and Maria Sidén as new board member. Ulrika Hagdahl was, as previously communicated, not available for re-election.
• By virtue of the authorisation granted by the Annual General Meeting on 15 April 2024, on the same date, the Board resolved to repurchase a maximum of 1,317,372 own Class A shares for a total maximum amount of SEK 120 million.
• The AGM on 15 April 2024 resolved to distribute a dividend of SEK 1.00 per share.
• Molins i Kalmar AB, whose main business is pipe flushing, was acquired in April.

OUTLOOK

• For the full-year 2024, cautious sales growth is expected for comparable entities together with gradual improvement in profitability compared with last year.

MARKET CONDITIONS REMAIN CHALLENGING BUT WITH SOME SIGNS OF IMPROVEMENTS

PERFORMANCE IN THE FIRST QUARTER OF THE YEAR
During the seasonally quieter first quarter caution continued to dominate the market, primarily due to uncertainty with regard to interest rate levels and their consequent impact on investments in planned maintenance, particularly among housing companies and housing cooperatives. This has mainly impacted demand for pipe relining, which posted net revenue for the quarter that was down 2% year-on-year (on a comparative basis). The picture is mixed as the pipe relining sector in Norway continues to perform well, Denmark has posted a strong recovery while Finland reported significantly lower net revenue, partly linked to previously announced restructuring. In Sweden, the picture is also mixed and down slightly overall on last year. Activity was low during the quarter for duct sealing and geothermal energy and had an impact of 5% on the Group’s total net revenue compared with last year. The relatively small sale of these operations mean that the start of individual projects can significantly impact the outcome for a single quarter. Flushing operations continued to perform well with net revenue up 7% on last year. The Group as a whole posted a decrease in net revenue of just over 4% for comparable entities for the first quarter.

The operating margin (adjusted EBITA for comparable entities) for the quarter was on a par with last year with an adjusted EBITA margin of 4.1% (4.5). Compared with last year, adjusted operating profit was higher for Sweden and Denmark, unchanged for Norway and down for Finland. Aside from the developments in Finland, adjusted operating profit was impacted by low activity in duct sealing and geothermal energy, and the closure of two new establishments in Sweden. In addition, ongoing development projects in sustainability, reporting and Group- wide business systems entailed a temporary increase in overhead costs.

SIGNS APPEARING OF TENTATIVELY GROWING MARKET OPTIMISM
A slight uptick in market sentiment was noted during the period, and particularly in the beginning of the second quarter, with increased levels of inquiries and business activity compared with previously. After the end of the quarter, the order stock has posted a positive trend following, among other events, a few major orders being won for pipe relining and duct sealing in April.

GRADUAL IMPACT FROM MEASURES IMPLEMENTED
As previously announced, several efficiency measures were initiated in the quarter. The key measures comprised the consolidation in Finland, whereby three separate companies became one, the closure of two loss-making greenfield operations in Sweden and the operational restructuring in Denmark. In addition, work has continued on improving processes and project management. On an annualised basis compared with 2023, the direct earnings impact of the measures implemented to date is estimated at around SEK 30 million with most of the impact expected to be achieved gradually and to have full impact from the second half of the year onward.

COMMENTS FROM JOACHIM WELIN, MANAGING DIRECTOR AND CEO
“Even in the first months of the year, we noted a general continuation of tough market conditions with our most important customer groups continuing to exercise considerable caution. Nevertheless, through selective work with tendering and internal measures, we have managed to improve our contribution margin compared with last year. It is also gratifying to note the continued good performance of our flushing operations at the same time as we noted a positive turnaround in our Danish pipe relining operations during the quarter.

The focus in the coming quarters will remain on strengthening the overall contribution margin and reducing overhead costs in proportion to net revenue.

In conclusion, we are very pleased to welcome Molins i Kalmar to the Wall to Wall Group. Molins generates sales of approximately SEK 30 million and its primary business activity comprises flushing operations in Kalmar and the surrounding area. The acquisition strengthens our market position in flushing as well as our geographical presence in southeastern Sweden. The expansion of the Group’s geographical coverage in flushing is a strategic priority.”

OUTLOOK FOR THE CURRENT YEAR
Market developments remain fragmented for the Group’s business areas, with contracting services in pipe relining and projects still experiencing a cautious market with elements of price pressure, while the market for services and flushing services is favourable. A positive trend for interest rates during the year is expected to contribute to a recovery for property owner investments in planned maintenance. At the same time, several measures are being implemented to optimise the organisation and reduce costs, which are expected to have a positive impact on profitability.

As announced in connection with the year-end report, the company anticipates cautious growth and a gradual improvement in profitability during the year compared with the full-year 2023, driven in part by initiated measures and in part by market improvements.

For full interim report, see appendix.