Release Date: July 18, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Lagercrantz Group AB (FRA:LG72, Financial) posted a solid quarter with net revenues increasing by 10% to SEK2,253 million.
- The company completed two acquisitions in July, adding SEK280 million in annual net sales.
- The EBITA margin remained strong at 17.1%, despite a slight decrease from the previous year.
- The international division showed significant improvement, achieving average group level on a rolling 12-month basis.
- The electrify division posted a very strong quarter, driven by improvements in other areas despite the lack of project deliveries from the previous year.
Negative Points
- Organic growth was negative at -3%, largely due to the absence of a significant project from the previous year.
- The control and techsec divisions experienced weaker performance, particularly in companies related to the construction sector.
- The EBIT margin for the electrify segment was down by 2 percentage points year-over-year.
- Some interest rate-sensitive businesses within the niche products division struggled, including Truxor, Westmatic, and Waterproof Diving.
- The company faced a relatively tough comparison from a very strong Q1 report last year, impacting year-over-year performance metrics.
Q & A Highlights
Q: The EBIT margin for the electrify segment was down by 2 percentage points year-over-year. How much of this was due to the lack of project deliveries from QD?
A: Most, if not all, of the margin decline was due to the absence of the SEK45 million project from last year, which had a significant contribution margin.
Q: Are there any similar project deliveries in the upcoming quarters that we should be aware of?
A: There were some significant projects last year, particularly in Q4, related to the yield capturing business. These projects come and go, and last year's project was particularly beneficial.
Q: The CEO's comments seem more optimistic compared to previous quarters. Are you seeing a gradual improvement in the market?
A: We are seeing trends that indicate stabilization and some improvement. Interest rates and inflation rates are coming down, and there is a renewed willingness to invest.
Q: Why did you decide to move Nikodan and MH Modules to the control division?
A: Both companies build conveyor systems and are more aligned with system integration and control. This move broadens the scope of the control division and allows for better focus and growth.
Q: Were there any significant effects in the divisional numbers outside of the reshuffling of companies?
A: There were no significant effects outside of the reshuffling. The revaluation of contingent considerations was included for comparison.
Q: Are there other areas within your business that benefit from environmental trends?
A: Yes, several businesses benefit from environmental trends, including those related to green transition and electrification. Examples include Wapro, Radonova, and SIB.
Q: What type of benefits do you see with building a cluster of similar companies, particularly in fire safety?
A: Collaboration among similar companies can lead to shared customer insights, lean manufacturing practices, and ERP systems. However, we maintain a decentralized approach, allowing each company to operate independently.
Q: How do you benefit from the network and management capabilities of acquired companies?
A: We encourage collaboration and idea-sharing among managers, which improves quality and helps identify potential acquisition targets. We also have a bonus scheme for successful acquisition tips.
Q: Have you seen high competition for acquisition targets?
A: The acquisition market has been stable. Our divisional structure and feet on the ground in the UK have improved our ability to find quality targets. We have a good pipeline and balance sheet to support future acquisitions.
Q: What initiatives have you implemented in the control division?
A: We have broadened the scope of the control division and moved companies like Nikodan and MH Modules to better align with our focus. The CP Cases acquisition also reflects this broader scope.
Q: Can you explain the higher tax rate this quarter and how it should be viewed going forward?
A: The higher tax rate this quarter is due to corrections after annual accounts, which is typical for Q1. This will correct itself in the coming quarters.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
