Release Date: August 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Instalco AB (LTS:0RP5, Financial) reported a stable development of sales above SEK14 billion and an order backlog exceeding SEK9 billion.
- The company maintained a solid cash flow of SEK907 million.
- Instalco AB (LTS:0RP5) launched a new business area, Inmatiq, focusing on property and process automation.
- The company continues to prioritize margins over volumes, reflecting a strategic focus on profitability.
- Instalco AB (LTS:0RP5) remains best in class with an EBITA margin of 7.2% despite market challenges.
Negative Points
- Net sales declined by 4.6% in Q2, amounting to slightly above SEK3.6 billion.
- Organic growth was down 6.4%, reflecting a challenging market environment.
- EBITA margin decreased from 7.7% last year to 7.2% this quarter.
- Cash flow from operations dropped to SEK158 million compared to SEK225 million in the same quarter last year.
- The company is still affected by projects taken during the second half of 2023 when market conditions were worsening.
Q & A Highlights
Q: My first one is on other Nordics, strong profitability here was just curious to hear about the drivers here if there is any particular region behind it or a combination of the two?
A: We have been working on improving profitability in other Nordics by downsizing and focusing on operational performance. This quarter was particularly strong due to project-based fluctuations, but we don't expect this margin to be consistent every quarter. - Robin Boheman, CEO
Q: In Sweden, where the margin is down, adjusting for the credit provision last year, it's down from almost [9]. Any particular effects in Sweden that weigh on the margin?
A: The margin in Sweden this quarter was affected by the costs associated with the Inmatiq investment, including hiring 60 FDs. However, I wouldn't put too much emphasis on the difference in margins for one quarter. - Robin Boheman, CEO
Q: Usually, we see a lower margin in Q3 compared to Q2 and then a better margin in Q4. Is there any reason why this shouldn't be the case this year?
A: Historically, this has been the trend, and I see no big difference this year. However, as a project-driven business, it depends on when projects are finalized and started. - Robin Boheman, CEO
Q: Would you say that the current invoicing and profitability fully reflect the weakening market conditions, or are there still contracts taken prior that will impact profitability negatively?
A: We are still delivering on projects taken in H2 last year and early this year, which were taken under tougher market conditions. We are taking measures to protect margins, focusing more on service and shorter projects. - Robin Boheman, CEO
Q: There seems to be a shift from subconsultants to your own staff. Does this impact the reported numbers in any particular way?
A: We tend to be more profitable with our own staff, but renting helps divide overhead costs. The shift affects profitability slightly but tends to be more profitable overall. - Robin Boheman, CEO
Q: On the contracting order book, does the allocation to large construction companies mean the duration of the order book is longer or more extended in time?
A: It's hard to talk about the duration of their projects. The order backlog of our construction companies is increasing, which should generate more projects for us. - Robin Boheman, CEO
Q: Can you comment on the profile of minority buyouts ahead of us? Do we have more minority interests to be bought out in the coming quarters?
A: We have options to buy additional stakes in companies, and Q2 was a period where we saw a good opportunity to utilize these options. We don't have any big ones planned for the fall. - Robin Boheman, CEO
Q: How has the top-line trend developed during the summer compared to a year ago?
A: We are continuously adapting the cost structure of subsidiaries based on market outlooks. We are on target with our cost-cutting measures and are also increasing nominal growth in areas like Inmatiq and Intec. - Robin Boheman, CEO
Q: Is it fair to assume that the gradual recovery anticipated should materialize during the fall?
A: That is a good assumption. However, it depends on which orders we win and the prices of these projects. - Robin Boheman, CEO
Q: How would you describe the competitive environment in the M&A market?
A: There are aggressive companies making acquisitions, likely preparing for a sale or listing. We focus on acquiring best-in-class businesses that fit our culture and price criteria. - Robin Boheman, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
