Sdiptech AB (publ) publishes interim report for the third quarter (July - September) 2023 The report is available on the company's website: www.sdiptech.se
STRONG ORGANIC GROWTH AND GOOD DEVELOPMENT OF THE CASH FLOW
THIRD QUARTER 2023
Net sales increased by 41% to SEK 1,205.2 million (856.8). In total for the Group, organic sales growth was +20%, excluding currency effects.
Operating profit EBITA* increased by 38% to SEK 234.9 million (170.8), corresponding to an EBITA* margin of 19.5% (19.9). Organic EBITA* growth for the Group was +20%, excluding currency effects.
Operating profit, EBIT, increased by 33% and amounted to SEK 234.4 million (176.5).
Profit after tax for the Group, increased by 4% and amounted to SEK 131.8 million (126.5), of which SEK 131.5 million (126.5) was attributable to the Parent Company’s shareholders.
Cash flow from operating activities amounted to SEK 256.2 million (114.7), corresponding to a cash conversion of 94% (59).
Earnings per ordinary share (average number), less minority interests and dividends on preference shares, amounted to SEK 3.37 (3.45). After dilution, earnings per ordinary share amounted to SEK 3.37 (3.43).
During the period the acquisition was completed of Kemi-tech ApS, the group’s second business unit in Denmark.
FIRST NINE MONTHS 2023
Net sales increased by 39% to SEK 3,449.9 million (2,487.7). In total for the Group, organic sales growth was +16%, excluding currency effects.
Operating profit EBITA* increased by 41% to SEK 668.7 million (475.5), corresponding to an EBITA* margin of 19.4% (19.1). Organic EBITA* growth for the Group was +14%, excluding currency effects.
Operating profit, EBIT, increased by 32% and amounted to SEK 619.4 million (469.9).
Profit after tax for the Group increased by 10% and amounted to SEK 354.0 million (321.1), of which SEK 352.8 million (320.3) was attributable to the Parent Company’s shareholders.
Cash flow from operating activities amounted to SEK 421.1 million (363.2), corresponding to a cash conversion of 60% (72).
Earnings per ordinary share (average number), less minority interests and dividends on preference shares, amounted to SEK 9.02 (8.72). After dilution, earnings per ordinary share amounted to SEK 9.02 (8.68).
During the period the acquisition of HeatWork AS in Norway, as well as Kemi-tech ApS in Denmark, were completed.
In March, management subscribed for 190,590 newly issued class B Sdiptech shares, by which the company has received SEK 14.4 million in equity.
In August, Sdiptech issued senior secured sustainability-linked bonds in the amount of SEK 600 million.
EVENTS AFTER REPORTING
No significant events are noted after the period.
COMMENTS BY THE CEO
We can proudly summarize another strong quarter for Sdiptech. Demand continues to be strong and the organic growth of both turnover and operating profit EBITA* was 20 percent excluding currency effects. Cost control is solid and we maintain a good operating margin of 19.5 percent. We can also point out that the cash flow generation is back at strong levels and amounted to 94 percent.
THE QUARTER Sdiptech once again delivered a strong quarter. Four central key figures underpin the development:
Organic net sales growth of 20 percent
Organic profit growth EBITA* of 20 percent
Operating profit margin EBITA* of 19.5 percent
Cash flow generation of 94 percent
Market conditions in all of the group's segments were favorable, which reflects the solid demand that can be expected within infrastructure. This led to a strong organic growth for net sales excluding currency of 20 percent, which means that we have more than made up for last year's temporary loss.
Our EV charger unit, Rolec, continues to deliver on schedule and is growing nicely compared to last year. Rolec's well-established position within B2B was favorable for the company's reported growth. At the same time, the other business units in the group delivered very well:
Excl. Rolec, organic net sales growth was 18 percent
Excl. Rolec, organic EBITA* growth was 18 percent
We continue to deliver an organic profit growth in line with our organic sales growth, which shows that we have a good cost control, and that the scalability of our business models works. Over the past two years, the Group has been able to present an EBITA* margin that is stable in the range of 19–20 percent, and we maintain that we should establish ourselves around 20 percent.
We are pleased to once again be able to show a good cash flow generation of 94 percent. Our business units work extra carefully with working capital so that our excellent growth also results in free cash flow. Over the past 12 months, the Group had a cash flow from operating activities after changes in working capital of SEK 622 million, which is a record. This corresponds to a cash conversion of approximately 70 percent. Over time, we expect cash conversion of approximately 80 percent in line with the Group's historical levels.
In August, Sdiptech issued a sustainability-linked bond. Our long-term goal is for bonds to be a cost-effective and complementary part of our financing mix. At some point we had to start, and the first time costs a little more. In this respect, we are nevertheless pleased that our bond was priced low compared to other first-time issuers, which demonstrates good creditworthiness.
Our total average financing rate (bank loans, bonds and earn-outs) increased by approximately 0.25 percentage points as a result of the bond issue, and now amounts to approximately 4.75 percent in total. Earn-outs are an important source of financing for us. No interest is paid on these and, as a rule of thumb, around 40 percent of these debts will fall due without payment if earnings remain at today's levels. Regardless of this, Sdiptech's debt ratio has decreased during the year due to increased profits, good cash flows and a slower pace of acquisitions.
OUTLOOKS Sdiptech's customers are within infrastructure and important societal functions such as electricity supply, water treatment, transport systems, schools, hospitals, etc. Customers are typically solid and demand is stable regardless of the economic situation. Our business model consists of developing our own products that meet important needs of our customers. The business model is reflected in solid organic growth, high profit margins and good diversified cash flows. In a methodical and selective manner, we are able to convert our cash flow into acquisitions of new high-quality products and businesses.
We shall in addition to this always allocate our capital in the best possible way to create shareholder value. As interest rates rise, we also raise the requirements for returns, and one consequence of this is that price expectations in the market are generally a little too high as we see it. At least for the high-quality objects that are relevant to Sdiptech. Of course, this is not the case everywhere, and we will continue to make good acquisitions. But a natural consequence of the current macro situation is a slower pace of acquisitions than normal, and lower indebtedness than otherwise would be the case.
The strong order intake from the beginning of the year continued during the third quarter and we currently see no clear signs of a slowdown. We are experiencing good demand in several of the areas in which Sdiptech operates, not the least in energy efficiency, electrification, water purification and traffic planning. Our exposure to consumer goods and residential construction is small, and our financial target of organic growth of 5–10 percent remains unchanged for the coming years.
Finally, I would like to extend a big thank you to all our dedicated employees for your strong efforts and achievements during the almost ten years I have had the honor of working with you. I would also like to take this opportunity to thank all shareholders for your trust in Sdiptech. At the end of the year, I will hand over the reins to our current CFO, Bengt Lejdström, who will then take over as President and CEO.
Sdiptech’s common shares of series B are traded on Nasdaq Stockholm under the short name SDIP B with ISIN code SE0003756758. Sdiptech’s preferred shares are traded under the short name SDIP PREF with ISIN code SE0006758348. Further information is available on the company's website: www.sdiptech.se
Sdiptech is a technology group that acquires and develops market-leading niche operations that contribute to creating more sustainable, efficient and safe societies. Sdiptech has approximately SEK 4,500 million in sales and is based in Stockholm.
Sdiptech AB (publ) is required to disclose this information pursuant to EU Market Use Regulation 596/2014. The information was provided by the above contact persons for publication 27 October 2023, at 08:00 CEST.
