Release Date: October 25, 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) reported a solid quarter with a 16% increase in net sales, primarily driven by acquisitions.
- The EBITA margin remained stable at a strong 17.8%, reflecting efficient operational management.
- The company completed two acquisitions in July, contributing to a rolling 12-month revenue increase of over SEK 1.1 billion.
- The niche products division showed impressive growth with a 21% increase in revenues and an all-time high EBITA margin of 22.9%.
- Lagercrantz Group AB (FRA:LG72) continues to expand internationally, with significant growth in the UK market, now accounting for 7% of total revenue.
Negative Points
- Organic growth was modest at 1%, indicating reliance on acquisitions for revenue increases.
- The construction sector remains challenging, impacting the control and tech divisions negatively.
- Cash flow performance did not meet the company's high ambitions, despite being at a good level.
- The market recovery has been slower than expected, with some growth anticipated to be delayed into 2025.
- The company faces higher tax rates due to expansion into regions with higher tax environments, such as the UK and the US.
Q & A Highlights
Q: With the increased M&A pace and high cost inflation, are we seeing an increased positive price component in the group's growth?
A: Jörgen Wigh, President & CEO, explained that while there was significant price inflation during the early stages of the Ukraine conflict, the current price component is not as significant. The company is now seeing more normal levels of price increases, aligning with decreasing inflation rates.
Q: Can you comment on the higher tax rate this quarter and expectations moving forward?
A: Peter Thysell, CFO, noted that the tax rate is marginally higher due to expansion into regions like the UK and US, which have higher tax rates. The expectation is for a tax rate around 23% for the full financial year, with some extraordinary items affecting Q1.
Q: Regarding the control segment, are you waiting for a market recovery, or are there initiatives to improve margins?
A: Jörgen Wigh, President & CEO, stated that they are working hard to bring some companies back, especially those affected by the construction sector. They are also considering restructuring and high-margin acquisitions to improve the division's performance.
Q: How do you view the size of acquisitions compared to the number of acquisitions in the next 6 to 12 months?
A: Jörgen Wigh, President & CEO, emphasized the goal of 15% annual profit growth, with a third from organic growth and two-thirds from acquisitions. They aim to buy 10% of their sales annually, preferring larger acquisitions if they can maintain disciplined pricing.
Q: Are there any specific niches driving the improvement in the electrification division?
A: Jörgen Wigh, President & CEO, mentioned that investments in the electricity grid are picking up, which has been delayed due to approval processes. This improvement is particularly noticeable in markets where electricity grid development is underway.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
